Bakers Delight accused of failing to stop $642,000 in underpayments

Fair Work Ombudsman alleges 142 staff, as young as 14, at Bakers Delight outlets in Hobart were underpaid $1.25 million between 2017 and 2020.

Bakers Delight said it strongly disagreed with the FWO”s interpretation of the legislation. Picture: News Corp

The Fair Work Ombudsman has taken legal action against Bakers Delight alleging the franchisor was legally liable for failing to prevent $642,000 in underpayments at three Hobart stores formerly operated by a franchisee.

The FWO alleges 142 staff, as young as 14, at Bakers Delight outlets in Kingston, Lindisfarne and Eastlands were underpaid $1.25 million between 2017 and 2020.

The FWO alleges Bakers Delight Holdings, the franchisor of the chain in Australia, is liable for $642,162 of the underpayments because it became aware the franchisee operating the stores had been underpaying staff but failed to take preventative action.

The FWO claims Bakers Delight Holdings either knew or should reasonably have known further underpayments would occur.

The workplace regulator is also taking legal action against the couple that owned and managed the operations of the stores, John Vince Puglisi and Lisa Kay Puglisi, and the couple’s company, Make Dough Enterprises, which was the franchisee of the three stores and allegedly directly employed and underpaid the affected workers.

Make Dough Enterprises was placed into liquidation earlier this year, when the three stores were closed.

It is the second time the FWO has used franchisor liability provisions in the Fair Work Act to allege in court that a franchisor is legally liable for unlawful conduct of a franchisee. The first matter, against 85 Degrees Coffee Australia remains before the court.

Acting Fair Work Ombudsman Kristen Hannah says the legal action highlighted that franchisors can be held accountable if they fail to take action to prevent breaches in their networks.

“We will use all laws and powers at our disposal to ensure franchisors are held to account when they fail to address noncompliance in their networks,” Ms Hannah said. “In this case, we allege Bakers Delight Holdings was aware many young workers at these three Hobart stores had been underpaid but failed to take reasonable steps to prevent further underpayments occurring.”

In a statement on Monday, Bakers Delight said it strongly disagreed with the FWO’s interpretation of the legislation and “believe we have done everything reasonable as the franchisor to prevent the contraventions they are alleging”.

“Despite this and in the interests of generating a favourable outcome for the employees involved, we have offered to pay the franchisee’s employees the full amount of back pay that the FWO claims we are liable for. Unfortunately, this has been rejected by the Fair Work Ombudsman,” the company said.

“We apologise to those employees affected by this and are determined to ensure that everyone employed under the brand always receives their full and correct entitlements.

“We have fully co-operated with the FWO throughout their investigation into Make Dough Enterprises and we now look forward to seeing the matter resolved as soon as possible.”

The affected workers are yet to be back paid and the FWO is seeking court orders requiring rectification of the underpayments, plus interest and superannuation. .

The FWO said it investigated the Kingston, Lindisfarne and Eastlands Bakers Delight outlets in response to “intelligence gathered about potential noncompliance at the outlets”.

“Fair Work Inspectors allegedly discovered that staff were underpaid entitlements including minimum wages, weekend and public holiday penalty rates, overtime rates, leave entitlements and minimum shift pay, and had money unlawfully deducted from their termination pay,” the FWO said.

The alleged primary causes of the underpayments was the failure to pay overtime rates listed in a 2012 enterprise agreement, and continuing to pay staff minimum rates listed in the agreement rather than increasing pay rates annually to ensure they were at least equivalent to minimum rates listed in the General Retail Industry Award.