City massage shop faces enforcement action after underpaying international students, backpackers

14 September 2016

The Fair Work Ombudsman has sounded a follow-up warning to the operators of massage shops that flouting minimum pay rates and short-changing vulnerable overseas workers will not be tolerated.

The latest note of caution follows another case in Melbourne where Fair Work inspectors have uncovered the underpayment of vulnerable Chinese workers at a massage shop in the CBD.

The Agency has announced enforcement action against Sen’s Body & Mind in the Melbourne Central Shopping Centre for misclassifying employees as independent contractors and short-changing them thousands of dollars.

When Fair Work inspectors audited the business just before Christmas last year, it found 10 of the 11 workers were international students or backpackers on the 417 working holiday visa.

Initially, Fair Work inspectors issued Sen’s Body & Mind with an on-the-spot fine for its failure to keep appropriate records and issue pay-slips as required, but the employer challenged the fine, maintaining that the workers were independent contractors – not employees.

As a result, an investigation was undertaken, which re-affirmed that the workers were employees and should have been paid minimum wages and entitlements applicable under the Hair and Beauty Award 2010.

Inspectors found that six staff had been underpaid a total of $5152 between December 21, 2015 and January 10, 2016.

The largest underpayment of an individual worker was $1036.

Sen’s Body & Mind paid each of the workers 45 per cent of the cost of each massage treatment they performed.

However, as casual employees, they were entitled to be paid a minimum of $24.30 an hour for ordinary hours worked and up to $25.86 on Saturdays and $38.88 on Sundays.

For time worked after 9 pm Monday-to-Friday and after 6 pm on Saturdays, the workers should have been paid $29.16 an hour and up to $48.60 on public holidays.

Fair Work Ombudsman Natalie James says the employer, Yuns Healing Spirit Pty Ltd, has been required to enter into an Enforceable Undertaking aimed at encouraging behavioural change and future compliance with workplace laws.

As part of the arrangement, it must repay the affected workers and apologise for its conduct, undertake workplace relations training and engage independent professional consultants to audit its future compliance.

Enforceable Undertakings were introduced by legislation in 2009 and the Fair Work Ombudsman has been using them to achieve strong outcomes against companies that breach workplace laws without the need for civil court proceedings.

“We use Enforceable Undertakings where we have formed a view that a breach of the law has occurred, but where the employer has acknowledged this and accepted responsibility and agreed to co-operate and fix the problem,” Ms James says.

In March, the Federal Circuit Court imposed penalties of more than $118,000 against the operators of two Melbourne massage shops which underpaid two of therapists more than $54,000.

Read the media release: Court imposes $118,800 penalty for underpayment of Chinese massage therapists.

Ms James says massage shop employers need to ensure they are aware of the minimum lawful pay rates their employees are entitled to, including penalty rates.

“It's not acceptable for an employer to pay a worker a ‘going rate’ or what they think the job is worth,” she says.

“I understand there are cultural challenges and vastly different laws in other parts of the world, but it is incumbent on all businesses operating in Australia to understand and apply Australian laws. To that end, the Fair Work Ombudsman is here to help with free advice and resources in a range of languages.”

Ms James says the Fair Work Ombudsman has identified a common business model operating across many massage shops.

“Therapists are paid a percentage of the cost of the massage they perform, typically 50 per cent, with no remuneration for time spent at the business where they have no clients,” she said.

“Anecdotally, we know that the therapists are often international students or overseas workers here on the 417 working holiday visa, particularly in Chinese and Thai massage shops.

“We continue to receive requests for assistance from employees of massage shops, despite the fact we have sought to educate employers in this industry and taken a number of enforcement actions.”

In February this year, teams of Fair Work Ombudsman inspectors made surprise, unannounced visits to 18 massage shops in Hobart and Adelaide in a pro-active effort to promote workplace compliance. Since it was established in 2009, the Agency has targeted massage services in Adelaide, Darwin, Newcastle, Coffs Harbour and on the Gold Coast.

Contravention rates have consistently been found to be between 40 and 60 per cent and typically include underpayment of wages, non-payment of wages, failure to issue employees with pay-slips, failure by employers to maintain proper employment records and misclassification of employees as independent contractors.

“Employees working in the industry are generally overseas workers whom we consider vulnerable because of their lack of knowledge about their workplace rights and/or their struggle to find gainful employment because of their limited English skills,” Ms James says.

She says employers should be aware that the Fair Work Ombudsman treats underpayment of overseas workers very seriously, and has recently been working closely with business and media representatives to help raise awareness among Chinese employees and employers of their workplace rights and obligations.

There are now more than 50,000 Australian Chinese-speaking business owners or managers and over 250,000 Australian Chinese employees in our workforce.

However, feedback to the Fair Work Ombudsman suggests there is a low awareness of workplace laws in Australia and the Agency has developed a strategy to increase community understanding via connections with community leaders and groups.

Overseas workers on the 417 working holiday visa have emerged as a strong priority for the Fair Work Ombudsman, and their wages and conditions are the subject of a national Inquiry launched last August. The findings of that Inquiry are being collated and will be publicly released in the near future.

Ms James says she is focused on ensuring the Agency also does more to ensure culturally and linguistically diverse business operators understand and comply with Australian workplace laws. “Minimum wage rates apply to everyone in Australia – including visa-holders – and they are not negotiable,” she said.

Employers who are concerned that they are not meeting their workplace obligations can visit www.fairwork.gov.au or phone the Fair Work Infoline on 13 13 94. An interpreter service is available by calling 13 14 50.  Small businesses calling the Infoline can opt to receive priority service to assist with their inquiries.

Information to assist people from culturally and linguistically diverse backgrounds has been translated into 27 languages and is available on the website.

The Agency also has fact sheets tailored to overseas workers and international students on the website and YouTube videos in 14 languages to assist workers to understand their workplace rights.

The Fair Work Ombudsman’s Pay and Conditions Tool (PACT) provides advice about pay, shift, leave and redundancy entitlements. Visit www.calculate.fairwork.gov.au to learn more.

Ms James said the Agency recently launched an Anonymous Report function which enables members of the community to alert the Fair Work Ombudsman to potential workplace issues. Intelligence can be provided anonymously at www.fairwork.gov.au/tipoff.

Follow Fair Work Ombudsman Natalie James on Twitter @NatJamesFWO external-icon.png, the Fair Work Ombudsman @fairwork_gov_au External link icon or find us on Facebook www.facebook.com/fairwork.gov.au External link icon.

Sign up to receive the Fair Work Ombudsman’s media releases direct to your email inbox at www.fairwork.gov.au/mediareleases.

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Media inquiries:

Eithne Johnston, Media Adviser
Mobile: 0439 835 855
eithne.johnston@fwo.gov.au

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