The Case

FWO v Crystal Carwash Café Pty Ltd (2014)

Crystal Carwash Café Pty Ltd (Crystal) operated 10 car washes throughout Sydney.

Through a complex sham contracting arrangement involving 24 companies, it engaged approximately 360 car wash workers, who were young, unskilled and/or recent migrants with limited English.

The Fair Work Ombudsman (FWO) commenced proceedings against Crystal, alleging underpayment of wages and overtime. Most employees were paid a flat rate of $13 per hour, despite the minimum overtime rate being more than $21 per hour.

Crystal eventually admitted it was the workers’ employer and paid the underpayments in full, to a total of $180,000. Crystal asked for a lesser penalty to be applied, given they had paid the underpayments.

The Verdict

The Federal Court provided no discount. The payments had been paid just before the matters proceeded to hearing and the underpayments had been deliberate, as demonstrated by the complex structure set up to try to avoid compliance.

The Court ordered Crystal to pay a penalty of $70,000 (from a maximum of $109,000) and imposed penalties of $10,000 each on the payroll manager, and the director and part-owner.

The Lesson

This case demonstrates that the courts are willing to impose significant penalties on employers who fail to comply with awards and who attempt to avoid compliance through sham contracting arrangements.

For more information, refer to chapter L1 Labour Hire in your Employment Law Practical Handbook.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.