Fair Work Ombudsman launches legal action against Australian Chatime franchisor

Yet another underpayment scandal is engulfing a retail business, and this time it’s popular bubble tea staple Chatime in the firing line.

Bubble tea favourite Chatime has become the latest in a long line of Aussie retailers to be accused of a wage theft scandal.

Today the Fair Work Ombudsman has kicked off legal action against the Australian franchisor of the chain as well as its managing director after claiming staff at franchisor-operated Chatime outlets in both Sydney and Melbourne were underpaid by more than $169,000.

Chatime Australia Pty Ltd – the franchisor of dozens of Chatime outlets around the country which also directly owns and operates a number of stores – is facing the Federal Circuit Court.

The Fair Work Ombudsman is also taking action against Chatime Australia managing director Chen “Charlley” Zhao for his alleged involvement in some of the underpayments.

Fair Work Ombudsman Sandra Parker said the alleged underpayments were picked up by inspectors during audits.

“It is particularly disappointing to be making allegations of significant underpayments against a franchisor of this size,” she said in a statement.

“We expect franchisors to not only pay their own staff correctly but to take responsibility for ensuring that their franchisees comply with the law.

“Enforcing workplace laws in the fast food sector and in franchise networks more generally continue to be priorities for the Fair Work Ombudsman.”

Chatime has been accused of underpaying workers. Picture: Instagram/@chatimeaustralia

She said all workers in this country were entitled to the same rights and urged anyone with pay concerns to contact the Fair Work Ombudsman.

It is alleged staff were paid as little as $7.59 to $24.30 per hour at stores operated by Chatime Australia, with Fast Food Industry Award entitlements such as loadings and penalty rates also ignored.

It is alleged Chatime Australia’s former chief financial officer previously gave Mr Zhao information on minimum award rates and warned Chatime Australia was “only partially complying”.

The Fair Work Ombudsman also claims workers were underpaid the ordinary hourly rates, overtime rates, casual loadings and penalty rates for weekend, night and public holiday work they were entitled to under the Fast Food Industry Award.

Annual leave entitlements and minimum engagement pay were allegedly also underpaid.

It is claimed 152 workers were underpaid a combined $169,320, with individual workers ripped off between $58 and $3990.

It is understood the affected workers include 42 junior workers aged below 21 and 95 visa holders, many of whom were international students – although the underpayments have since been rectified.

Mr Zhao faces penalties of up to $10,800 per contravention and the maximum penalty for Chatime Australia Pty Ltd is up to $54,000 per contravention.

A directions hearing is listed in the Federal Circuit Court for late January.

CEO and founder of Australian Payroll Association Tracy Angwin, who has more than 25 years’ experience working in the Australian payroll sector, said payroll mistakes were coming under the spotlight more and more frequently.

“Whether you’re a franchise or not, you should expect a visit from a Fair Work inspector at any time,” she warned.

“They may want to see payroll records, including attendance documentation and pay slips. Often there are on-the-spot fines if you can’t produce these documents.

“Unfortunately, franchisors have traditionally provided very little support to their franchisees, including fit-for-purpose technology to help them with standard operating procedures as well as payroll training and advisory services.

“With increasingly more attention on payroll mismanagement and errors from the regulators, this support needs to be provided as part of a franchise agreement, either directly or from a third-party provider.”

However, Chatime is just the latest in a string of household names to be rocked by underpayment claims.

Woolworths’ underpayments crisis made global headlines. Picture: Ian Waldie/Bloomberg

In late October, it was revealed Woolworths had underpaid nearly 6000 employees over the past nine years with repayments expecting to cost up to $300 million, with the scandal making global headlines.

Other companies to be accused of underpayments in recent months include the ABC, Qantas, Super Retail Group – which owns Rebel Sport, Supercheap Auto, BCF and other retailers – the Commonwealth Bank, Bunnings and more.