George Calombaris’ restaurant empire has collapsed, is now in administration and his twelve restaurants are up for sale. Because of this collapse, about 400 staff are now out of work1. How could this happen to such a successful restaurateur? Well, it all started when it was reported that 200 staff at his restaurants had been underpaid $2.6 million. According to Calombaris, this was because of poor processes in classifying employees from around 2011. Calombaris’ company was initially alerted to the payroll problems by the Fair Work Ombudsman in 2015, but the issue was not investigated by the company until late 2016 when the new CEO, Troy McDonagh, contracted KPMG to sort out what had happened. While many staff were underpaid, especially overtime, nearly half of all staff were overpaid their base salary2.
When this came to light, Calombaris’ company was made to pay back current and former employees and under a court-enforceable undertaking with the Fair Work Ombudsman, was compelled to make a $200,000 ‘contrition payment’ (i.e. fine). Attorney General Christian Porter considered this to be too light a penalty given that the full extent of the underpayment was found to be $7.83 million. The Fair Work Ombudsman later agreed that the fine was probably too low. Calombaris was also dropped as one of the ‘judges’ on the MasterChef television show, along with other ‘judges’ Matt Preston and Gary Mehigan, ostensibly for asking for too big a slice of the revenue pie. However, it does make you wonder if that was the reason, as this happened after a petition with 25,000 signatures was raised calling for his sacking. Calombaris was subsequently given the chop as the face of a lucrative campaign with Tourism WA2,3,4.
Reaction by the public was particularly swift with patronage of 12 restaurants owned by Calombaris’ company dropping by 50% after the scandal became public. It was this drop in cash flow which led to Calombaris’ company going into receivership, as it owed the Commonwealth Bank, its chief lender, some $5-10 million1.
After the collapse of Calombaris’ empire, the blame game started. The first was the hospitality sector which blamed the Fair Work Ombudsman for their overzealous ‘name and shame’ campaign. They also argued that more jobs than just those from Calombaris’ restaurants could be at risk5. This indicates that they know of other instances of underpayment of staff. This drivel from the hospitality sector blaming the regulator is tantamount to abusing the police for the loss of income by armed robbers because of a sentence of incarceration handed out by the courts. Could it be, if Calombaris hadn’t underpaid his staff, his company would still be trading?
Second cab off the rank of blame, was Innes Willox, Chief Executive of the Australian Industry Group. He blamed the government and unions for a well-meaning but out of control campaign. He particularly aimed his rhetoric at the “unions, in particular, through relentlessly overinflating and politicising the issue and branding employers as ‘thieves’”, and stated that they “should bear much of the opprobrium for the sad outcome in the Calombaris case and others.” Ludicrously, he went further: “Anti-business rhetoric has reached fever pitch, risking jobs and investment and federal and state governments were supporting a divisive agenda by parroting overly emotive union terms such as ‘wage theft’.”5. These statements by Willox are even more bizarre. Given that unions represent workers, Willox is effectively blaming the people who were underpaid for the collapse of Calombaris’ empire. Given the recent lies blaming the Greens and arsonists for the bushfires uttered by assorted members of the government and other right-wing nutters6, I am surprised Willox didn’t include the Greens and arsonists among those responsible for Calombaris’ demise. Despite this, his statement is just as stupid.
Sources
- https://www.theage.com.au/national/victoria/continued-to-lose-money-fire-sale-at-george-calombaris-food-empire-20200211-p53zql.html
- https://www.smh.com.au/business/workplace/george-calombaris-restaurants-underpaid-staff-26-million-20170403-gvctvq.html
- https://www.abc.net.au/news/2019-07-24/george-calombaris-master-chef-judge-fine-too-light/11341096
- https://thenewdaily.com.au/finance/work/2019/10/23/george-calombaris-fine-wage-theft/
- https://www.afr.com/work-and-careers/workplace/who-killed-george-calombaris-empire-20200211-p53zr7
- http://www.blotreport.com/2020/01/05/who-to-blame/
It is awful this abuse of union power and how it hurts us poor old business owners isn’t it? It happens time and again. Look at all those poor seven year olds who worked “down pit” pulling coal wagons that were denied their halfpenny a day to help keep their families out of debtor’s prison who were denied by the rabid unionists. How else were mine owners supposed to make a decent profit? Then there were those unionists who forced well meaning decent employers to the wall through their insistence on campaigning for eight hour days, and actually having a whole weekend off. Then they asked for such things as maternity leave, then paternity leave, would you believe, then overtime, then flexitime, and penalties, and leave loading. Fortunately we have been making some inroads into this union tyranny over the last thirty or so years and some things have been wound back. The unions now only have 15-20% of the workers in their thrall. Yes eventually we will restore the working class man to his rightful position of complete subservience. Then these bloody unionists, ombudspeople, auditors, these interferers in our right to plunder resources, human and non-human, and maximise our hard earned fortunes, will feel our wrath.
Mark,
Spot on the money. It is only the times which have changed; the attitudes are still the same. The irony is that with the decline in union power, comes the stagnation of wages, and comes the decline of retail, so the retailers ask for smaller wage rises, cuts to penalty rates, and more wage stagnation. Muppets shooting themselves in the foot.
I see Coles has now admitted underpaying store managers by $20M. No doubt in Willox’s confused and perverse mind that will turn out to be the fault of a union somewhere. I have a relative who managed Woolworths stores in his late teens. He may have been paid at required rates but I can tell you it was slave labour, with hours of unpaid work. Like many he was looking at future reward – until the penny finally dropped.
Jon,
Now Wesfarmers have admitted that Target has underpaid staff. They rarely ever seem to overpay staff.
And Super Retail Group (Rebel Sport, Supercheap Auto, Macpac, BCF) has now admitted that their accidental wage theft costs have ballooned to $61.2M. Small bikkies compared to Woolworths’ $300M.
UNSURPRISINGLY, business groups are lining up to blame everyone apart from the perpetrators. Council of Small Business Organisations Australia chief executive Peter Strong, Australian Industry Group chief executive Innes Willox and Australian Retailers Association executive director Russell Zimmerman are all fuming at the federal government’s plan to FINALLY make business leaders accountable.
SURPRISINGLY, Christian Porter has swatted away their bluster:
“Mr Porter, who has said employers should expect only modest changes to the award system under a separate review, on Tuesday made clear he had no patience for employer pleas about complexity.
“To blame complexity, from some of the most sophisticated organisations in Australia, is just something that I fundamentally do not accept,” he said.
“Many of them engage in massive expenditure effort on self-promotion, on advertising, and they have had their eye off the ball.”
https://www.smh.com.au/politics/federal/vigilante-risk-employers-hit-back-at-push-to-shame-wage-thieves-20200217-p541i8.html
I’d add: “many of them have executives and managers who are handsomely remunerated (aka massively overpaid) to ensure the efficient running of the business ACCORDING TO THE LAWS OF THE LAND.”
Jon,
Everyone, it seems, has their snouts in the trough, except the people who actually do the work. It would be good to see a few of these gits in gaol. I think they might suddenly find that their systems improve almost overnight. My partner, who was in HR and oversaw the wages system for a large organisation said that there are some really ropey wages software systems out there. I bet they are cheap too.
Undoubtedly many of the mistakes were unintentional and it’s good to see restitution being made, but that’s not the point, as Porter as pointed out. You can be sure that executives make absolutely certain that their own remuneration packages are correctly delivered down to the last dollar.
Jon,
I bet executives make sure their packages are all present and correct. When something exceptionally disgraceful appears on the news, I often scare my partner, by saying ‘If I was fuhrer, things would be different’. I’d make the top marginal tax rates much higher than they are now; bonuses to be spread around the entire workforce of a particular company; CEO’s and other executives’ salaries to be capped as a multiple of that of the the lowest-paid employee, etc. etc.