Directors of shoe chain hit with record $200,000 fine for underpaying staff

A record fine of $200,000 has been imposed on the former operators of a chain of Melbourne shoe stores with a history of underpaying their staff.

The penalty is a Victorian record for the Fair Work Ombudsman, which took legal action against the Henna Group in the Federal Magistrates Court in Melbourne.

Henna Group, which formerly operated Scarpe Shoes stores at Docklands, Chadstone and Fountain Gate and a warehouse at Hallam, has been fined $160,000 while the company’s group manager Sahil Rasul and sole director and owner Bulbula Amin, both of Endeavour Hills, have each been fined a further $30,000.

Federal Magistrate Grant Riethmuller found that Rasul and Amin were responsible for deliberately underpaying four staff a total of $16,036 and ordered that part of the fine be used to back-pay the workers, who are owed $5458, $4788, $3796 and $1994 respectively.

The employees were underpaid their minimum hourly rate, penalty rates, leave entitlements and wages in lieu of notice. Their wages were also paid on an irregular basis and they sometimes did not get meal breaks.

Federal Magistrate Grant Riethmuller said there was no evidence of contrition and noted Rasul had told a Fair Work inspector he was winding-up the Henna Group and the Fair Work Ombudsman would not be able to “touch him”.

“The lack of co-operation with the Fair Work inspectors also suggests that the respondents have a complete disregard for the entitlements of their employees,” Riethmuller said in his judgment.

“There is a need for general deterrence and to send a message to the community, and in particular small employers, that employers must make steps to ensure correct employee entitlements are paid.”

Rasul and Amin did not attend the court hearing and did not have legal representation.

Kamal Farouque, a principal at law firm Maurice Blackburn, told SmartCompany the fine is “a pretty significant penalty”.

“I think it reflects the gravity of the approach that court takes when employers fail to comply with paying employees their basic wages and entitlements and it reflects an increasing trend upwards in penalties in this area,” says Farouque.

“In the past, breaches in this area did not incur as significant penalties but two things have impacted on this; firstly, over time the maximum penalties have increased and, secondly, the perceived seriousness of failing to pay employees their proper entitlements has increased.

“It is a warning to employers that they should be careful to comply with their obligations to pay employees their entitlements under awards and agreements.”

Fair Work Ombudsman Nicholas Wilson says the record penalty illustrates how seriously the Courts are now treating the deliberate underpayment of wages by some employers.

“An employee’s right to be paid their full lawful entitlements for work they perform is absolutely fundamental,” Wilson said.

“Successful prosecutions such as this also benefit employers who are complying with workplace laws, because it helps them to compete on a level playing field.”

The previous highest penalty imposed as the result of a Fair Work Ombudsman prosecution in Victoria was $207,900 against Reiquin and its director Richard Timothy Reid for underpaying five casual car washing staff at the Royal Melbourne Car Wash in Camberwell.

The Henna group could not be reached for comment.