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Bakers Delight franchisor faces court over alleged $1.25m underpayment

Regulation

The Fair Work Ombudsman alleges 142 staff were underpaid across three outlets between July 2017 and October 2020.

By Josh Needs 10 minute read

The Fair Work Ombudsman (FWO) has commenced legal action against the Australian franchisor of the Bakers Delight chain, alleging 142 mostly young staff were underpaid $1.25 million between July 2017 and October 2020.

The FWO alleged the franchisor is legally liable for the extensive underpayments at three Hobart stores – Kingston, Lindisfarne and Eastlands – operated by one of its franchisees. 

The FWO said it is taking legal action in the Federal Court against the franchisor, Bakers Delight Holdings Pty Ltd, in relation to a portion of the alleged underpayments. 

It alleged the franchisor is liable for $642,162 in underpayments across the three stores that occurred after February 2019 because it was aware the franchisee operating the stores had been underpaying staff but failed to take preventative action. 

The FWO alleged that Bakers Delight Holdings knew or should have reasonably known about the underpayments because an audit it commissioned and completed in February 2019 identified underpayments and non-compliance issues at the stores. 

The FWO said it is also acting against the couple that owned and managed the stores, John Vince Puglisi and Lisa Kay Puglisi and the couple’s company Make Dough Enterprises Pty Ltd, the franchisee of the three stores which allegedly directly employed and underpaid the affected workers. 

The FWO investigated the stores after intelligence pointed to potential non-compliance at the outlets as inspectors allegedly discovered staff were underpaid entitlements (including minimum wages, penalty rates, overtime rates, leave entitlements) and had money unlawfully deducted from their termination pay. 

It was alleged that the primary causes of underpayments were the franchisee failing to pay overtime rates and continuing to pay staff minimum rates listed in an enterprise agreement rather than increasing pay rates annually to ensure they were at least equivalent to minimum rates listed in the award. 

The FWO alleged most of the underpaid staff were as young as 14 with four also visa holders, while the alleged individual underpayments ranged from $74 to $106,281 with all alleged underpayments still outstanding. 

The FWO alleged Make Dough Enterprises, Mr Puglisi and Ms Puglisi committed a range of other contraventions of the Fair Work Act 2009 including allegedly providing false records to the FWO and allegedly failing to comply with notices to produce documents. 

This is the second time the FWO has taken legal action against a franchisor alleging it was liable for contraventions by its franchisees. 

The first was earlier this year when it alleged 85 Degrees Coffee Australia Pty Ltd was liable for eight of its franchisees allegedly underpaying nine workers. 

Acting Fair Work Ombudsman Kristen Hannah said the legal actions display that franchisors could be held accountable if they fail to prevent breaches within their networks. 

“We will use all laws and powers at our disposal to ensure franchisors are held to account when they fail to address non-compliance in their networks,” said Ms Hannah. 

“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.” 

 

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Josh Needs

Josh Needs

AUTHOR

Josh Needs is a journalist at Accountants Daily and SMSF Adviser, which are the leading sources of news, strategy, and educational content for professionals in the accounting and SMSF sectors.

Josh studied journalism at the University of NSW and previously wrote news, feature articles and video reviews for Unsealed 4x4, a specialist offroad motoring website. Since joining the Momentum Media Team in 2022, Josh has written for Accountants Daily and SMSF Adviser.

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