Business owner says minimum wage “just crazy” and cops $228,000 fine for underpayment

A Melbourne small business owner will be forced to pay a $228,000 penalty after admitting she underpaid a migrant employee because she thinks Australia’s minimum pay rates are “just crazy”.

Na Xu was found guilty of underpaying an employee $19,567 over a period of just eight months, with The Federal Circuit Court handing down a penalty of $35,496.

Xu’s travel services company Grandcity Travel & Tour which operated in Melbourne, Sydney, Brisbane, Perth and China was fined a further $192,840 as a result of an investigation by the Fair Work Ombudsman (FWO).

The employee in question was paid less than half of her total entitlements, receiving between $9 and $11 an hour on casual rates between January and September 2013.

Under the General Retail Industry Award, rates around $21 per hour should have been paid, in addition to penalty rates for overtime, weekends and public holidays.

The back pay was only granted to the employee once Xu was brought before the court .

Handing down his decision, Judge John O’Sullivan noted previous complaints by employees of other Grandcity agencies run by Xu and also uncovered an email sent out to all Grandcity employees saying “the boss pays you to do the work and not to negotiate any work terms and conditions”.

“The respondent have demonstrated a complete disregard for the minimum standards contained in the Fair Work Act and Xu’s personal interpretation of minimum standards under workplace laws as ‘just crazy’ reinforces the need to demonstrate that compliance with minimum standards is not optional, it’s the law,” O’Sullivan found.

Employment lawyer Peter Vitale told SmartCompany the size of the underpayment isn’t relevant as much in this case, as the penalty to Xu and Grandity appears to be a broader message.

“It wasn’t merely the underpayment but the fact that a sham contract was in place so that Grandcity had put employees on a contractor arrangement when they should have been on an employee one,” says Vitale.

“The Fair Work act makes this an offence.”

Benefits that lure employees into implementing contractor arrangement as a pose to employee arrangements with workers is that employers are not required to provide superannuation, leave or penalty rates. In comparison, a contractor receives none of these benefits but is usually paid at a higher rate.

Vitale argues as this breach appears to be deliberate, “the courts need to send a message about enforcing minimum standards and that’s what they’ve done.”

SmartCompany contacted Grandcity but did not receive a comment before publication.