Following an ongoing investigation by the Fair Work Ombudsman into employee wages, payroll errors dating back six years were recently identified with a number of employees found to be short-changed. Former MasterChef judge George Calombaris admitted that his business had underpaid staff by $7.8 million.
KEY TAKE OUTS:
- George Calombaris failed to correctly pay employee wages and underpaid staff by $7.8 million.
- The Fair Work Ombudsman carried out an investigation into employee wages and discovered errors dating back six years.
- Calombaris announced on 10 February 2020 that the Made Establishment restaurant group was placed into voluntary administration.
The Hard Truth
Calombaris admitted that his company had not adequately managed its enormous growth over the past six years and recently announced that the Made Establishment restaurant group (“Made Group”) was placed into voluntary administration. Financial and restructuring administrators from KordaMentha were appointed as voluntary administrators of 22 companies in the Made Group. The frozen yogurt operation, “Yo-Chi” remains unaffected however a total of 12 restaurants ceased immediately. Amongst this number were seven souvlaki outlets and five fine dining restaurants, affecting over 400 employees’ futures.
We have witnessed the retail and hospitalities industry being negatively impacted in recent years by an increase is the cost of labour and food supplies, the rise of convenient, cheap and on-demand services such as UberEats and Menulog, increased competition within the industries and a shift in consumer demands from former fine dining trends. Amongst these contributing factors was a decline in trade due to employee underpayments which shook the Made Group in July last year. Mr Calombaris admitted that staff have since been paid in addition to a $200,000 contrition payment which was ordered by the Fair Work Ombudsman.
Unions were shocked by the small size of the penalty however the Ombudsman stated that the Made Group’s financial position was considered when determining the payment amount. Notwithstanding the rebranding attempts of venues such as The Press Club in Melbourne, the Made Group has not been able to increase trade since with Aussie diners left with a ‘bad taste in their mouth’.
Administrators are expecting for creditors and staff to receive full payment of any debts but they are also investigating alternative options for some of the poorly performing venues.
What is Voluntary Administration?
Voluntary Administration is the process where an insolvent company is put under the control of an administrator (being an independent person) whose role is to review the company’s assets and finances with a view to achieving the best result for the company and its creditors.
This is a different process to liquidation as the goal is to restore the business rather than finalise its affairs and dissolve it.
Whilst the history of the difficulties faced by Made Group may be alarming, there are many examples of sustainable business models and a number of lessons to be learned by companies. Unfortunately, Calmobaris’ biting off more than he could chew serves as a warning to many other employers and companies.
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