Another burst bubble: Chatime fined after underpayment

Last month, the Fair Work Ombudsman (FWO) secured $132,840 in penalties against the Australian franchisor of popular bubble tea franchise Chatime Australia Pty Ltd (Chatime) and its managing director after underpayments totalling more than $160,000 were discovered across its stores in Sydney and Melbourne.

Unfortunately, wage theft in Australian workplaces has become a recurring feature in 2024, and the recent bubble tea pay dispute is just the latest warning to all employers, especially franchises, about the financial and reputational risks of non-compliance.

Here, our experts explain the FWO’s decision, the Chatime workplace penalties, and how it underscores the critical responsibility employers have in adhering to workplace laws.

The facts of the Chatime wage theft case: 152 employees across ten stores in two states

In November 2024, the FWO fined Chatime $132,840 after the franchisor was found to have seriously breached the Fair Work Act (Cth) 2009 (FW Act) multiple times, including underpayment of workers and failing to meet its legal obligations.

Between August and December 2016, Chatime Australia underpaid 152 workers – including 41 junior workers under the age of 21 and 95 visa holders – across 19 stores in Sydney and Melbourne a total of $162,533. After a thorough investigation, it was uncovered that workers were paid flat hourly rates as low as $7.59, bypassing lawful entitlements such as loadings and penalty rates under the Fast Food Industry Award.

The Federal Circuit and Family Court has issued a $120,960 penalty to Chatime, the franchisor responsible for numerous Chatime outlets across the country, including those it directly owns and operates. Additionally, the Court imposed an $11,880 penalty on Chatime Australia’s Managing Director, Chen ‘Charlley’ Zhao, for his role in facilitating certain underpayments.

The compliance lessons every employer must learn

This case highlights the critical need for franchisors to ensure they remain vigilant in their oversight of franchisee compliance. While franchisees handle day-to-day operations, franchisors must ensure they adhere to workplace laws.

The $132,840 penalty imposed on Chatime serves as a clear warning: non-compliance will lead to significant fines, reputational harm, and extensive legal liabilities. In his decision, Judge Nicholas Manoursaridis found it necessary to send a message to employers who fail to ensure employees are paid their minimum entitlements and fairly compensated will face the consequences of their actions.

FWO will continue prioritising compliance in the fast food, restaurants, and cafés sector

Filing over 140 litigations against employers involving visa-holder workers in the last seven years, the FWO isn’t slowing down when it comes to enforcing compliance securing more than $23 million in this timeframe.

Fair Work Ombudsman Anna Booth has reinforced the FWO’s commitment to ensuring fair wages for migrant workers and treating cases involving the underpayment of vulnerable workers very seriously, saying, “The large number of vulnerable employees underpaid in this matter was concerning”.

Thinking about your workplace compliance? Talk to us

Whether you’re a small business or part of a franchise network, ensuring compliance is essential. And while most business owners wouldn’t dream of intentionally committing wage theft, mistakes can and do happen – this is where Citation HR can help. Our workplace relations experts can complete a thorough HR compliance audit of your business – and the best part is that this service is included in our monthly, cost-effective subscription, which is designed to protect your business from costly risks.

If any of this information has raised any questions about positive duty in your workplace or you’ve got another matter you need assistance with, reach out to our experts via our 24/7 HR Advice Line.

Not a Citation HR client? To learn more about how Citation HR can support your business and streamline its people management practices, get in touch with our friendly team for a confidential, no-obligation chat here.

About our author

Simone Atherton is a Workplace Relations Consultant at Citation Group. She has an interest in all things legislation and ER/IR related and regularly provides advice on workplace matters to find solutions for clients. She is currently completing a postgraduate Juris Doctor degree and is passionate about industrial relations, providing effective and tailored solutions to workplace challenges, and ensuring fair and compliant practices for both employers and employees