Bakers Delight Holdings is facing court over the alleged underpayments of 142 staff at three franchised outlets in Hobart.
This is the second time the Fair Work Ombudsman has used franchisor liability provisions in the Fair Work Act to allege legal liability for franchisee underpayments. The first is a case against 85 Degrees Coffee Australia that remains before the court.
The FWO alleges that 142 mostly young staff at Bakers Delight outlets in Kingston, Lindisfarne and Eastlands were underpaid $1.25 million between July 2017 and October 2020.
Fair Work inspectors allegedly found staff were underpaid entitlements including minimum wages, weekend and public holiday penalty rates, overtimes rates, leave entitlements and minimum shift pay, and had money unlawfully deducted from their termination pay.
Bakers Delight liability allegations limited
FWO’s allegations against Bakers Delight Holdings are limited to alleged minimum wage, penalty rate and overtime underpayment contraventions between February 2019 and October 2020.
The ombudsman believes Bakers Delight Holdings is liable for the alleged $642,162 in underpayments at the three stores because it failed to take preventative action after an audit the franchisor had commissioned identified underpayments and other non-compliance issues.
The FWO alleges Bakers Delight shared the audit findings with the franchisees and requested they introduce compliance measures. However, it alleges, no further action was taken when the franchisees failed to comply.
Under the Fair Work Act franchisors are required to take action if they know, or should reasonably have known, further underpayments would occur.
Bakers Delight rejects allegations
A Bakers Delight spokesperson said the company refutes the FWO allegations.
“We strongly disagree with the Fair Work Ombudsman 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.
“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.”
The spokesperson said Bakers Delight had cooperated fully with the FWO throughout its investigation.
“We look forward to seeing the matter resolved as soon as possible and have no further comment to make ahead of the court hearing.”
Former franchisees also face legal action
Former franchisees, John Vince Puglisi and Lisa Kay Puglisi, and the couple’s company, Make Dough Enterprises Pty Ltd, are also facing legal action. The FWO alleges all three were involved in all the underpayments between 2017 and 2020. Other alleged contraventions include falsifying records and failing to comply with Notices to Product documents.
Make Dough Enterprises was liquidated earlier in 2023 and the three stores closed.
Bakers Delight Holdings faces penalties of up to $66,660 per contravention; Make Dough Enterprises faces penalties up to $66,660 per contravention or $660,000 per serious contravention; and the Puglisis face penalties of up to $13,320 per contravention or $133,200 per serious contravention.
The first case management hearing in the Federal Court in Hobart is scheduled for 26 July 2023.
