undertook a number of in-depth investigations of 7-Eleven stores that were the subject of requests for assistance from employees. These investigations disclosed concerning levels of non-compliance with the Fair Work Act 2009 (FW Act) and Fair Work Regulations 2009 (FW Regulations), including instances of deliberate manipulation of records to disguise underpayment of wages. To identify and address the drivers of non-compliance, the Inquiry examined the actions and considered the motivations of workplace participants. It sought to better understand the respective roles of 7-Eleven, its franchisees and their employees in the network’s operating model and culture. In particular, the Inquiry sought to determine if 7-Eleven had a role in the alleged falsification of employment records and underpayment of wages by franchisees. The Inquiry found 7-Eleven’s approach to workplace matters, while ostensibly promoting compliance, did not adequately detect or address deliberate non-compliance and as a consequence compounded it. In particular, instances where franchisees created false and misleading records to satisfy 7-Eleven’s auditing and payroll regime while continuing to underpay employees. Investigations of stores included in the 20 store sample and of stores investigated as part of the wider Inquiry have led to a range of enforcement actions, including: seven matters filed before the Federal Circuit Court one Enforceable Undertaking made 20 Letters of Caution issued 14 Infringement Notices issued three Compliance Notices issued over $293 500 recovered for workers. This report examines the operating environment in which problems surfaced and considers what influence the 7-Eleven model had on franchisees and their behaviour. It discusses the drivers of non-compliance and details recent changes made by the network to ensure future compliance following public scrutiny. It ends with a number of recommendations designed to: promote a sustainable culture of compliance across the 7-Eleven network enhance the FWO’s effectiveness to bring to account entities and persons responsible for exploiting vulnerable workers on temporary working visas.
To determine the hours actually worked, we requested records from 7-Eleven, including reports from the payroll system, register log ins and records showing when an employee had checked the fuel levels in the store’s petrol tanks. The register log in reports showed that employees didn’t use individual log in codes so they couldn’t be used as evidence. To gather sufficient evidence of the hours Hussan worked, an inspector cross-checked the hours shown in Hussan’s photographs, his handwritten records, the employer’s rosters, the employer’s timesheets, the payroll reports and the fuel dip reports. Hussan’s timebook record largely correlated with the fuel dip records provided by 7-Eleven. Importantly, the fuel dip records showed Hussan signing the record when the employer’s timebook recorded he was not at work This detailed cross referencing allowed the inspector to determine the most accurate evidence of hours worked. 4.7 Rectification of underpayments To date we have been able to obtain approximately $293 500 in underpayments across 7-Eleven stores investigated as part of this Inquiry. A number of barriers have prevented us from achieving full rectification of amounts determined to be outstanding. The transient nature of the workforce means we haven’t been able to locate some employees to advise them of an underpayment or to transfer funds. In some cases, it’s been reported employees have returned funds to the employer shortly following ‘rectification’ of underpayments. In these instances we have faced challenges in validating what has actually been paid to the worker. Case study: repayment of funds Our investigation into Store A identified underpayments of over $80 000 for a 12 month period. The inspector issued a contravention letter requiring these amounts to be rectified. The employer provided evidence of rectification in the form of bank documents showing bank transfers to employees. Follow-up contact between the inspector and some of the employees raised concerns that these amounts may not have been paid.
Provision Summarised requirement Maximum penalty Section 323 – pay in full (encompasses section 324 permitted deductions) Requires employer to pay entitlements in full, in money, and only to deduct amounts which are permitted (e.g. by law or agreement with the employee). 60 penalty units ($54 000 corporate/$10 800 individual) Section 325 – unreasonable requirement to spend Employer must not unreasonably require an employee to spend any part of their wages (including by repayment to the employer). Section 327 provides that an amount required to be spent under section 325 will be taken never to have been paid to the employee. 60 penalty units ($54 000 corporate/$10 800 individual) Underpayment contraventions (various) These may apply if an amount is not paid or is paid back, and therefore taken to be unpaid. Usually (for s.45 – Modern Award) 60 penalty units ($54 000 corporate/$10 800 individual) Regulations 3.44 (1), (2), (3), (6) – Records – accuracy Records kept by an employer, or used by the employer, must not be false or misleading to the employer’s knowledge. 20 penalty units ($18 000 corporate/$3 600 individual) Section 340 action Employer must not take adverse action against an employee because of the employee’s workplace right. May arise, for example, where an employer takes adverse action because an employee exercises their right not to 60 penalty units ($54 000 corporate/$10 800 individual)
limit opportunities for their systems to be exploited, making it harder for franchisees not to comply with the law. At various points 7-Eleven has taken action, however it is the view of this Inquiry that it could have done more, and acted earlier. While we acknowledge the real and significant steps taken by 7-Eleven to begin to rectify the situation, there is still much to do. Creating a culture of compliance from the top down will require a sustained and committed effort throughout the organisation, and resource allocation over a long period of time. Sustained change in behaviour is most likely to be achieved if driven by the franchisor. Deliberate contravening behaviour, particularly around false record keeping, appears to be ingrained within aspects of the network. If some 7-Eleven franchisees have built into their business model the underpayment of employees, particularly vulnerable workers, this culture will be difficult to address notwithstanding 7-Eleven’s recent efforts to implement record keeping systems which greatly enhance record compliance. The reported outbreak of demands to employees to pay back wages illustrates the lengths some franchisees will go to and the degree of leverage they have over employees. Difficulties in obtaining corroborative evidence of threats or coercion relating to this behaviour highlight the limits of what a regulator can achieve in terms of enforcement and rectification outcomes. It may be that chronic underpayments and associated behaviour will not be entirely eradicated as long as these operators continue to be part of the 7-Eleven network. Any business encountering deliberate and longstanding non-compliance of the nature observed in the 7-Eleven network will face challenges in overcoming entrenched behaviours, especially in a large and complex business. Sustainable compliance will only be achieved through persistent, resourced and ongoing accountability measures that root out and ensure serious consequences for stores that continue to engage in this behaviour. The balance of risk and rewards for non-compliance should be considered by both 7-Eleven and Government. The consequences of this type of behaviour must be more serious than the benefits that flow from underpaying employees if we are to impact behaviour. Financial penalties that are significantly lower than the savings to be made from underpaying wages have minimal deterrence impact. The real threat to a franchisee of losing their business due to breaches of the franchise agreement is a strong deterrent.
were in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention. The FWO frequently uses section 550 to commence court proceedings against alleged ‘accessories’ to contraventions. Most commonly, accessories are individuals involved in running the employing entity that committed the contravention (the ‘primary contravenor’). This includes company directors, company officers, and—albeit less commonly—human resources officers or professional advisors. Section 550 is a critical tool for us to use to bring culpable individuals to account, especially in circumstances where the employing entity has been deregistered or liquidated, as often occurs during our investigations or after we have commenced court proceedings. Accessories can also be other businesses in a position of power within the same supply chain as the employing entity, such as a head contractor or franchisor. We have used section 550 to bring parties other than the direct employer to account. For example, a company receiving the benefit of labour provided by contractors, when the price paid under the contract was insufficient to pay worker wages. In one such case, the matters of FWO v Al Hilfi (SAD 27/2012) and FWO v Al Basry (SAD 108/2012) concerned a trolley collecting supply chain: Coles Supermarkets Australia Pty Ltd sat at the top of the supply chain in which the contract price paid was not sufficient to cover workers’ minimum entitlements and workers were significantly underpaid. Mr Ahmad Al Hilfi and Mr Ayam Al Basry sat at the bottom of the supply chain as the employing entity. Mr Nidal Albarouki and Mr Clency Ferriere, respectively the former owner and general manager of the trolley collecting companies Starlink International Group Pty Ltd and Starlink Operations Group Pty Ltd (in liquidation), sat in the middle of the chain as the intermediary. In this matter, we obtained penalties of $94 050 against each of Mr Albarouki and Mr Ferriere in respect of their involvement in the underpayments. Coles Supermarkets also entered into an Enforceable Undertaking with us, where it admitted it had an ‘ethical and moral responsibility’ for the conduct of all persons involved in its business. This was the first time a major supermarket chain had accepted responsibility for compliance with workplace laws in its supply chain.