The Fair Work Ombudsman has penalised 85 Degrees Coffee Australia Pty Ltd (‘85 Degrees’) which operated a number of 85 Degrees-branded outposts in NSW and the ACT and was also the head franchisor of several franchisee-operated outlets.
The Fair Work Ombudsman penalised the franchisor $1.44 million for underpaying staff and what they have described as a “systematic failure to ensure compliance within its franchise network.”
It’s the third-highest penalty ever secured by Fair Work, and is also the first time they have implemented the “responsible franchisor entity” provisions of the Protecting Vulnerable Workers reforms which holds a franchisor to account for the actions of its franchisees.
The penalty comes after nine young workers and visa holders at eight 85 Degrees-branded franchisee-operated outlets in Sydney were underpaid a total of $32,321 in 2019.
The underpayments ranged from $239 to $15,198 with workers underpaid minimum rates; overtime entitlements; penalty rates for weekend, public holiday, and evening work; casual loadings; and a laundry allowance under the General Retail Industry Award 2010; and annual leave entitlements under the National Employment Standards, between 1 January and 31 December 2019.
One worker was also not paid on a weekly or fortnight basis as stated in the Award, while another was not paid a penalty rate that is required when they don’t receive an adequate rate between shifts.
The affected workers were in cashier, baker, and kitchenhand positions across outlets in Parramatta, Castle Hill, Hurstville, Campsie, Chatswood, Burwood, Eastwood, and Chippendale.
The individual franchisees have back-paid the workers in full and there has been not court action against them.
So while 85 Degrees did not directly underpay the workers they have been held legally liable under the responsible franchisor entity.
Fair Work stated that 85 Degrees should reasonably have known, and from 1 April 2019 did know, about record-keeping and pay slip contraventions and did not take reasonable steps to prevent it from occurring.
Fair Work Ombudsman Anna Booth says the latest penalty is a reminder to franchisors that they will be held accountable for actions of their franchisees.
“85 Degrees’ conduct in this matter was completely unacceptable. The company had been on notice for some time about compliance issues in its network but failed to take reasonable steps as a responsible franchisor to address those issues,” Ms Booth said.
“All franchisors, including international chains in the Australian market, need to be aware that the Fair Work Ombudsman will continue to hold them to account if they turn a blind eye to compliance problems in their network. Franchisors must take action.”
It’s not the first time 85 Degrees has been penalised by Fair Work, with the company also penalised $475,200 in 2022 after underpayments and record-keeping contraventions against young Taiwanese students in Sydney.
