George Calombaris (Image: AAP/Regi Varghese)

Normally, employer groups are among the most vocal supporters of rigorous enforcement of industrial relations laws, especially on “rogue” and “militant” unions.

But the hospitality industry, it seems, would prefer if the relevant regulator wasn’t too eager to enforce the rule of law. At least, that’s the message in the wake of the collapse of George Calombaris’ restaurant company.

The celebrity chef’s empire crumbled after revelations it underpaid staff millions over a number of years. A dramatic fall in patronage followed.

The CEO of the Restaurant and Catering Association, Wes Lambert, blamed the collapse on the Fair Work Ombudsman’s “heavy-handed enforcement” of award pay levels.

“This is what happens,” he said, having listed the pressures the industry faces, “when you add on top of that a regulator naming and shaming businesses that are coming forward and reporting underpayments.”

Perhaps he didn’t think it through, but the implication of that is Lambert would prefer underpayment be kept secret from the public, to prevent customers exercising their prerogative to avoid offenders like Calombaris’ restaurants. Would that include gag orders on employees to prevent them telling the media they’d been underpaid?

Australian Industry Group head and IR hardliner Innes Willox was exercised not so much by the FWO “naming and shaming” offenders as the use of the term “wage theft”.

“The unions, in particular, through relentlessly overinflating and politicising the issue and branding employers as ‘thieves’, should bear much of the opprobrium for the sad outcome in the Calombaris case,” Willox said.

“Anti-business rhetoric has reached fever pitch, risking jobs and investment.”

There was, Willox said, only a “very small minority of employers who deliberately underpay workers”. 

Alas for Innes, that doesn’t quite stand up.

Multi-year data from the Fair Work Ombudsman (FWO) shows that more than a quarter of employers in industries targeted by the FWO — of which hospitality is a key one — underpay their workers.

The case could be made for exactly the opposite point to Willox’s — that driving employers who underpay workers out of their industries reduces the pressure on employers who do the right thing by their workers, giving them greater confidence to invest knowing they aren’t facing competitors who cheat.

The arguments of hospitality employers might have a skerrick of credibility if wages in the sector had been expanding rapidly in recent years.

But Wage Price Index data from the ABS for the food services and accommodation industry, which includes restaurants, cafes, pubs and clubs, shows average annual wages growth of only 2.2% over the last four years — slightly above the 2.1% average growth for the entire economy, but well below the fastest-growing sectors during the years of wage stagnation, health and infrastructure.

Nor has the sector had trouble attracting workers — jobs in the food and beverages services employment sub-division have grown 22% in the same period.

Wage growth was also just 0.6% above the Consumer Price Index average over the same period. Indeed, the restaurant sector benefited from the Fair Work Commission’s cuts to penalty rates, meaning many workers have actually gone backwards on pay. If the industry can’t cope with real wages growth of 0.6% a year, there’s a flawed business model somewhere.

Willox, notably, criticised both sides of politics and scolded the government for “supporting a divisive agenda”. After a slow start in the face of revelation after revelation of underpayment by major employers, the government increased the FWO’s budget by tens of millions to crack down on both wage underpayment and sham contracting. The FWO’s raiding squads now uncover at least one case of wage underpayment a week, and often more, in industries like hospitality.

The government is also set to introduce new laws in coming months that are expected to criminalise wage underpayment, to the fury of employer groups.

The term “wage theft” has only been used on a few occasions by FWO representatives in recent years, and usually in relation to its usage by others.

The government, on the other hand, has been less restrained. “Submissions on wage theft criminalisation,” were invited by Attorney-General Christian Porter in September, “to help stamp out deliberate and systematic wage theft by Australian employers.”

The Coalition might be anti-union, but even it knows blatant exploitation of workers when it sees it.

Peter Fray

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