Bakers Delight Underpayment Case: Why Australian Employers Must Review Award Compliance Now
Recently, national bakery chain Bakers Delight faced legal action after 142 staff members across three Hobart stores were allegedly underpaid $1.25 million.
This case highlights a serious issue. More importantly, it serves as a clear warning to Australian employers.
With the Fair Work Ombudsman (FWO) increasing minimum pay rates across all Modern Awards, businesses must review their payroll systems immediately. If you employ staff under an Award, now is the time to act.
What Allegedly Happened?
According to the FWO, Bakers Delight Holdings — the franchisor — became aware of alleged underpayments in February 2019. However, the Ombudsman claims the company failed to take reasonable steps to prevent ongoing breaches.
As a result, the FWO has taken the matter to the Federal Court, alleging the franchisor holds liability for $643,162 of the total underpayments between February 2019 and October 2020.
In addition, the Ombudsman has initiated legal action against the couple who own and manage the stores for alleged underpayments dating back to July 2017.
Notably, the alleged underpayments remain outstanding.
What Were Employees Allegedly Underpaid?
The Ombudsman claims staff did not receive correct entitlements, including:
- Minimum wages
- Weekend penalty rates
- Public holiday penalty rates
- Lawful termination payments
- Correct allowances
Furthermore, many workers were reportedly as young as 14 years old, and four were visa holders. This increases the seriousness of the alleged breaches.
Meanwhile, the franchisor strongly disputes the Ombudsman’s interpretation of the legislation. The company states it took reasonable steps to ensure compliance and has reportedly offered to back-pay employees. However, the FWO rejected that offer.
The first Federal Court hearing is expected in late July.
Why This Case Matters for Your Business
Although this situation involves a national franchise, the lessons apply to every Australian employer.
Failing to pay correct Award rates, penalty rates, and allowances breaches the Fair Work Act 2009. Consequently, businesses that ignore compliance risk:
- Costly back-pay orders
- Significant financial penalties
- Federal Court proceedings
- Reputational damage
- Personal liability for directors and managers
Therefore, proactive compliance protects both your employees and your business.
5 Immediate Steps Employers Should Take
To reduce risk, you should:
- Review the Modern Award that applies to each employee
- Confirm classification levels align with actual duties
- Check that minimum pay rates reflect the latest FWO updates
- Audit payroll systems for penalty rates and allowances
- Ensure Employment Agreements match Award obligations
By taking these steps now, you can prevent costly disputes later.
How AHR Can Help
At AHR, we work with Australian businesses to ensure full Award and payroll compliance.
Specifically, we:
- Identify the correct Modern Award
- Confirm classification levels and pay rates
- Align Employment Agreements with Award requirements
- Review Position Descriptions
- Conduct proactive compliance audits
As a result, you reduce risk and gain confidence that your payroll systems operate correctly.
Speak With an HR Compliance Expert Today
If you want clarity and peace of mind, contact AHR today.
📞 Call 1800 577 515
📅 Book a consult at a time that suits you
Let us help you manage your HR and WHS compliance obligations with confidence
