George Calombaris underpayment scandal blows out to $7.8 million

Celebrity chef George Calombaris has been slapped with a substantial fine after admitting to underpaying $7.83 million in wages to 515 current and former employees of his hospitality empire as part of an unprecedented deal with the Fair Work Ombudsman.

The MasterChef star has been ordered to make a $200,000 "contrition payment" and must also make a series of public statements to promote compliance with the Fair Work Act, according to an enforceable undertaking announced on Thursday morning.

George Calombaris.

The full extent of the underpayment scandal has dwarfed initial estimates by Calombaris from April 2017, when his company Made Establishment announced that 162 workers had been underpaid $2.6 million because of "historically poor processes".

A four-year investigation by the Fair Work Ombudsman uncovered a raft of breaches, including a failure to pay minimum award rates, penalty rates, casual loadings, overtime rates, split-shift allowances and annual leave loadings.

Made Establishment also failed to keep records of the hours worked by staff on annualised salaries, some of whom were also denied accrued overtime and penalty rates.

Calombaris addressed staff on Thursday to explain the conditions of the enforceable undertaking.

He issued a statement on Thursday morning.

"We apologise to all our affected team members, past and present – as it is our people that make our restaurants great, and it is our priority to ensure all of our employees feel respected, rewarded and supported in their roles," he said.

Calombaris said he was "committed to acting as a force for change in the industry and leading by example".

The agreement with the Fair Work Ombudsman will require Calombaris to implement new payroll and compliance systems across his stable of restaurants that include Hellenic Republic, Gazi and Jimmy Grants.

Each venue must also be independently audited for the next three years, while workplace relations training will be provided to all Made Establishment staff with responsibility for human resources, payroll and on-site management.

Fair Work Ombudsman Sandra Parker said the court-enforceable undertaking would ensure improved wages and record-keeping were in place at the Made group.

"Made’s massive back-payment bill should serve as a warning to all employers that if they don’t get workplace compliance right from the beginning, they can spend years cleaning up the mess," Ms Parker said.

Staff were briefed at Hellenic Republic in Kew on Thursday morning.

One staff member, who declined to be identified, said the meeting was mostly positive.

“I believe George when he says he wants to be a ‘force for change’ in our industry,” he told The Age and The Sydney Morning Herald.

He said he had worked in the hospitality industry a long time and he had never been treated better than at Calombaris’ restaurant chain.

He said staff had been told to direct all questions about underpayments to the restaurant’s marketing team, and that members of Calombaris’ leadership team would be on site at all his restaurants throughout the day.

The massive pay-out and strict conditions imposed by the enforceable undertaking are expected to send shockwaves throughout the hospitality industry, with several prominent chefs and restaurateurs currently under investigation.

George Calombaris' Gazi restaurant.Credit: Eddie Jim

The Fair Work Ombudsman recently confirmed it was examining alleged underpayment at upmarket restaurants owned by Neil Perry, Guillaume Brahimi, Teage Ezard and Heston Blumenthal following a series of stories by The Age and The Sydney Morning Herald.

Staff from Made Establishment first made complaints to the Fair Work Ombudsman in 2015, but Calombaris and his then business partner George Sykiotis claimed the issues had been resolved.

However, when Radek Sali, the former chief executive of Swisse vitamins, took a major stake in the business in 2016, a string of discrepancies were identified.

Made Establishment self-reported to the Fair Work Ombudsman in 2017, before making a public statement about the unfolding scandal.

At the time, Mr Sali said he was "prepared for a few potholes in the books" when he first invested, but was unaware that hundreds of staff had been ripped off.

On Thursday morning, Made Establishment chief executive Leigh Small said all but a few claims had been settled and existing staff had been correctly classified under the award system.

"Since changing ownership, we have introduced a new CEO, a new people and culture director and new processes and procedures to ensure we're not only complying with workplace relation laws, but actively promoting a culture of employee wellbeing," Ms Small.

The issue of systemic underpayment gathered momentum before the federal election in May, when outgoing Liberal industrial relations minister Kelly O'Dwyer gave in-principle agreement to a recent report by former consumer watchdog chief Allan Fels recommending criminalising wage theft.

She said the exploitation of workers "harms individuals, undercuts law-abiding employers and reflects poorly on Australia's international reputation".

Employer organisations the Business Council of Australia and the Australian Industry Group both opposed criminal sanctions, while several hospitality figures have long objected to the award wage system.

In 2012, Calombaris fuelled a national debate about the viability of penalty rates, when he complained that some of his restaurants were unprofitable on a Sunday because he was required to pay staff up to $40 an hour.

"The problem is that wages on public holidays and weekends greatly exceed the opportunity for profit.

"And it's not like they've had to go to uni for 15 years," the MasterChef star said.