Subway franchisee accused of underpaying workers more than $50,000

A Subway franchisee is in hot water for allegedly underpaying 11 staff by more than $50,000, with an industry expert warning that franchisors should ensure their franchisees receive proper legal information.

The Fair Work Ombudsman has launched a prosecution against the operator of four Subway outlets in Newcastle in northern NSW.

According to Fair Work Ombudsman Nicholas Wilson, the decision to prosecute was made because of the significant amount involved for vulnerable, young workers, and the employer’s failure to rectify the matter.

It is alleged Nicole Patrice Dawe, who part owns and operates the four outlets, was centrally involved in underpaying 11 employees a total of $56,585 between 2006 and 2011.

It is alleged the majority of the underpayments are the result of the employees – who were aged between 15 and their early 20s – being underpaid the minimum hourly rate.

Some employees were also underpaid annual and personal/carer’s leave entitlements, and payment in lieu of notice of termination.

The biggest individual underpayment alleged is $18,512.

Dawe was allegedly involved in failing to comply with Notices to Produce employment records, keep proper employment records, and issue pay slips in line with workplace laws.

Dawe was allegedly also involved in committing multiple breaches of workplace laws. She faces maximum penalties of up to $6,600 per breach.

The Fair Work Ombudsman is seeking a Court Order that any penalty imposed on Dawe goes towards rectifying the alleged underpayments of the employees.

A directions hearing is listed for June 22 in the Federal Magistrates Court in Sydney.

The private company through which the four Subway outlets were operated between 2006 and 2011 – Kijani Investments Pty Ltd – was placed into court-ordered liquidation earlier this year, preventing the Ombudsman from prosecuting the company.

Brian Tap, regional director for Subway Systems Australia, told Franchising every Subway restaurant in Australia is individually owned and operated by independent franchisees.

“Franchisees [are therefore] responsible for hiring, training, remunerating and managing their staff according to law,” Tap said.

“We expect franchisees, as small business owners, to follow all laws and regulations pertaining to operating their businesses.”

Subway says it is working with the Fair Work Ombudsman, as part of a national franchise program, to better educate franchisees concerning employment-related matters.

Jason Gehrke, director of the Franchise Advisory Centre, says someone who is going into business for themselves, as a franchisee, will ultimately look to the franchisor for guidance.

“If the franchisor is not providing information and advice, the franchisee has to seek that information for themselves,” Gehrke says.

“If the franchisee is underpaying young people large sums over a long period of time… that can easily result in some brand damage for the franchisor.”

“I think more and more franchisors will become more vigilant in the IR space because… they won’t want to see their franchisees getting them bad press.”