Café faces almost half a million dollar penalty for underpaying Taiwanese students

The 85 Degrees café brand operator in Australia faces a $475,200 penalty in court after it underpaid Taiwanese students under the pretense of a supposed internship arrangement. According to the Fair Work Ombudsman’s office, the penalty came after the company admitted its violation of Australian workplace laws by underpaying eight Taiwanese students between July 2016 and June 2017.

The independent statutory agency also noted that the penalty secured against 85 Degrees Coffee Australia Pty Ltd is the fifth-highest overall penalty obtained in an FWO case and the second-largest court penalty against a single company.

Deliberate underpayment of students

At the time of work, the Taiwanese students were between 20 and 22 years old and had difficulties with the English language, according to FWO’s report.

“They were students at the Taipei City University of Science and Technology in Taiwan and came to Australia on working-holiday visas under an ‘internship’ arrangement between the University and the Taiwan-based Comestibles Master Co Ltd, an associated entity of 85 Degrees that shares the same parent company,” the FWO said.

During their internship, the students were then placed in 85 Degrees branches in Australia. Four students worked at an 85 Degrees cake factory in St Peters. Two worked at the company’s bread factory in Hurstville; one worked across the St Peters factory and the 85 Degrees café outlet in Hurstville. Lastly, another worked at the company’s outlet on George Street in the Sydney CBD.

“The purported internship involved 85 Degrees paying the students between $1,650 to $1,750 per month for performing up to 60 to 70 hours of work per week in its factories and retail stores in Sydney,” FWO said.

After the investigation commenced, it was found that each student was underpaid between $50,213 and $58,248 in just under 12 months. 

“The students were entitled to be paid the minimum rates and entitlements under the applicable Awards, including minimum wage rates, overtime rates, penalty rates, annual leave entitlements and superannuation,” the FWO said.

The company also violated the provisions of the Fair Work Act concerning the issuance of pay slips, record-keeping, and giving Fair Work Information Statements.

Ultimately, Justice Robert Bromwich found that 85 Degrees deliberately underpaid the workers.

“Its most senior management must have been aware, or at least plainly should have been aware, that Australian law applied to the employment here,” Bromwich said. “The end result was undoubtedly exploitative, and the contravening conduct itself was plainly deliberate.”

Bromwich also rejected the company’s claims that the students were not particularly vulnerable under the internship.

“I am unable to accept that the intern employees were anything other than highly susceptible to exploitation in the sense of being in no realistic position to resist being overworked and underpaid,” Bromwich said. “The long hours that were not paid for by overtime or penalty rates, longer than other employees, exacerbated the poor living conditions and general amenity brought about by not being able to pay for suitable accommodation.”

The FWO noted it was not the first time that 85 Degrees contravened the Fair Work Act. The company entered into an enforceable undertaking with the FWO in 2015 after underpaying other visa holders.

Warning to all employers

Following the case, Fair Work Ombudsman Sandra Parker warned employers in Australia that the deliberate underpayment of visa holders can bring severe consequences and hefty penalties.

“The substantial penalty sends a clear message that the exploitative conduct we have seen in this matter will not be tolerated in any Australian workplace,” Parker said. “Employers must pay the lawful minimum pay rates that apply to all employees, for all hours worked, regardless of a worker’s nationality or visa status.”

Parker also reminded workers with concerns about their pay or entitlements to immediately contact the FWO for assistance.