Wage scandals becoming the dark underbelly of the labour market

It seems wage scandals in Australia aren’t going away.

Earlier this week petrol station and convenience store chain, On the Run (OTR), which is headed by former 7-Eleven chief executive Warren Wilmot, found itself embroiled in allegations of underpayment of wages and sham traineeships when a class action law firm flagged it was investigating the company.

Adero Law firm said in four days 600 current and former workers had registered interest in an action that could attract thousands of workers.

Warren Wilmot (right), the boss of OTR, at a senate inquiry when he was CEO of 7-Eleven. Credit: Wayne Taylor

The lawyer heading the investigation, Kellie Pledger, said registrations for the class action were pouring in. “Sometimes we get a registration a minute,” she said.

Adero is investigating whether the OTR traineeship is a scam. it is also looking at the collective agreement which continued until 2018. The allegations date back to a time before Wilmot's tenure and the wage scandal aspect of the allegations relate to a collective agreement that Wilmot did not have any hand in negotiating.

OTR and its parent Peregrine Corporation deny the allegations. Wilmot, who resigned from 7-Eleven in October 2015, did not return calls or respond to emails.

Employers have been allowed to build empires on the backs of employees being paid less than the minimum award entitlements.

Kellie Pledger from Adero Law

Pledger said after talking to a number of current and former workers at OTR, there was an overwhelming sense that nobody wanted to do the traineeship, but they were desperate for a job, and had little option.

“Fair Work has failed to protect these many thousands of workers. Employers have been allowed to build empires and expand their business portfolios on the backs of employees being paid less than the minimum award entitlements,” she said.

She is right. A lot of people have made a lot of money suppressing wages, either using legal loopholes or encouraging illegal activity.

At 7-Eleven thousands of workers were students on visas who were underpaid. Some were paid as little as $5 an hour. Some were blackmailed, threatened with deportation if they spoke up or kidded into believing they were on a good wicket.

When the scandal was exposed in August 2015 in a joint venture with The Age, Sydney Morning Herald and Four Corners, the company apologised and paid back more than $160 million to thousands of workers in back pay.

But it didn’t stop others behaving badly. Since the 7-Eleven scandal there have been many more companies caught up in underpayment issues including Domino’s, Caltex, Retail Food Group, Pizza Hut, bubble tea operator Chatime and a string of high profile restaurants to name a few.

Almost every week, the workplace regulator puts out press releases about another venue that has been caught underpaying workers.

Whether it is in the form of scam traineeships, outright underpayment or highly exploitative enterprise agreements like the one at Grill’d, it is creating a dark cloud on the labour force.

These companies have come to symbolise what is wrong in a number of sectors of the economy, where underpayment or wage suppression is part and parcel of doing business and vulnerable workers are like lambs to the slaughter in this insidious practice.

It isn’t an overstatement to say that worker exploitation is widespread and has become entrenched over time.

It begs the question, what is the workplace regulator doing? What is the government doing?

There seems to be a lot of talk about criminal sanctions and other crackdowns but little action.

Michael Fraser and Maddison Johnstone of Wage Theft Australia.Credit: Tash Sorensen

With more than 1 million workers in Australia on visas, there is a lot of room for exploitation.

Then there are high school students and university students who are underpaid. Since the Grill’d scandal was exposed a week ago, hundreds of current and former workers have called or emailed with stories of being overworked and not paid after their shift finishes. Some relay stories of their managers closing off the computers after 11pm and refusing to pay them for overtime.

Managers are paid a bonus of up to $12,000 for meeting performance indicators including keeping the sales-to-wages ratio below a certain level. If they don’t meet the hurdles they are asked questions and expected to fix it. Some have written in saying they work for free to try and keep the ratio low.

Internal documents showed that at one store the average wage per hour was less than $14.50.

The Fair Work Ombudsman has said it is making inquiries into Grill’d. It received a complaint from a former employee and it is now conducting inquiries to check the company’s broader compliance with the Fair Work Act.

“The Fair Work Ombudsman is conducting inquiries in relation to Grill’d. As these inquiries are ongoing, it is not appropriate for us to comment further. Any workers with concerns should contact us directly.”

It refused to elaborate any further.

In the case of OTR, which has more than 3000 workers and more than 150 outlets largely in South Australia, the investigation by the law firm is just beginning.

Michael Fraser and Maddison Johnstone, who set up Wage Theft Australia, said they first received complaints in 2017 from OTR workers.

“When speaking to a number of workers, alarm bells immediately rang,” Fraser said.

Fraser who played a big role in exposing the wage scandal at 7-Eleven after moving next door to a 7-Eleven and finding rampant underpayment, including cashback scams and half-pay scams, said some migrant workers – who were clearly oblivious to their rights – complained that they were on flat rates at OTR.

The Fair Work Ombudsman is earning a reputation as a toothless tiger. It goes after the little operators but is timid when it comes to the bigger names. Unless the regulator is better resourced and has an appetite to go after the wrongdoers, and the government gives it more powers, instead of tinkering around the edges little will change.