Fair Work Inspectors Spot Check 7-Eleven Stores After Reports Of Staff Underpayment

Thursday 3 September 2015 @ 11.39 a.m. | Industrial Law

The working conditions at 7-Eleven convenience stores have been under the spotlight this week, following a joint Fairfax Media and Four Corners report on what they called “startling and systematic wage fraud… including falsification of payroll records and other illegal practices”.  The allegations led to a raid by Fair Work Inspectors, who conducted “spot checks” of 20 stores in Melbourne, Sydney and Brisbane.  According to a media release by the Fair Work Ombudsman, a site visit conducted last year led to one Melbourne store owner admitting to inspectors he had falsified payroll records and underpaid his staff, claiming “he learned how to manipulate the payroll system from another franchisee at a 7-Eleven conference.”

7-Eleven Stores Previously Faced Legal Action

In the media release, Fair Work Ombudsman Natalie James said that “7-Eleven stores have been on the Fair Work Ombudsman’s radar for some years”, and gave examples of enforcement action against various franchises dating back to 2009.   In July this year, the former owner of a Brisbane store was fined $6970 after the Federal Circuit Court determined that he had failed to comply with notices to produce documents and compliance notices in relation to the underpayment of an employee of his store.  The employee, an international student from Nepal, was allegedly owed more than $21,000, but Judge Vasta noted that he was unlikely to receive this money as the company behind the store went into liquidation.

On 31 August 2015, the Fair Work Ombudsman announced  in a press release that they had started legal proceedings against the owner-operator of a 7-Eleven store in Blacktown, alleging that he and his company had underpaid two console operators by $49,426.

Fair Work’s Concerns

In the press release, Ms James said she had concerns because of the extent of the contraventions uncovered by the most recent raids.  She said:

“While we are not expert in the field of franchise models and financial viability, our Inquiry has raised concerns about the 7-Eleven model… We are exploring whether the model places significant pressure on a franchisee’s ability to meet statutory obligations, predominantly through a lack of cash flow. In some cases, we suspect it is the reason franchisees have underpaid staff…

We are concerned to see repeated cases of underpayments being facilitated through the falsification of pay information to head office occurring in the 7-Eleven network. Patterns of behaviour such as this do make us curious as to the role of Head Office…

Successful franchisees must mean successful franchisors. At this stage, we’re not convinced that the processes in place for the franchisees of 7-Eleven is facilitating compliance with workplace laws.”

Head Office Response

Chief Executive Warren Wilmot told The Sydney Morning Herald that the company strongly disputed claims that the 7-Eleven model was not financially viable, and said the company would cooperate fully with the Fair Work Commission.  He also said that  franchisors wanting to exit the company could get their franchise fees refunded and assistance selling their stores.  The company also announced plans to set up an independent panel to examine any staff underpayments.

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