The INNS and outs of adverse action: FWO prosecutes hotel owner for underpaying employees because of race

In its first ever underpayment prosecution relying on the race discrimination provisions of the Fair Work Act 2009 (Cth) (FW Act), the Fair Work Ombudsman (FWO) has successfully established that two employees of Chinese descent and Malaysian extraction were underpaid because of their race and/or national extraction (Fair Work Ombudsman v Yenida Pty Ltd & Anor [2017] FCCA 229).

In 2015, the FWO commenced proceedings against a Tasmanian hotel and its owner for various contraventions of the FW Act, including underpayment of its head chef and his wife plus a further 15 employees.

Most significantly, the FWO claimed that the head chef and his wife, both of Chinese descent and Malaysian extraction, were discriminated against because they were paid less than what other employees who were not of that descent or extraction would have been paid in similar circumstances.

The head chef was brought to Australia by the hotel owner in 2007 to work in the hotel’s kitchen under a 457 visa. His wife later joined him on a spousal visa and began working for the hotel in 2009 as a kitchen hand, until her resignation in 2010. The couple gained permanent residency in 2013 and the head chef resigned from his employment with the hotel in 2014, without notice, following a dispute about annual leave.

Following his resignation, the hotel owner claimed that the head chef owed him money because he resigned without notice. This prompted the head chef to contact the FWO who commenced an investigation into the hotel’s employment practices.

In prosecuting the hotel and its owner, the FWO argued that the hotel owner had deliberately advertised the head chef position in Malaysia because it was common practice for employees in Malaysia to work longer hours and more days for less money, and he thought that an employee coming from Malaysia would not know the ins and outs of Australian workplace laws. The FWO suggested that this was a deliberate attempt to exploit the head chef’s race and national extraction because he would be coming to Australia with no familiarity with Australian workplace standards.

The FWO also argued that the hotel owner gave conflicting evidence about why he advertised the chef position in Malaysia. He claimed that he wanted to hire a chef with expertise in Asian cuisine, but the head chef was hired on the basis of his experience in a steak house and was told to bring Italian and French recipes with him. He was not required to cook Asian dishes in the hotel kitchen.

The FWO claimed that the hotel owner and his wife (also of Chinese descent) frequently referred to the couple as “family” as a way to imply that the couple should work harder and longer hours. The evidence of the kitchen hand was that she felt the hotel owner “owned” her and her husband and thought he called them “family” because of a Malaysian and Chinese expectation that you help out your family and work hard for them, not because it was a friendly or inclusive term.

The hotel owner admitted that he had underpaid his employees but claimed that it was not because of their race or national extraction. He claimed that he was confused about the application of the relevant modern award, though he knew it existed and applied some (incorrect) penalties and loadings to the hours worked by other employees.

He also claimed that he thought that the approval of the head chef’s visa applications and the scrutiny applied by the Department of Immigration meant that his employment arrangements were compliant with Australian laws.

Judge Baker of the Federal Circuit Court of Australia did not find the hotel owner to be a credible witness and rejected his explanations for underpaying the employees. Judge Baker found that the employees’ descent and national extraction was a substantial and operative reason for the taking of adverse action against them, namely their underpayment. Whilst other employees were also underpaid, the adverse action against the two employees brought to Australia from Malaysia was by far the most serious.

Judge Baker found both the hotel (as a corporate entity) and the hotel owner liable for contraventions of the FW Act.

The Court will hear submissions from the parties as to appropriate penalties. 

This case is the first of its kind and is a reminder to employers about the importance of carefully and regularly reviewing obligations to employees, especially vulnerable employees who may not be familiar with Australian workplace laws. 

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

02 9256 7500 |

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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