Bakers Delight faces court over franchisor liability for alleged franchisee underpayments

Bakers Delight Underpayment FinReview

In a recent development, Baker’s Delight, a well-known bakery franchise, is facing legal action initiated by the workplace watchdog for its alleged failure to prevent a franchisee from underpaying workers. The Fair Work Ombudsman has filed a case in the Federal Court, accusing Baker’s Delight of being aware of the franchisee’s underpayments but failing to take appropriate measures.

Baker’s Delight commissioned an audit in 2019, which reportedly identified the underpayments and non-compliance issues at the three Baker’s Delight outlets in Kingston, Lindisfarne, and Eastlands. The franchisor provided the audit findings to the franchisee, operated by John and Lisa Puglisi through Make Dough Enterprises, and urged them to take appropriate actions. However, the franchisee allegedly refused to address the non-compliance issues, and Baker’s Delight Holdings did not take further steps to rectify the situation. This alleged lack of action raises concerns regarding the franchisee’s commitment to adhering to workplace laws and obligations.

The three Baker’s Delight outlets are accused of underpaying 142 mostly young staff a total of $1.25 million between July 2017 and October 2020. The franchisee failed to update its base rates to comply with retail award minimums. Consequently, staff members were underpaid minimum wages, penalty rates, overtime rates, and leave entitlements. Most affected employees were young workers, some as young as 14, with four being visa holders. The magnitude of these underpayments, with one apprentice baker allegedly underpaid up to $106,281, emphasizes the significance of addressing this issue promptly.
Baker’s Delight, maintains that it had done everything reasonable to prevent the alleged contraventions. Despite disagreement with the Fair Work Ombudsman’s interpretation of the legislation, Baker’s Delight offered to pay the full amount of back pay claimed by the Ombudsman on behalf of the affected employees. However, this offer was rejected. The company expressed its commitment to ensuring that all employees within the brand receive their rightful entitlements and emphasized its cooperation throughout the investigation.

Apart from seeking civil penalties against Baker’s Delight for its alleged liability of $642,162, the Fair Work Ombudsman has also taken the Puglisis and their company to court. The ombudsman alleges serious breaches of workplace laws and seeks substantial penalties. The legal process aims to rectify the underpayments, including interest and superannuation, and ensure compliance with court orders. The upcoming directions hearing on July 26 indicates that the case is progressing.

The legal action against Baker’s Delight over alleged underpayments by its franchisee serves as a critical reminder of the importance of fair and lawful practices in the workplace. Franchisors must take responsibility for the actions of their franchisees, ensuring payroll auditing and compliance with appropriate process to follow up.

Jul 17, 2023

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