7-Eleven, the largest convenience store chain of Australia has been under the scanner for over seven years. The reason for this being the alleged systematic underpayment of wages to its employees mostly international students. Investigations have also given indications of rosters and time sheets being doctored, store financials having wage bills that are understated and explosive documents in relation to payroll compliance (Hobday, 2016). The store reviews have provided further evidence of deep rooted rot within the Australian empire of 7-Eleven (The Sydney Morning Herald, 2015). This essay will discuss a brief summary of the report that was released by Fair Work Ombudsman (FWO) in April, 2016 on the findings of the inquiry that it carried out on the franchisees of 7-Eleven in view of the above allegations of “systematic non-compliance with federal workplace laws”. Besides this, it will also explain the failings or gaps that are present in the industrial relations system which enabled the convenience store to underpay its employees. Finally, recommendations will be provided which will help in protecting the rights of the employees so that they are prevented from being exploited on the same lines in future.
The Fair Work Ombudsman carried out an inquiry into the franchise network of 7 Eleven. This was prompted by allegations from the employees of 7-Eleven regarding the “systematic non-compliance” with the federal laws in relation to the workplace. It had also come to light that several franchisees were falsifying the records in a deliberate move for disguising the underpayment of wages (Australian Government, 2016).
The FW Act permits inquiry into any practice or act which is in contradiction to the Act, an instrument of fair work or “safety net contractual entitlement” (Australian Government, 2015). Thus, the purpose of such an inquiry by FWO was identifying if the allegations had a basis within the store network of 7-Eleven, what factors were the driving forces for non-compliant behaviour, were these factors being disguised and in case yes, then how, how was it possible to expose them and who was responsible for it. The inquiry looked to access the role as well as the involvement of the company’s head office and if the “franchise operating model” was in itself a contributing factor to the unlawful behaviour that certain franchisees demonstrated. The aim of the inquiry was also to find out if the workers themselves turned out to be in participants in the non-compliance either inadvertently or reluctantly. The inquiry for structured in a way that it included several major activity components particularly investigations on the basis of the assistance requests from the individual employees, testing allegations that were anonymous, engaging with 7-Eleven and forensic auditing of a sample of the stores in an in-depth manner (Australian Government, 2016).
Based on the continuous concerns of the employees as well as intelligence the strategic inquiry by FWO started in a sample of 20 stores of 7-Eleven throughout the provinces of Queensland, NSW and Victoria in June, 2014. The aim of the inquiry was to test the allegations by means of site inspections in a coordinated manner followed by an analysis of record keeping of a sample of 20 stores of the company. Several in-depth investigations were also undertaken which revealed concerning levels of non-compliance with both the Fair Work Regulations 2009 and the Fair Work Act 2009 and many instances of records being deliberately manipulated for disguising underpayment of wages. Three of the five stores were found to be underpaying their staff (Australian Government, 2016).
The investigations of sample stores and other stores which were investigated as a result of wider inquiry led to several enforcement action comprising filing of seven matters in the “Federal Circuit Court”, issuance of 20 caution letters, one enforceable undertaking, issuance of 3 notices of compliance and 14 notices of infringement along with the recovery of more than $293, 500 for the employees (Australian Government, 2016).
It was found out by the inquiry that the approach of 7-Eleven to the matters of the workplace promoted compliance ostensibly but it also did not detect in an adequate manner or address the issue of deliberate non-compliance. Consequently, it compounded the matter. In certain specific instances, misleading and false records were created by the franchisees for satisfying the auditing as well as payroll regime of 7-Eleven while they continued to underpay their workers (Briton, 2015). Despite the presence of such signs, 7-Eleven did not make any substantial alterations in either its store review processes or its payroll system for targeting the risks related to incorrect record-keeping. The inquiry also suggested that the records or store practices were not interrogated sufficiently by the payroll section for uncovering the signs of non-compliance where they were hidden by the franchisee even though a reasonable basis was present before 7-Eleven to conduct inquiry and take action (Australian Government, 2016).
The formal allegations related to non-compliance led to the identification of certain themes as well as practices related to gaps in the system of industrial relations which led to the workers being underpaid. The workforce of 7-Eleven largely consisted of international students from the backgrounds that were non-English speaking. Although the international student visas permit them to work for 40 hours in a fortnight, several of the students were working in excess of this. They are paid correctly on paper but half their pay is taken back by blackmailing them, indicating the existence of a cash-back scheme (Cox, 2016). Thus, they were employed in breach of their visa conditions and threatened with deportation in case they complained. Their wage records are falsified to show that they were working as per the requirements of the visa. A common feature of these kinds of allegations was the training periods that were unpaid and ranged from one shift to 14 days of work (Nunweek, 2015).
It thus came to light that the intersection between the visa framework as well as the “workplace relations system” was apparently multiplying the vulnerable situation in which the workers found themselves. The international students in Australia are permitted to work for only 20 hours in a week but they were forced to work for 40 hours by the franchisees and then paid only for 20 hours. Therefore, if their base wage per hour is $24, they effectively receive only $12 (Branley, 2015). As per the law in Australia, the minimum wages cannot be undercut by the employers, even though the employees might make an offer of accepting the low rates. The employees also have to maintain at all times, accurate records related to time-and-wages. There are minimum pay rates that apply to everyone in Australia and are not negotiable. The employer cannot take advantage of any worker especially an overseas employee who may have limited knowledge of English and their rights of the workplace but the students were threatened that if they tried to complaint they will end up losing their visas or being deported due to the breach of the conditions in their own visas (Nunweek, 2015). This way the franchisees took advantage of the gaps and exploited the vulnerability of these students by catching them in a vicious trap.
Recommendations which will protect the rights of employees from being exploited along similar lines in the future should first of all recognise the need of balancing the range of regulatory as well as policy settings that every framework is looking to address. In light of this, it is recommended that companies implement arrangements for effective governance which ensure that all the federal workplace laws are complied with. The companies having franchisees can also establish a “staff consultative forum” which can have representatives of the employees from the different parts of the network and this should be separate from the franchisees. These companies should accept their ethical as well as moral responsibility to make sure that their stores meet the expectations of the society and the community for fair, safe and equal work opportunities for every employee. The corporates like 7-Eleven also need to review their operating models for ensuring periodic reviews of their financial viability and also legal exposure with respect to their agreements of franchising. An independent external party may be engaged for self-auditing their compliance. Steps should be taken for improving the employment related practices of the franchisees by implementation of changes that are not only permanent but also sustainable for a franchise model for ensuring that workplace relations law like the Fair Work Act, 2009 and other instruments related to it are complied with in full for every employee in all the franchisees.
The FWO inquiry was conducted particularly for figuring out if 7-Eleven had a part to play in the alleged employment record falsification and wage underpayment by the franchisees. It also looked for identifying and addressing the non-compliance drivers, the motivations along with the actions of the workplace participants. Its aim was to understand in a better way the roles of 7-Eleven, its franchises as well as its employees respectively in the culture and operating model of the network. It found that 7-Eleven did not take steps for rectifying this incorrect act of the franchisees despite having the sufficient reason to do so. Advantages were taken of the gaps in law by employing vulnerable international students in breach of their visa conditions. They were underpaid, exploited and threatened with deportation in case they complained. For avoiding such kind of exploitation in future and protecting the employee rights, a sustained effort is needed for which resources have to be allocated for a longer time period. A sustainable behaviour change has to be driven top down and the culture of compliance has to be rebuilt by a strong leadership as false record-keeping has apparently been ingrained within each and every aspect of the network.
Australian Government. (2016). A Report of the Fair Work Ombudman’s Inquiry into 7- Eleven: Identifying and addressing the drivers of non-compliance in the 7-Eleven network . Australia: Australian Government.
Australian Government. (2015 ). Fair Work Handbook. Retrieved August 31, 2016, from Fairwork Ombudsman: https://www.fairwork.gov.au/ArticleDocuments/712/Fair-Work-Handbook.pdf.aspx
Australian Government. (2016). Fair Work Obudsman: Statement of 7-Eleven. Retrieved August 31, 2016, from Australian Government: https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/april-2016/20160409-7-eleven-presser
Branley, A. (2015 ). 7-Eleven staff work twice as long at half pay rate, investigation reveals. ABC News .
Briton, B. (2015 ). 7-Eleven scandal: The tip of a low-wage iceberg. Guardian (Sydney) .
Cox, D. (2016 ). 7-Eleven wage scam: Union says it has evidence cash-back scheme is 'still alive and kicking'. ABC News .
Hobday, L. (2016 ). 7-Eleven wage underpayment claims taking too long: Allan Fels. ABC News .
Nunweek, J. (2015 ). Lessons from 7-Eleven’s scam. Overland Literary Journal .
The Sydney Morning Herald. (2015). How 7 Eleven is Ripping off its workers.. The Sydney Morning Herald .
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