7-Eleven to pay out struggling franchisees as the company reels from 4 Corners’ ‘half-pay scam’ allegations

THE explosive wage theft allegations against Australia’s biggest convenience store have prompted 7-Eleven to pay out ‘struggling’ franchisees.

7 eleven logoco

IN RESPONSE to explosive wage theft allegations aired on television last night, Australia’s biggest convenience store chain has gone into damage control.

7-Eleven was accused of operating “a sweatshop on every corner”, with an insider claiming to 4 Corners that the company was “built on something not much different from slavery.”

“They can’t run 7-Eleven as profitably and successfully as they have without letting this happen,” the insider said.

The company released a statement last night denying that its business model relied on exploitation, and offering struggling franchisees a painless exit.

Chief executive Warren Wilmot said the company would “refund the franchise fee paid, and help to sell any store where a goodwill payment has been made” for any franchisee “who no longer wants to participate in the system”.

“We dispute there is insufficient financial viability in a system that delivers on average net profit of $165,000 per store, and year-on-year growth of more than nine per cent,” Mr Wilmot said.

“The viability of the 7-Eleven system is in no way, never has been and never will be, dependent on franchisees underpaying their staff,” he said.

“This doesn’t let off the hook any franchisees doing the wrong thing, because we will pursue them to repay any money owed to former or present staff.”

The company is accused of paying workers as little as $10 an hour, with a Fairfax Media analysis revealing that up to two-thirds of stores are blatantly ripping off staff. That’s less than half the award rate of more than $24 an hour, and you can forget about overtime or penalty rates.

In what is being dubbed the “half-pay scam”, staff are allegedly paid for only half the hours they work, with time sheets fudged and “ghost workers” added to rosters before franchisees send the paperwork to head office.

Mr Wilmot vowed to “weed out franchisees in our network, who are not doing the right thing by their staff, and further tightening our audit and monitoring systems”, with the first step the establishment of an independent panel to examine underpayment claims and distribute backpay.

The response comes amid reports of workers and franchisees preparing a class action against 7-Eleven Australia and its American parent company.

An insider told Fairfax media panic had set in at head office about a month ago, as pressure mounted during the 4 Corners investigation.

Fairfax Media yesterday alleged there was a management cover-up of widespread exploitation, with documents leaked to the publication allegedly implicating staff at 7-Eleven’s head office.

The documents are understood to contain extracts of interviews conducted by 7-Eleven’s field inspectors, in a payroll compliance review of 225 franchises across the country, which allegedly found that the vast majority were underpaying staff. The alleged breaches of workplace laws were handled internally.

The former head of Australia’s competition watchdog Allan Fels said he found it hard to believe that 7-Eleven’s head office did not know what its franchisees were up to.

“It’s just impossible to believe that they’re unaware of it,” Prof Fels said on ABC radio yesterday morning.

A Melbourne 7-Eleven shop owner has admitted to cooking the books and ripping off workers to the tune of $30,000, telling the Fair Work Ombudsman he learned how to manipulate the payroll system from a fellow franchisee at a 7-Eleven conference.

Kumar Sandarakumar admitted to producing false records by manipulating the data he entered into the 7-Eleven head office payroll system, and agreed to pay all outstanding worker entitlements as an alternative to court action.

Over 12 months to late 2014, 12 workers were short-changed more than $30,000 with one underpaid $7981. One employee worked for 20 hours in one pay period but only seven hours were logged on the system.

Fair Work Ombudsman Natalie James said student workers had been reluctant to speak up, because they were breaching their visa conditions by working more than 40 hours a fortnight.

“Some have told us they are scared that if they complain about being underpaid, their employer will report them to the Department of Immigration and Border Protection,” Ms James said in a statement.

The Ombudsman has also launched fresh legal proceedings against a 7-Eleven retail store in Sydney which allegedly underpaid two migrant employees almost $50,000 and falsified their paperwork.

Ms James said the decision was made to prosecute because of the seriousness of the alleged breaches and the involvement of vulnerable migrant employees.

The company released a statement welcoming this action, with Mr Wilmot emphasising: “We do not condone the action of any franchisee who does not meet his or her obligations”.

In response to tweets from outraged customers, the United States 7-Eleven account repeatedly tweeted:

@BeachMilk We are confident 7-Eleven Australia will take the appropriate steps to address this situation. http://t.co/kN2H7HVQVI

— 7-Eleven (@7eleven) August 30, 2015

One worker told Fairfax of his harrowing time working at a 7-Eleven in the Gold Coast area, recounting a nightmarish routine of working 16-hour shifts.

One Indian student told the publication there was no sympathy from his bosses, even after he was violently robbed twice in the space of 18 hours.

The store manager allegedly chastised the student for not fighting back against the balaclava-clad man who, armed with a long, serrated knife, robbed him of $180.

“Ah should fight or do throw the till on him, something, punch him. Why did you give the money like?” the manager is claimed to have said.

The student said he was made to foot the bill if drive-off petrol thieves struck on his shift, and perform the jobs of two people in running the store on his own.

International students can find themselves in a difficult situation if franchisees underpay them, because employers can wield the threat of dobbing them into immigration authorities for breaches of their visas — even if the breach, such as working extra hours, has been imposed by the employer.

There are also allegations that franchisees have withheld passports and drivers licences of staff.

Earlier this month, a 7-Eleven franchisee was fined $21,000 for underpaying an overseas worker and refusing to co-operate with the Fair Work Ombudsman.

The franchisee ripped off a Nepalese student $21,298 over the 13 months to last February while operating a Queensland outlet, which has since been closed.

Initially fined $6970 by the Federal Circuit Court, it defied orders to produce documents and pay the student the wages he was owed, prompting the heftier fine.

More court cases may follow as the scandal unfolds, with Fair Work analysing evidence seized in raids across Australia.

A spokeswoman for 7-Eleven said in a statement to Fairfax: “7-Eleven strongly supports the Fair Work Ombudsman’s investigation into employees’ pay and conditions currently underway at a select number of franchisees’ stores ... In the one instance we were made aware of a store employee’s passport being held by a franchisee, we intervened to facilitate the return of the passport.”

The spokeswoman said 7-Eleven expected franchisees to meet their legal obligations and that if even one store was underpaying workers, it was one store “too many”.

Statements posted on 7-Eleven’s website said: “We take our responsibility as a franchisor seriously. We ensure we provide education and support to assist our franchisees to meet all their legal obligations, including their obligations as the employers of store staff.

“We are deeply concerned about the personal impact on affected employees or former employees, and the damage such actions cause to franchisees who are trusted, reliable and responsible small business owners, meeting their obligations as employers. Our business does not condone the action of any franchisee who does not meet their employer obligations, and we do not and will not hesitate to take any appropriate action, under law and within the franchise agreement, where a franchisee is found to be in contravention of the law.

“If you have any questions or concerns about your pay or conditions, we would encourage you to contact the Fair Work Ombudsman for advice and support.”