The operators of an inner Sydney restaurant who relied on informal market research to set their wage rates have been penalised almost $300,000 for deliberately short-changing their employees and using false records to try to disguise the underpayments.

Handing down the penalties this morning, Federal Circuit Court Judge Justin Smith found that the Mamak Malaysian restaurant on Goulburn Street Haymarket had deliberately ignored its workplace obligations “in order to maximise profit”.

“That approach, of course, was taken at the cost of the employees, who, in reality, funded the success of the business,” Smith said at the conclusion of legal proceedings initiated by the Fair Work Ombudsman.

The Fair Work Ombudsman took legal action after an investigation revealed that six employees – five of them visa-holders at the time from non-English speaking backgrounds – were collectively underpaid more than $87,000 when they received as little as $11 an hour between February, 2012 and April, 2015.

Restaurant owner-operators Joon Hoe Lee, Julian Lee and Alan Wing-Keung Au have been penalised $36,992, $35,360 and $35,360 respectively.

Their company Mamak Pty Ltd has been penalised a further $184,960.

Smith found that the underpayments stemmed from informal market research by the restaurant operators to see what other restaurants were paying their staff.

“They discovered that there were three approaches – the first were the star-rated restaurants, which paid according to the Award, the second were medium restaurants that followed the Award half the time and the third included small restaurants that just paid illegal rates,” Smith said.

“Mamak took the third approach. The fact that there are many restaurants in the industry that do not comply with their legal obligations does not exculpate the respondents in any way. In my view, it does the opposite.

“The point here is that all of the respondents knew that there was an Award but deliberately chose to ignore it in order to maximise profit.

“Not only did the respondents know that the employees were being paid less than their legal entitlements, but they also knew that their records were not kept in accordance with the law.”

In addition to the financial penalties, Smith ordered Mamak Pty Ltd to commission a qualified professional to audit pay practices across all of its restaurants next year and to rectify any underpayments identified.

The audit – for the period from March to December 2016 – will cover the Haymarket restaurant, as well as Mamak Malaysian restaurants at Chatswood in Sydney and the Melbourne CBD, and a factory at Marrickville, in Sydney, where food is prepared.  

Fair Work Ombudsman Natalie James said the Agency is strongly committed to taking pro-active action to improve compliance in the hospitality industry.

James said she was particularly pleased to see the Court taking the provision of false records to Fair Work Inspectors seriously, and awarding close to the maximum penalties available under the current laws. She also noted the government’s commitment to increasing these penalties in its election policies.

“Cases such as this demonstrate the harm that can be caused when businesses fail to keep records, or provide false records to disguise their deliberate underpayment of staff.”

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