Federal Court makes precedent-setting worker exploitation judgment

by John Hilton03 Nov 2016
The Yogurberry frozen yoghurt chain has been penalised $146,000 over the exploitation of four workers in a precedent-setting Federal Court judgment.

The four Korean employees were working at the World Square Shopping Centre in the Sydney CBD and were paid as little as $8 an hour, adding up to $17,827 in total underpayments.

This marks the first time the Fair Work Ombudsman has secured penalties against a master franchisor for being an accessory to the exploitative practices of one its associated companies.

The four workers were in Sydney on 417 working holiday visas at the time and did not speak much English. They were underpaid between July, 2014 and May last year, and two of them were aged just 19 and 20 at the time.

Justice Geoffrey Flick found that the head Australian company and master franchisor of the Yogurberry chain, YBF Australia Pty Ltd, was directly involved in establishing pay rates and other practices at the store.

He also found that the Yogurberry master franchisor and its associated companies had not disclosed information on purpose about their financial status to the Fair Work Ombudsman.

This was so they could withhold "from scrutiny their true financial position, potentially including the extent to which their contraventions have improved their financial position”, according to Justice Flick.

The Court’s decision sends a strong message to franchisors that they can be held accountable, despite using corporate structures to try to legally hold themselves at arms-length from their outlets, according to the Fair Work Ombudsman Natalie James.

“The result of this matter sends a clear warning to the operators of franchise networks in Australia that refusing to take responsibility for addressing exploitation in their networks is not a viable option,” said James.

“If you operate a company in Australia and your business model involves exploitation of vulnerable workers, you can expect to face harsh scrutiny and serious punishment.

“Yogurberry finds itself in this situation - penalised and publicly shamed - because it ignored our clear warnings that it needed to address exploitation occurring in its stores.
“The outcome of this matter, along with other recent scandals, clearly illustrates the consequences for companies who fail to meet their legal obligations and community expectations in relation to treatment of vulnerable workers in their networks.”

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