Brewing Trouble: Coffee Chain Fined $1.44M for Franchisee Underpayments – A Bitter Lesson for Franchisors!

In a landmark decision handed down today, 85 Degrees Coffee Australia Pty Ltd has been penalised for breaching the Vulnerable Workers Laws. We previously wrote about these laws and how franchisors can comply with them in our article here

Our key takeaways from the decision handed down today are as follows:

  1. Significant Penalties for Non-Compliance: The Federal Court fined 85 Degrees Coffee Australia Pty Ltd $1.44 million for underpayments and record-keeping breaches by its franchisees, highlighting the severe financial repercussions of non-compliance.
  2. Responsible Franchisor Duty: Franchisors can be held liable under the Fair Work Act’s s558B if they reasonably could have known about breaches by their franchisees. Justice Bromwich found that 85 Degrees failed to uphold this duty, knowing contraventions were likely and failing to prevent them.
  3. Repeat Offender: The court noted that 85 Degrees is a repeat offender, previously fined $475,000 for underpaying Taiwanese interns in 2022 and having entered an enforceable undertaking in 2015 for similar issues between 2009 and 2014, showing a pattern of non-compliance.
  4. Systematic Failure: The judgment emphasized that 85 Degrees demonstrated a systematic failure to ensure compliance within its franchise network, underlining the importance of robust oversight and compliance mechanisms for franchisors.
  5. Lesser Underpayments in Current Case: While the overall underpayments in the latest case ($32,321.19) were significantly less than previous amounts ($429,393.18), the court’s ruling still resulted in substantial fines, demonstrating that even smaller violations can lead to heavy penalties if systemic issues are evident.

If you are a franchisor and want to know more about your obligations pursuant to these laws, please get in touch.

Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply