The operator of two La Porchetta restaurants in Melbourne's south-east says he thought giving his mostly young staff free pizza and drink was enough to make up for underpaying them.
Ruby Chand runs two La Porchetta franchises, in Pakenham and Berwick.
The federal government's workplace watchdog, the Fair Work Ombudsman, has launched legal action against Mr Chand and his restaurants, over alleged wages underpayments to 111 staff.
It alleges Mr Chand and his companies owe the workers – employed as cooks, kitchen attendants and waiters between July 2009 to February last year – more than $250,000.
Mr Chand said he had checked four years ago with the ombudsman's office about whether it was legal to top up payments to staff with "in kind" payments such as pizza and soft drink.
"We thought that we could give them free food and drink to compensate everything. Instead of someone getting paid $10.80, we were paying $10.50," Mr Chand said.
We thought that we could give them free food and drink to compensate everything. Instead of someone getting paid $10.80, we were paying $10.50.
But two statements of claim from the ombudsman, lodged in the Federal Circuit Court, say some staff were underpaid thousands of dollars.
One employee, Omar Popal, was paid $16,100 over 20 months, but was entitled to be paid $34,600, the ombudsman alleges. Another employee was underpaid almost $18,000, the ombudsman says.
Mr Chand initially talked to Fairfax Media about the alleged underpayments, but declined to speak further when contacted on Tuesday, saying he had been advised by his lawyer not to discuss the matter.
The investigation into the two restaurants began after a complaint to the Fair Work Ombudsman by a parent who was concerned their child was being underpaid.
Most of the employees the ombudsman alleges were underpaid were teenagers working as casuals. The youngest was 14.
The underpayments were the result of the employees being paid flat hourly rates below the minimum they were entitled to, or trainees not being paid for a minimum number of hours they were employed to work.
Mr Chand said he did not want to go to court to fight the allegations, and that he had simply not realised he was underpaying his staff. "It was a simple error."
And he said the value of meals he provided had cost him more than the money he would have paid out. "Giving them food I lost more money," Mr Chand said.
Mr Chand also said that an inspector from the Fair Work Ombudsman's office had carried out a concerted campaign against him.
"She went knocking on peoples' doors and told them they were supposed to get paid $18 or $19 [an hour], not even realising this [was incorrect]," he said. "She used to go to their houses and say 'Your son or daughter is getting paid wrong'," Mr Chand said. "I had to tell her [this was wrong]."
Acting Fair Work Ombudsman Michael Campbell said his office had taken legal action against the restaurants because of the high number of alleged underpayments, and the age of the young workers.
The case is due to go to court in September.