Starbucks Coffee Australia Pty Ltd (Starbucks) has back-paid staff in Sydney, Melbourne, Brisbane and the Gold Coast more than $4.5 million and has entered into an Enforceable Undertaking (EU) with the Fair Work Ombudsman.
The ASX 100 company self-reported its non-compliance to the FWO in 2020 after becoming aware of underpayments while conducting a review of their time and attendance and payroll systems.
Most of the underpayments were the result of Starbucks failing to pay part-time staff the correct overtime pay they were entitled to under the Fast Food Industry Award 2010 and the Fast Food Industry Award 2020.
The underpaid part-time employees included baristas, supervisors and assistant managers. Many were young workers. The underpaid employees worked across 52 stores.
Starbucks failed to comply with the Award-requirement to have written agreements in place specifying the regular workdays and hours that made up each part-time employee’s ‘ordinary hours’ of work.
This led to Starbucks often failing to recognise when part-time employees were entitled to be paid overtime entitlements.
Some part-time employees were also underpaid annual leave and public holiday entitlements.
A smaller number of full-time store managers were also underpaid due to Starbucks paying them annual salaries that were insufficient to cover their minimum Award entitlements, given the significant amounts of overtime and weekend work they performed.
Starbucks has made payments of $4.57 million – including more than $4.34 million in wages and entitlements, more than $180,000 in interest and more than $40,000 in superannuation – to 2,427 current and former employees, who were underpaid between 2014 and 2020.
Individual back-payments range from $20 to $18,574. The average back-payment is $1,883.
The EU requires Starbucks to provide evidence to the FWO of its completed back-payments by the end of September.
Fair Work Ombudsman Anna Booth said an EU was appropriate because Starbucks had cooperated and demonstrated a strong commitment to rectifying underpayments, including devoting significant resources to engaging independent experts to oversee its rectification.
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“Under the Enforceable Undertaking, Starbucks has committed to implementing stringent measures to ensure workers are paid correctly. These measures include engaging, at the company’s own cost, audits of its compliance with workplace laws over the next two years,” Ms Booth said.
“This matter demonstrates how important it is for employers to place a high priority on their workplace obligations. For Starbucks, a failure to have written agreements in place for part-time staff and a set-and-forget approach to paying some full-time staff on annual salaries resulted in significant underpayments and rectification costs.
“Employers need to be aware that taking enforcement action to protect young workers and improve compliance in the fast food, restaurant and café sector are priorities for the FWO.”
Under the EU, Starbucks must make a $150,000 contrition payment to the Commonwealth’s Consolidated Revenue Fund.
Starbucks is also required to provide FWO with evidence of the new systems and processes it has put in place to ensure future compliance, commission workplace relations training for payroll and store management staff, write to affected staff to apologise, and make corporate governance improvements.
Employers and employees can visit www.fairwork.gov.au or call the Fair Work Infoline on 13 13 94 for free advice and assistance. An interpreter service is available on 13 14 50.
The FWO also has targeted resources and information for workers and employers in the fast food, restaurant and café sector.
NOTE: The Starbucks outlet at the Sydney International Airport is operated by an entity that is unrelated to Starbucks Coffee Australia Pty Ltd. The outlet is not involved in the non-compliance issues detailed in this media release.