Mecca in Hot Water: Outrage Over 17-Year-Old Zombie Agreements

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What were they thinking? Beauty giant, mecca, was caught red-handed—accused of illegal labour practices.

Mecca Cosmetica, a beauty company, has found out that while transitioning thousands of employees out of expired workplace agreements that allowed them not to pay total penalty rates for 17 years, it underpaid its employees by over $500,000.

According to a spokesperson from Mecca, most of the 3500 employees were paid correctly. However, during the six years, 17.5% of the 9000 staff members were affected by underpayments. The median backpay for these employees was only $153.

It was also revealed that Mecca, owned by Rich Lister Jo Horgan, had used two expired agreements from 2005 to employ its staff.

Her husband and co-CEO, Peter Wetenhall, signed off on agreements, not including weekend or evening penalty rates entitlements. In addition, casual workers were only paid a 15.5% loading instead of the 25% loading specified in the award.

Even though the deals expired in 2009, the company decided to keep using them, and they did so until mid-2022.

Mecca did not have to impose retail award penalties due to the “zombie” agreements. As per the agreements, the company was only required to pay its staff the minimum base rate, giving it a potential cost advantage over competitors.

When asked about Mecca’s payment of penalty rates in addition to the agreement, a spokesperson stated that Mecca had paid over $74 million beyond the award entitlements during that time.

“During this period, our Australian retail team’s total payroll includes 16% of the amount,” she said.

“Every year, we review our team members’ pay rates to ensure that they receive compensation that meets or exceeds the minimum retail award rates, regardless of their employment arrangement.”

Mecca sent a letter to its staff regarding underpayments caused by breaking terms in old employment agreements known as “zombie agreements.” The letter stated that Mecca has decided to stop using these outdated employment arrangements and switch all stores to the retail award.

“We have made a move to establish a single employment agreement for all our Australian retail team members as we expand, to ensure consistency and clarity,” the letter said.

According to a spokeswoman, the company initially planned to transition to the award in 2019, but COVID-19 became the main priority in ensuring the safety and employment of their team members.

“We resumed the work at the earliest opportunity and informed our store teams in April 2022 that we were shifting to the retail award. We finished the task in July 2022.”

According to a spokesman from the agency, Mecca Brands Pty Ltd is being investigated by the Fair Work Ombudsman for underpaying its staff.

“If employers come across any instances of non-compliance, we request them to report it to the FWO and assist us in investigating the matter. This will ensure that any unpaid entitlements owed to employees are promptly reimbursed.”

As per surveys conducted by business management consultant Great Place to Work, Mecca has repeatedly been recognised as one of the top workplaces in the country.

However, starting in 2019, current and former staff members claimed that the organisation’s management discriminated against, bullied, and showed favouritism.

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