The wage fraud issue involving 7-Eleven Australia has
been highly-publicised, with the spotlight turning to the
culpability of 7-Eleven's head office.
The issue has highlighted that the upper management of
corporations may face serious legal consequences when there has
been a failure to adequately regulate the safety and/or employment
procedures in operation at their franchisee or subsidiary
2008 - The Workplace Ombudsman investigates
dozens of convenience stores, including 7-Eleven, recovering
$162,000 for 168 staff.
June 2014 - The Fair Work Ombudsman (FWO)
starts an inquiry into 7 -Eleven as a result of numerous complaints
made by staff.
1 August 2015 - Fairfax Media and the
ABC's Four Corners program jointly report on systemic
wage fraud and falsification of employee records in numerous 7
–Eleven Australia franchises.
18 September 2015 - 7 –Eleven announces
it will conduct an internal investigation into wage fraud
allegations, hiring an independent auditor.
30 September 2015 - Russ Withers, the
Australian founder and chairman of 7 -Eleven stores, and chief
executive Warren Wilmot resign.
5 February 2016 - 7 -Eleven's internal
wage fairness panel, led by former Australian Competition and
Consumer Commission chair Allan Fels, reports to the Senate
April 2016 - The FWO releases a report with a
series of recommendations that 7 -Eleven ought to adopt.
What has 7-Eleven been accused of?
The complaints centred on wage underpayment. The allegations
included employees being intimidated and coerced into working
excessively long hours at less than half of the standard minimum
wage. Many of the employees had to pay thousands of dollars to gain
working visas and when payment discrepancies were raised with
management, threats of either dismissal or a complaint to the
Department of Immigration were threatened, implying the worker
could face deportation for contravening the permissible maximum
working hours of their visas.
A point of issue was whether 7-Eleven's head office was
complicit in the wrongdoing. Whistle-blowers reported franchisors
selected "experienced franchisees" to mentor new owners
in wage manipulation and record falsification. Investigators from
Fairfax and ABC reported on an endemic culture in which franchisor
employers promoted ways to "get around" the award wage
Mr Fels came to the conclusion that much of the issue lay with
the 7 -Eleven franchisee agreement, stipulating a strict 57/43
gross profit-sharing model. His conclusion was that, in most cases,
a franchisee could only remain solvent by underpaying its workers
and engaging in fraudulent behaviours. There were concerns
franchisors either had knowledge of systemic failures or were
wilfully blind to franchisees' practices.
FWO inquiry report on 7-Eleven
The April 2016 report by the FWO into 'Identifying and
addressing the drivers of noncompliance in the 7 -Eleven
network' issued the following key recommendations to 7
that it enter into a compliance partnership with the FWO in
which 7 -Eleven would publicly accept it had a moral and ethical
responsibility to require standards of conduct from all franchisees
and individuals involved in its enterprise
that it implemented effective governance arrangements that
ensure compliance with all relevant Commonwealth laws, and
that it review its operating model.
The report findings placed an emphasis on the need to tackle
systemic problems apparent within the 7 -Eleven business model. By
encouraging the implementation of a biometric time-recording system
for all employees and franchisees, the report highlighted that the
starting point for prudent holistic management of any organisation
begins with sound policies, procedures and practices.
Furthermore, through the recommendation for regular
self-auditing to be adopted, the report reinforced that good
corporate governance must incorporate proactive oversight to ensure
these sound policies, procedures and practices are in practical
When addressing concerns of corporate accessorial liability in
employment and safety sectors, the best defence is a good offence.
A good offence in this scenario is the improvement and
implementation of proactive management strategies.
A sound corporate governance shell must include:
an adequate internal information-sharing system for
communicating employment and/or safety issues that reaches all
an internal, up-to-date knowledge gathering system to recognise
the constant developments across both employment and safety
regular internal auditory processes, ensuring policy and
procedure methods are in practical operation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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