Din Tai Fung fined $4m after scheme to ‘rob employees’

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Popular dumpling chain Din Tai Fung and two of its senior managers have been slapped with fines worth more than $4 million, with the Federal Court finding a “calculated scheme to rob employees of their hard-earned wages” had occurred.

The Taiwanese chain, which has restaurants in both Sydney and Melbourne, has been fined a whopping $3.9 million, while two managers were ordered to pay fines of $92,232 and $105,084.

Din Tai Fung was investigated by the Fair Work Ombudsman with the court finding a fraudulent scheme had been run for four years which underpaid workers and created “false” records to conceal the wrongdoing.

Federal Court Justice Anna Katzmann found the restaurant chain failed to pay minimum award rates, weekend and public holiday penalty rates, overtime rates, split shift allowances and casual loadings and instead created two sets of records.

One showed a real reflection of wages and hours while the other had “false pay slips, timesheets, payroll journals and pay run summaries”.

Underpaid by up to $50,000

Ms Katzmann described the company’s conduct as “deceitful and unscrupulous” and noted that staff were “particularly vulnerable to exploitation”.

“The overwhelming majority of the employees were young, migrant workers. All but one were under 30,” she noted in her judgment handed down on Tuesday.

Documents before the court, which Din Tai Fung submitted to the Department of Immigration and Border Protection, showed that as of 27 June 2017, 338 of its 382 employees were “foreign employees” and that the vast majority of them were temporary visa holders.

Employees were underpaid different amounts ranging from around $2300 to over $50,000, the court found, and they still have not been compensated.

The court heard evidence that the employers deliberately hired visa holders rather than Australian citizens or permanent residents in order to avoid their business practices coming to the attention of the authorities.

While only 17 employees were highlighted in the case, Justice Katzmann said it was likely to have impacted the broader workforce back in 2018.

Fair Work Ombudsman Anna Booth said the penalties, being the second-highest secured in FWO’s history, underlined the seriousness of the offences.

“We welcome these penalties that demonstrate the serious nature of the offending by the respondents in this matter. Their actions resulted vulnerable migrant workers being underpaid hundreds of thousands of dollars,” she said.

“The court has characterised the conduct of Din Tai Fung as ‘a calculated scheme to rob employees of their hard-earned wages’.

“The FWO agrees with this characterisation of the respondents’ conduct. Serious consequences await any business found to be engaging in such calculated and systemic conduct such as the type uncovered in this matter.”

Will the fines be paid?

However, the two companies that previously ran Din Tai Fung went into liquidation before the case was heard and the current restaurants are now run by new entities.

One of the companies that employed Din Tai Fung staff had a turnover in excess of $15 million in the 2013 financial year and in 2017 it had an annual turnover of $7.2 million.

But a liquidators report showed that it had just $17,000 worth of assets and liabilities of the same amount, while the other operator of Din Tai Fung had $121,000 in debt and liabilities of $144,187.

Rejection of managers financial situation

Justice Katzmann said the HR co-ordinator and general manager, who were involved in the “deceitful” conduct failed to provide any evidence on the underpayments – rejecting a wage audit that only covered eight low level casuals at one restaurant — and showed no contrition.

Lawyers for one of the managers claimed she would have to sell a share of her home to pay the fine, but this was rejected by the judge.

She also rejected claims that the HR manager was paid $49,580 and the general manager received $70,665 in 2018, which was less than the cooks were renumerated.

“I consider it highly unlikely that a member of the management team … would be paid less than a cook and that the general manager would be paid at such a low rate. The inference that they were also paid partly in cash is inescapable,” she said.

Further assessment notices showed the general manager had a taxable income of $7037 in 2022 and in 2023 the HR Manager’s taxable income was a mere $82.

“The ASIC searches show that as of 25 August 2023 neither woman held any shares in any Australian companies,” Justice Katzmann said.

“I have no confidence, however, that this information provides a true or complete picture of their current financial circumstances.”

The court also found that in 2020, while the Ombudsman’s investigations were still in progress, the Din Tai Fung business was sold to another company which currently operates the restaurant chain.

More cases of underpayment

A number of high profile outfits have revealed staff underpayments in recent years.

In January, The Australian Catholic University revealed a multimillion-dollar underpayment of 1100 of its casual academic staff over several years. It admitted to a $3.6 million discrepancy in staff payments, which occurred between 2016 and 2023.

In February, it was revealed that thousands of current and former Optus retail consultants and store managers would be paid out more than $7.8m after the company apologised for underpaying workers.

The Fair Work Ombudsman announced the telco had signed an enforceable undertaking to repay more than 3700 staff members employed between 2014 and the end of 2019.

Last year, Australian retailer Best & Less has been forced to back pay staff more than $5.2m after it was revealed workers were being incorrectly paid and not properly reimbursed for overtime, penalty and annual leave entitlements.