The master franchisor of the Yogurberry frozen yoghurt chain in Australia has been penalised over the exploitation of four Korean workers at one of its Sydney outlets in a precedent-setting Federal Court judgment.
The judgment – which includes $146,000 in penalties and an order for a national audit of the Yogurberry chain – is the first time the Fair Work Ombudsman has secured penalties against a master franchisor for being an accessory to the exploitative practices of one its associated companies.
Significantly, almost half of the total penalties were imposed against companies in the Yogurberry Group for being accessories to the exploitation of the workers and the national audit requires the master franchisor to take extensive steps to ensure future compliance.
The four exploited workers were paid as little as $8 an hour while working at a Yogurberry outlet at the World Square Shopping Centre in the Sydney CBD, leading to total underpayments of $17,827.
They were in Australia on 417 working holiday visas at the time and spoke little English.
Justice Geoffrey Flick found that the head Australian company and master franchisor of the Yogurberry chain, YBF Australia Pty Ltd, was directly involved in establishing pay rates and other practices at the store – and that and the exploitation occurred despite prior warnings from the Fair Work Ombudsman.
Justice Flick also found the Yogurberry master franchisor and its associated companies had deliberately not disclosed information about their financial status to the Fair Work Ombudsman.
Justice Flick found that this was for the purpose of “withholding from scrutiny their true financial position, potentially including the extent to which their contraventions have improved their financial position”.
The Fair Work Ombudsman says the Court’s decision sends a strong signal to franchisors that they can be held accountable for exploitation in their networks, even if they use corporate structures to try to legally hold themselves at arms-length from practices in their outlets.
“The result of this matter sends a clear warning to the operators of franchise networks in Australia that refusing to take responsibility for addressing exploitation in their networks is not a viable option,” The Fair Work Ombudsman said.
“If you operate a company in Australia and your business model involves exploitation of vulnerable workers, you can expect to face harsh scrutiny and serious punishment.
“Yogurberry finds itself in this situation – penalised and publicly shamed – because it ignored our clear warnings that it needed to address exploitation occurring in its stores.
“The outcome of this matter, along with other recent scandals, clearly illustrates the consequences for companies who fail to meet their legal obligations and community expectations in relation to treatment of vulnerable workers in their networks.”
The four Korean workers, two of them aged just 19 and 20 at the time, were underpaid between July, 2014 and May last year.
The three companies penalised in Court are all part of the Yogurberry Group of companies operated by the same family:
- Yogurberry World Square Pty Ltd, which directly employed the workers, was penalised $75,000.
- YBF Australia Pty Ltd was penalised $25,000, and
- The Yogurberry Group’s payroll company, CL Group Pty Ltd, was penalised $35,000.
In addition, YBF Australia part-owner Soon Ok Oh was penalised $11,000 for her involvement in exploiting the workers.
In addition to the penalties, the Fair Work Ombudsman secured a Court Order requiring the Yogurberry Group of companies to commission a professional external audit of all Yogurberry stores in Australia within the next two months and to rectify any underpayments discovered.
The Court also ordered the companies and Ms Oh to commission workplace relations training for managers and to pay the Fair Work Ombudsman’s legal costs, to be quantified at a later date.
Source: FWO Media Release 3/11/2016
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