Beauty giant Mecca underpaid staff on 17yo ‘zombie’ agreements   

Mar 23, 2023
Financial Review

Beauty giant Mecca Cosmetica has discovered it underpaid employees more than $500,000 while moving thousands of staff out of expired workplace deals that legally allowed it not to pay full penalty rates for 17 years.

About 1600 staff across the retail and beauty empire received back-pay letters on Wednesday following an independent review that found Mecca owed them a total of $560,000 for breaching minimum shift requirements and roster rules from 2016 to 2022.

A Mecca spokeswoman said the large majority of its 3500 workforce was appropriately paid and the underpayments affected 17.5 per cent of the 9000 staff who worked during the six-year period with a median backpay of just $153.

However, the letters also revealed that Rich Lister Jo Horgan’s Mecca had been employing its staff under two long-expired agreements that date as far back as 2005.

The agreements, signed off by her husband and co-CEO, Peter Wetenhall, did not have entitlements to weekend or evening penalty rates and paid casuals just 15.5 per cent loading compared with the award’s 25 per cent loading.

But the company opted not to terminate the deals after they expired in 2009 and continued to use them until mid-2022.







The “zombie” agreements meant Mecca did not have to apply the retail award penalties and was legally obliged to pay staff only the minimum base rate – opening up a potentially huge cost advantage over competitors.

Mecca has grown to become a beauty giant with more than 3500 employees in Australia across about 100 stores.

The brand earned $572 million in revenue in 2020 – the latest accounts available – with profit of $25 million after tax, up 50 per cent from $16.6 million the year before. Ms Horgan and Mr Wetenhall’s wealth is tipped to be about $658 million.

Asked if Mecca paid penalty rates on top of the agreement, a spokeswoman said it “paid more than $74 million above applicable entitlements [the award] during this period”.

“This equates to 16 per cent of total payroll for our Australian retail team for this period,” she said.

“We review our team members’ pay rates annually and have always sought to ensure that, regardless of what employment arrangement applied to them, their pay rates were either at or above the retail award rates.”

‘Brave’ employee sought to axe zombie deal
Zombie agreements have attracted controversy in recent years, with Queensland hospitality group Mantle branded a “disgrace” by the Fair Work Commission for maintaining a deal without penalty rate entitlements for 22 years.   

At the election, Labor promised to sunset zombie agreements after branding them a loophole to cut pay and the government legislated the deadline for this December.

Fair Work Commission records show a Mecca employee sought to terminate one of the company’s zombie agreements as early as 2021.

Her application – backed by the Shop Distributive and Allied Employees Association – preceded Mecca’s own application to terminate the deals the following year. The commission approved both applications on May 23, two days after the election result.

SDA national secretary Gerard Dwyer said that “this again demonstrates why zombie agreements should all have a drop-dead date”.

“It took a brave young member to come forward enabling the SDA to take up the case,” he said.

“It should not be incumbent on young workers; registered unions should have the right to intervene.”

He said the Albanese government had “sunsetted” agreements made before the Fair Work Act in 2009 but there was still “a loophole” for agreements made between 2010 and 2018.


Jo Horgan with husband and business partner Peter Wetenhall. Robbie Fimmano

In the letter on the underpayments, which resulted from breaching conditions in the zombie agreements, Mecca told staff it had decided to move away from its “older legacy employment arrangements” and transition all its stores to the retail award.

“We made the move because as we continue to grow, it is easier to have one clear and consistent employment arrangement in place for all our Australian retail team members,” the letter said.

A spokeswoman said the company had decided to move to the award in 2019 but then COVID-19 hit and it was “all consuming in keeping our team members safe and employed”.

“We picked this work up again as soon as practicable, and wrote to our store teams in April 2022 to let them know that we would be transitioning to the retail award, and we completed this work in July 2022.”

FWO ‘conducting an investigation’
Mecca’s chief people officer, Vanessa Freeman, said: “We’ve written to all the affected current and former team members to apologise and let them know that we’ll be processing their payments within the coming weeks.

“While our focus continues to be on resolving this for affected team members, we’ve also acted quickly to introduce new systems and processes to stop this from happening again.

“It has always been our intention to generously reward our team members through remuneration, benefits and education, and this will continue to be our focus in the future.”

Mecca said the backpay would include compounding interest and would be paid at the current rate of superannuation at 10.5 per cent.

A Fair Work Ombudsman spokesman said it was “conducting an investigation into Mecca Brands Pty Ltd following its self-reported underpayment.