The workplace watchdog has launched legal action against Baker’s Delight for failing to stop a franchisee underpaying workers more than $640,000, including through rates below minimum wages.

The Fair Work Ombudsman has alleged in the Federal Court that the franchisor was aware a franchisee’s three stores in Hobart were underpaying staff penalty rates, overtime and award rates for 18 months but did not take reasonable steps to prevent it.