Restaurant empire behind Chin Chin underpaid staff: leaked audit

Ben Schneiders and Royce Millar

October 3, 2019

The Age

A detailed external audit shows that the high-end restaurant business that runs Chin Chin in Melbourne and Sydney underpaid staff by $340,000 in a single year, with one-fifth of the company’s workforce affected.

The audit by accounting firm Stannards measured actual staff wages for the 2017-18 financial year against the award at The Lucas Group Services Pty Ltd- a company owned by prominent restaurant owner Chris Lucas. The audit showed that in one financial year alone, 134 staff – or about 20 per cent of the workforce – were paid less than the minimum rates of the award, the wages safety net.

Through lawyers, Mr Lucas “vehemently” denied there were underpayments and said workers had been repaid in full – a claim disputed by a number of staff members interviewed by The Age and The Sydney Morning Herald.

Mr Lucas refused to be interviewed on the record for this story, but in a separate interview with the Herald and The Age he called for an amnesty in investigations for underpayments to allow employers to make adjustments “without fear of being publicly attacked or fined”.

He complained about media reporting of underpayments in the restaurant industry, said the employment law was too “complex”, and it was “almost impossible for even the most professional organisation to be totally compliant”. He added that he was “concerned about the mental state of the people that have been publicly hung out to dry”.

The 15-page audit of The Lucas Group shows hundreds of thousands of dollars of underpayments occurred at all the company’s restaurants including Chin Chin in Sydney and Melbourne, Kisume, Go Go Bar, Hawker Hall, Kong and Baby Pizza. It was most pronounced at Chin Chin Sydney which opened in October 2017.

The audit compared actual pay rates for nearly 700 waiters, chefs and other staff against what they should have been paid, and shows significant discrepancies. Some staff had been paid $10,000 per year less than they should have received as compared to the minimum rates of the award. The Age and Herald are not suggesting that Mr Lucas consciously underpaid staff.

Accounting firm Stannards did not respond to requests for comment.

Law firm Holding Redlich, acting for the company, threatened legal action against the newspapers unless they destroyed their copy of the audit. They also demanded a list of all people we spoke to about the audit. The Age and the Herald have not complied with the request.

The lawyers said the company “vehemently denied” staff were underpaid and said the report cited was “confidential” and a likely “draft report” and that it was “almost certainly” out of date and incomplete.

“The company has paid the full amounts specified in the final reconciliation report  …  a shortfall during the year, if rectified following a reconciliation in accordance with the award, does not constitute underpayment,” they said.

But chefs and other staff said that, where they have occurred, many of the repayments had only been a fraction of what had been assessed under the audit. Some of the repayments were made nearly a year after the underpayment occurred.

The Age and Sydney Morning Herald have been in contact with eight people who were listed as underpaid in the 2017-18 audit. Only one said they had been paid in full, three said they received no payment and the rest had received partial payments. One worker listed by the audit as being underpaid nearly $9000 received a third of what they were owed, documents show.

The apparent failure to repay these workers in full – or in some cases at all – comes despite the company being subject to an ongoing investigation by the Fair Work Ombudsman. The Ombudsman said it was investigating but would not comment further: “We urge workers to contact us directly for assistance,” a spokeswoman said.

The view with these bigger restaurant groups is that it is a privilege to work at these groups. If you don’t like it you can get the f— out.

A worker at The Lucas Group.

The audit had not been provided to the Ombudsman, according to sources with knowledge of the situation. Lawyers for the company said the business was under “no obligation” to provide the audit report as it did “not relate to the period under review” by the Ombudsman.

The hospitality industry has a culture of long and unsociable hours and the restaurant award allows management to “buy out” penalties and overtime for a 25 percent higher hourly rate. However, under the buyout, permanent workers must still be paid more than the award overall. It is a breach of workplace laws for an employer to require excessive unpaid overtime that pushes wages below those minimum legal rates.

The Lucas Group has recently decided to move away from the annualised salary method of paying staff and will now pay award rates, for nearly all staff, for all hours worked each week.

Since The Age and Herald first contacted the company in August, one staff member underpaid in the previous year, 2016-17, has also started being repaid – more than two years after the underpayment occurred.

In late 2017, the company paid back one bartender Sorcha Harrop $9500 for just nine months work after she took legal action. At the time the company claimed her situation was unique. Ms Harrop told The Age and Herald she took the legal action after realising how badly she and her colleagues were treated.

“For a period there, I was doing open to close, 9am to 1am the next morning with only an hour break,” Ms Harrop said. “They exploited eager passionate people and worked them to the bone.”

Workers, who did not want to be named but who were listed in the audit as underpaid, also complained of harsh working conditions: “People like me are basically treated like shit,” said a former chef at Kisume. “The view with these bigger restaurant groups is that it is a privilege to work at these groups. If you don’t like it you can get the f— out.”

An industry source with knowledge of the situation said significant underpayment continued into the 2018-19 financial year, particularly at Chin Chin Sydney.

Sydney chef and restaurateur Matt Moran has claimed that, “making any hospitality company 100 per cent compliant is hard because there are so many different awards … The whole thing should be simpler.” And Erez Gordon, who owns The Bishop in Sydney’s Surry Hills, said, “so-called ‘wage theft’ has been culturally acceptable for decades … because that’s how

survive and stay in the game.”

But the Victorian secretary of the hospitality union, Ben Redford, said the broader issue of wage underpayment was of “great concern to Hospo Voice and its members”. He called on the Fair Work Ombudsman to take “swift, firm action” on the issue and for significant penalties to be handed down in “appropriate cases.”

An ongoing investigation by The Age and Herald has uncovered industry-wide underpayment of wages whereby permanent staff are disadvantaged through the excessive use of unpaid overtime. The investigation has uncovered the practice at restaurant businesses fronted by industry heavyweights Neil Perry, Heston Blumenthal, Shane Delia, Guillaume Brahimi and Teage Ezard.

All are being investigated by the Ombudsman. Similar issues ensnared high profile restaurant figure George Calombaris. His business recently paid back staff $7.8 million and a $200,000 “contrition” payment.

Mr Lucas has claimed the restaurant industry has been unfairly singled out, pointing to wage scandals in other industries.

But Fair Work Ombudsman surveys regularly show the hospitality sector among the worst offenders with up to half of all restaurants and cafes non-compliant with the law.