In defence of George Calombaris

COMMENT

George Calombaris is a greedy monster whose sole motivation is to squirrel away as much money as he possibly can, at the expense of hundreds of vulnerable young workers.

At least, that's the impression you might be left with after the past few weeks in the damning aftermath of the restaurateur's underpayment scandal.

An investigation by Fair Work Australia concluded that over six years, 515 people employed by his hospitality empire were underpaid by a total of $7.8 million.

The unions say it can't have been anything other than a deliberate business model, designed to pay hardworking staff as little as possible for the sake of profits.

A relentless campaign against Calombaris saw him become public enemy number one and the consequences have been hefty.

He has been dumped from the Network 10 reality series MasterChef Australia, lost endorsement deals and watched his restaurants sit empty for weeks.

But is Calombaris really deserving of the ruthless crucifixion he has endured?

George Calombaris has become public enemy number one in recent weeks. Picture: Nicole Cleary
George Calombaris has become public enemy number one in recent weeks. Picture: Nicole Cleary

 

In an interview with 7.30 host Leigh Sales this week, the embattled celebrity chef said "there's no excuse" for the catastrophic failure.

There's no legal defence to excuse the severity of the issue - he's right.

But in reality, there are some compelling excuses that explain how such a large number of staff could be underpaid such a large amount of money.

And when you actually examine the figures, the amount of money on an individual basis wasn't enormous.

In his interview with Sales, Calombaris also took total responsibility for what he described as the inadequate processes and back-end systems that led to the underpayments.

But that too is unfair, given how hands-off he was with the nitty gritty management of his rapidly expanding commercial enterprise, at a time when he was juggling a gruelling schedule.

Calombaris isn't blameless and he shouldn't get off scot-free for what transpired over several years. But is he a monster?

 

WITH RESPECT, HE'S JUST A CHEF

Calombaris has achieved great success in his career, almost from the moment it began.

He opened his first solely owned restaurant, The Press Club, when he was 26.

He had gone from apprentice chef at Melbourne's Sofitel Hotel, to Sous chef at a restaurant he helped open with mate Gary Mehigan, to head chef at Reserve in Federation Square, in the space of five years.

He admits his focus was always on the food - crafting dishes that would get bums on seats and keep the punters coming back for more.

George Calombaris during his TAFE apprenticeship.
George Calombaris during his TAFE apprenticeship.

In that respect, Calombaris excelled. He was named Young Chef of the Year in 2004, Chef of the Year in 2005 and one of the top 40 chefs of influence in the world in 2008.

But what abilities and expertise did he have in business management?

Was he a commercial genius whose abilities crafted successful enterprises, or was it the food that led to the success?

"He's a chef," Radek Sali told Neil Mitchell on 3AW this week, saying the young business owner was out of his depth.

Sali bought into the Calombaris empire in 2017 and has a majority and controlling share. As part of the investment, a routine audit was conducted, which revealed the underpayments.

"He started this (business) journey as a 26-year-old on the tools in the kitchen doing what he loves most," Sali said. "This thing just grew rapidly beyond his capability."

 

George Calombaris spoke about the underpayment scandal on 7.30 this week. Picture: ABC
George Calombaris spoke about the underpayment scandal on 7.30 this week. Picture: ABC

Not to disparage chefs, but is a TAFE qualification for food preparation and cooking the best foundation for complex financial management?

Amanda Evans is a human resources expert and said not prioritising practices can land any business - small, medium or large - in hot water.

"Small to medium business owners are experts in their chosen craft, service or product, whatever it is they do, but perhaps not in the more complex side of the operation," Evans, director of the firm Evans Faull, said.

"Navigating the employment landscape is complex and if you don't understand it in the first place and keep up with changes you can lose a handle on it."

The law is black-and-white and ignore is no defence, Evans said.

But she said meeting obligations of relevant employment awards can be challenging, "especially if you don't know what you don't know".

Calombaris is hardly the first person who turns creative ability into a business and hits issues with the financial side of things.

 

'HOW HARD CAN IT BE?'

Of the 122 modern awards that exist, three separate ones apply to the hospitality industry, employment law expert Nicholas Marouchak said.

Those three documents don't make for light reading either.

A summary of the main award for the hospitality industry is almost 40 pages long and covers off a range of variables that need to be strictly adhered to.

"Rates of pay vary greatly on a number of factors," Marouchak, director at MKI Legal, said.

"The worker's age impacts their rate of pay. If someone is working in the early morning or the evening, there are different rates of pay, as there are on weekends and public holidays. If the employee works through a meal, they get a penalty rate.

"And so, from the start of a shift to the end, there's likely different rates of pay throughout. It's difficult to make sure you're tracking all of that."

As his business empire boomed, George Calombaris took on more and more — including MasterChef Australia, which shot for six months of the year. Picture: AAP
As his business empire boomed, George Calombaris took on more and more — including MasterChef Australia, which shot for six months of the year. Picture: AAP

 

For the operator of one small business, it would be tricky to manage the multitude of obligations without stringent and reliable systems in place.

"You open the first one, then the second one, then the third one," Calombaris told 7.30 of the rapid expansion of his business.

"The creativity is flying, the ideas are flying, the dreaming is there, but the sophistication in the back end isn't there."

When you turn one business into several businesses and a dozen staff into a few hundred staff, dropping just one ball could have major consequences, Marouchak said.

"Managing pays without a system would be prone to error. Having good computer systems in place is critical. But not just that, but checking the system is important - it's only as good as the data (entered).

"There are a number of other legal obligations too. There are special requirements on what information a pay slip must contain and a pay slip has to be provided within one business day of an employee being paid."

George Calombaris admits his focus wasn’t on the back-end processes of his business.
George Calombaris admits his focus wasn’t on the back-end processes of his business.

While ignorance or being busy aren't a defence, Evans said a it's reasonable to see how a business owner who lacks expertise could struggle.

"You need to understand each role and then matching it to the award's classifications, and the different pay points for each classification. Then you need to look at overtime, penalty rates and allowances.

"Casuals are treated differently - there's a loading on top. Also, minimum rates go up every July so you have to keep an eye on that and making sure it's applied and paid."

Leigh Small, chief executive officer of mAdE Establishment, said an internal investigation in 2017 revealed many employees had been incorrectly classified due to failures within the payroll system.

"For example, the Restaurant Industry Award requires us to conduct annual reconciliations for those employees paid through an annual salary arrangement to ensure those employees, each of whom receive an additional 25 per cent loading in consideration for an anticipated amount of overtime and penalty rates, have been properly remunerated for all overtime and penalty rates that were actually accrued to the employee over the year," Small said.

"This was one of the requirements we failed to meet."

 

HAVE STAFF BEEN PAID BACK?

Within months, all current staff who had been underpaid were fully reimbursed, the business said. A process of finding and back paying former staff began shortly after.

And news.com.au understands that Calombaris personally poured in millions of dollars of his own money to cover the back payments.

One element of the saga that hasn't attracted much attention is that hundreds of staff were also overpaid by various amounts due to being incorrectly classified.

Those workers weren't required to pay back any money and they stayed on the same amount of money, rather than dropping down to the correct rate.

There's no denying that $7.8 million is a significant amount of money.

But consider that in the context of the enormous size of the workforce, which numbered several hundred, as well as the total number people paid incorrectly.

It's understood the average underpayment of affected staff ranged between two and three per cent each.

An average worker's salary during that period was $60,000 and the typical underpayment was about $2000 per person, per year.

"We're very confident that everyone has been paid," Sali said.

Gary Mehigan, Matt Preston and George Calombaris all left MasterChef Australia as judges.
Gary Mehigan, Matt Preston and George Calombaris all left MasterChef Australia as judges.

Two former workers have come forward in recent months to share their experiences and say they were left unsatisfied with how the matter was handled.

Without disregarding their feelings or experiences, two out of 515 is a curious number.

Some mightn't have wanted to draw attention to themselves or be part of a media or union campaign, and there could be others who are disgruntled.

The size of the current workforce across the 14 restaurants run by mAdE Establishment numbers more than 600.

TOO BIG, TOO BUSY

While back-end problems were brewing, Calombaris was at his busiest.

His restaurant business had boomed beyond The Press Club to include a dozen other ventures in Melbourne, Sydney, southeast Queensland and Greece.

Calombaris wrote several cookbooks, filmed product endorsements and commercials and spent six months of the year filming MasterChef.

Time spent on his day job was largely confined to the four walls of his frenetic kitchens.

It's been said that Calombaris and his business partners only self-reported after complaints from staff.

In reality, one worker raised concerns about their rate of pay to Fair Work in 2015 and the Ombudsman sent a letter shortly after requesting that a review of the payroll system be carried out.

Calombaris asked that the employee's rate of pay be double-checked and corrected, which it was, signed the compliance letter and moved on with others things.

Celebrity chef George Calombaris has paid a large personal toll — and he has paid back the underpaid staff. Picture: Josie Hayden
Celebrity chef George Calombaris has paid a large personal toll — and he has paid back the underpaid staff. Picture: Josie Hayden

 

Two years later, when Sali invested in the business, a standard audit revealed the severity of issues.

Their own calculations indicated underpayments of current staff of $2.6 million, which mAdE Establishment publicly disclosed. A KPMG audit, contact with former employees and co-operation with Fair Work concluded the actual figure was $7.8 million.

"When we first identified the underpayments in early 2017, our first priority was to immediately back-pay the $2.6 million owed to 162 current and recently departed staff," Small said.

"We self-reported to the Fair Work Ombudsman and we encouraged any former employees to come forward so that we could investigate their claims. By the end of our investigation, we had back paid $7.8 million."

The hospitality union insists it can't have been a mistake but Calombaris has maintained it was. The Fair Work Ombudsman has also said the underpayments appear to have been a terrible accident and not maliciously deliberate.

Since changing ownership in 2017, mAdE said it has overhauled the administrative operation, Small said.

"We have introduced a People and Culture Director, a Chief Finance Officer and an experienced finance team who have implemented new processes and procedures to ensure we are not only complying with workplace relations laws but actively building a culture of employee wellbeing."

 

CULPABLE, BUT A MONSTER?

The businesses run by Calombaris failed to properly pay a large number of staff over a long period of time.

Was it deliberate? It's unlikely. Is it bad and a serious issue? Absolutely.

Does Calombaris deserve the mob-led destruction and the boycotting of his businesses, which employ several hundred people and give business to countless suppliers? Probably not.

The contrition payment of $200,000 does seem inadequate, but Fair Work no doubt took into account the swift repayment, the public disclosure and the apparent remorse shown.

 

Ignorance is not a legal defence. Picture: AAP
Ignorance is not a legal defence. Picture: AAP

 

Calombaris himself said there's no excuse and that any underpayment is unacceptable.

The law takes a black-and-white view of culpability, but shouldn't intent be factored in in the court of public opinion?

"George's primary focus in the business at the time was on creating great food for his rapidly growing list of restaurants," Small said.

"But George realises that, as one of the directors of the business over that period, this was no excuse for having poor back-office systems and processes. That's why George considered it important to lead by example, to apologise to affected workers and to ensure the company self-reported, and paid everyone back in 2017."

Business practices at mAdE have changed - there's a chief executive officer, a chief financial officer, internal HR professionals and auditors.

Fair Work will be watching them like a hawk for quite some time.

And so, at this point in time, those who were wronged have received justice and the money they're entitled to. The issue of 'wage theft' has received more prominence than it ever would've. Calombaris, no longer a director of his company, has pledged to be a force for change in the hospitality industry.

Shouldn't all of that satisfy the mob?


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