Cosmetics company Lush admits to underpaying Australian workers by $4.4m | Business

The cosmetics company Lush has admitted to underpaying its Australian workers more than $4m over nearly a decade.

An internal investigation found the company’s Australian arm underpaid 3,130 employees over eight years from 2010 to 2018, and breached three awards, due to “inadequate” workplace processes.

The fair work ombudsman said Lush Australia underpaid staff by a total of $4.4m, including interest and superannuation. The company, which referred itself to the regulator after the internal investigation, has agreed to pay back the money and also make a $60,000 contrition payment.

On Tuesday, the ombudsman said Lush Australia had “failed to provide its employees with a range of entitlements they were owed”.

The underpayments included retail staff who work in the chain’s stores, in management, and manufacturing workers in its Sydney factory, where all its cosmetics and bath bombs are hand-made.

A Guardian Australia investigation in August revealed that some workers in the factory were required to lift up to 500kg of dry materials a day. They claimed to have suffered back and wrist injuries, and developed breathing difficulties from their work.

The British-based firm prides itself on its hand-made products and ethical supply chain.

On Tuesday, the ombudsman said Lush Australia breached minimum wage rates under three awards.

“The contraventions were caused by Lush’s inadequate workplace relations systems and processes, including a lack of training for staff and managers, a manual payroll system, and the absence of a HR department in a rapidly growing business,” the ombudsman said.

“Lush failed to provide its employees with a range of entitlements they were owed … including minimum wage rates, rates for weekend and shift work, overtime rates and allowances. Record-keeping laws were also breached.”

Godfrey Moase, an executive director with the United Workers Union, which covers Lush’s manufacturing workers, said the underpayments could have been easily avoided.

“It reflects a culture where labour rights are not prioritised,” he said. “It is not complex to comply with these awards, it is not complex to comply with Australian minimum standards.”

He said most of the workers who made Lush’s products by hand “would have been definitely underpaid during the course of their employment between 2010-2018”.

“For any sizeable business, a contrition payment of $60,000 is a rounding error,” he said.

A spokeswoman for Lush Australia said the company had now “invested significantly in new payroll systems” to “ensure this cannot happen again”.

“We hold our values dear and would never knowingly underpay, cheat or avoid our responsibilities and we regret that these mistakes and oversights happened. We know this has been a difficult experience for all those concerned and we would therefore like to take this opportunity to publicly thank our staff for their patience and understanding whilst the long process of wage recalculation took place.”

The company said in 2018 it had discovered “serious payroll system errors” dating back to 2010, and disclosed them to the fair work ombudsman.

“The complex nature of the issues involved meant that the project has taken considerably longer than originally envisaged but it was important to ensure that the process was completed accurately,” the spokeswoman said.

Lush Australia said it had committed to annual audits of its system. The company is also required to display public notices “detailing its workplace law breaches” and operate a hotline for staff to access for three years.

The contrition payment will be made to the commonwealth’s consolidated revenue fund.

The fair work ombudsman, Sandra Parker, said Lush had “cooperated with the investigation and demonstrated a strong commitment to rectifying all underpayments”.

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