Gold Coast restaurant fined $284,000 for “heinous” underpayment and falsification of records despite multiple warnings

SmartCompany, October 19, 2017

A Gold Coast restaurant and its director have been fined more than $280,000 for underpaying nine workers and falsifying payment records, despite being explicitly warned not to fabricate records if they did not exist.

The company operating Surfers Paradise Japanese restaurant “Samurais Paradise” and its director Shigeo Ishiyama appeared before the Federal Circuit Court after the Fair Work Ombudsman (FWO) alleged underpayment of workers at the venue in 2015.

The ombudsman ultimately found that nine workers were paid between $8 and $11 an hour for all hours worked over a four month period in 2015.

Fair Work inspectors visited the restaurant after being contacted by an employee in 2015, and the ombudsman says it found evidence to suggest underpayments had occurred. The inspectors then requested payment records from the business, warning if it didn’t have records, it must not make these records up.

However, the records then provided to the inspectors were found to have irregularities on two counts: they listed five workers instead of nine, and they suggested two workers were being paid $11 an hour, according to the court judgment. The ombudsman’s office then directed the business to backpay the workers $20,000.

The ombudsman found that these initial documents included factual inaccuracies about the rate of pay and hours workers.

The business then provided updated records showing the it was now paying the workers correct rates along with superannuation. These records were later also found to be false.

The FWO then began an official investigation, culminating in the business backpaying nearly $60,000 to all affected staff.

The Federal Circuit Court has penalised Samurais Paradise Pty Ltd $246,400 for breaches of Australian workplace law. Ishiyama was penalised an additional $38,000, bringing total penalties to $284,000.

In his judgment, Judge Salvatore Vasta labelled the underpayments as “heinous” and “certainly deliberate”, reducing the penalties imposed only due to the director’s poor financial position.

“The aggravating circumstances of the falsifying of records and the provision on two occasions of false records, shows that this case is in a very serious bracket,” Judge Vasta said.

“The making of false records, as I have already said, is a most heinous offence. The Respondent was warned not to make false records, but did any way and those false records gave quite an improper picture of what was happening.”

“Simply no excuse” for underpayment

Speaking to SmartCompany, employment lawyer Peter Vitale said the seemingly “deliberate nature” of the company’s breaches likely lead to the court’s penalties being “on the higher end”.

“There was some discount made by the judge thanks to the company’s cooperation after the investigation commenced,” Vitale says.

“It’s difficult to judge what motivations the business owner might have had, but regardless there is little point in providing the Fair Work Ombudsman with false information. They have all of the necessary tools to investigate cases fully, and they will get to the bottom of the issue.”

In the judgment, Judge Vasta noted the director “did say to the Fair Work Ombudsman that he felt that he had to underpay so as to stay competitive”, believing the motivation for the underpayment was likely due to increased competition.

“Whilst one applauds persons trying to stay competitive, this cannot be done at the expense of the employees and in breach of the FW Act,” Judge Vasta said.

Vitale agrees, saying while this can be common in hospitality businesses, there’s “simply no excuse”.

“What this does highlight is the need for small businesses to start from first principles. Ensure you can run your business profitably while meeting all your legal obligations, and if you’re unable to do so you may need to readjust the way the business is run,” he says.

“This is common sense, but with the number of cases coming before the courts, it’s clear the message still needs to get out there.”

The court has given the business and its director 18 months to pay the penalties, which Vitale says is a lengthier time period than normal, believing it’s an example of the courts being “realistic” about imposing penalties.

“The courts want any penalty they impose to mean something, so if the penalty’s so significant the company goes into liquidation immediately and can’t pay it, that sort of undermines the whole operation,” he says.

“Using false records in attempt to get away with underpaying workers is an insidious practice. Without adequate records in can sometimes be difficult for Fair Work Inspectors to accurately calculate a worker’s entitlements,” Ombudsman Natalie James said in a statement.

“We welcome the court’s decision to impose near maximum penalties in this case, it is a reflection of the serious nature of this behaviour.”

SmartCompany contacted Samurais Paradise but did not receive a response prior to publication.