Starbucks Coffee Australia has back paid staff in Sydney, Melbourne, Brisbane and the Gold Coast more than AUD 4.5 million (USD 2.9 million) after becoming aware of underpayments to workers including baristas and supervisors, Australia’s Fair Work Ombudsman reported. The global coffeehouse chain has also entered into an Enforceable Undertaking.

The company self-reported its non-compliance to the Fair Work Ombudsman in 2020 after conducting a review of its time and attendance and payroll systems. Most underpayments were the result of Starbucks failing to pay part-time staff correct overtime they were entitled to under the Fast Food Industry Award 2010 and the Fast Food Industry Award 2020.

Underpaid employees worked across 52 stores and included baristas, supervisors and assistant managers. Many were young workers.

Starbucks failed to comply with the requirement to have written agreements that specified the regular workdays and hours that made up each part-time employee’s “ordinary hours” of work. The oversight led Starbucks to fail to recognise when employees were entitled to overtime entitlements.

Some part-time employees were also underpaid annual leave and public holiday entitlements.

A smaller number of full-time store managers were also underpaid due to Starbucks paying them annual salaries that were insufficient to cover their minimum award entitlements, given the significant amounts of overtime and weekend work they performed.

Starbucks has made payments of AUD 4.57 million (USD 2.9 million), including more than AUD 4.34 million (USD 2.79 million) in wages and entitlements, more than AUD 180,000 (USD 116,100) in interest and more than AUD 40,000 (USD 25,800) in superannuation, to 2,427 current and former employees, who were underpaid between 2014 and 2020.

Individual back-payments range from AUD 20 (USD 12.90) to AUD 18,574 (USD 11,984). The average back-payment is AUD 1,883.

The Enforceable Undertaking requires Starbucks to provide evidence to the Ombudsman of its completed back-payments by the end of September.

Fair Work Ombudsman Anna Booth said the undertaking was appropriate because Starbucks had cooperated and demonstrated a commitment to rectifying underpayments.

“Under the Enforceable Undertaking, Starbucks has committed to implementing stringent measures to ensure workers are paid correctly. These measures include engaging, at the company’s own cost, audits of its compliance with workplace laws over the next two years,” Booth said.

“This matter demonstrates how important it is for employers to place a high priority on their workplace obligations. For Starbucks, a failure to have written agreements in place for part-time staff and a set-and-forget approach to paying some full-time staff on annual salaries resulted in significant underpayments and rectification costs,” Booth added.

Under the Enforceable Undertaking, Starbucks must make an AUD 150,000 (USD 96,781) contrition payment to the Commonwealth’s Consolidated Revenue Fund.

Starbucks is also required to provide the ombudsman with evidence of the new systems and processes it has put in place to ensure future compliance, commission workplace relations training for payroll and store management staff, write to affected staff to apologise, and make corporate governance improvements.