Advertisement
News

Everything We Know So Far About 7-Eleven Australia’s Wage Fraud Scandal

Franchisees were paying employees well below minimum wage, blackmailing them to work double shifts, and threatening to report foreign workers to immigration if they spoke out.

by Wendy Syfret
Sep 1 2015, 7:40am

Image via Flickr user Mike Mozart

Imagine a job that only paid you for every second hour you worked and threatened to have you kicked out of the country if you complained. This is the situation reportedly facing employees of the 7-Eleven convenience chain in Australia.

This week a joint investigation between the Fairfax publication BusinessDay and the ABC's Four Corners discovered an internal 7-Eleven document that laid out franchisee incomes over the last financial year. The document revealed a third of Australia's 620 stores made less than $350,000 over the previous 12 months, with 84 bringing in between $200,000 and $250,000, and 38 earning less than $200,000.

At this point, that probably doesn't sound too shocking. But keep in mind how mindblowingly expensive it is to run one of these stores. Using the casual award rate as a guide, a business that's open 24 hours a day, seven days a week, would cost around $230,000 annually in wages alone.

Making this even more impossible is the fact that under the Australian 7-Eleven model, head office takes a massive 57 per cent of gross profits. This leaves stores to cover almost a quarter of a million dollars of staffing costs on 43 percent of their revenue, which begs the question: how are 7-Eleven franchisees paying their workers?

As it turns out, many stores have been surviving by using a form of payroll fraud called the "half-pay scam." As the name suggests, this involves employers doctoring timesheets to log just half the amount of hours worked. Under this setup, an employee working a 40 hour week would end up receiving $12 an hour—well under the award rate of of $24.69. There are also allegations some stores are paying as little as $10 an hour.

But that's not where the misconduct ends. International students working at the global convenience giant were told they would be reported to the immigration department if they spoke out about their wages. This threat was also used to coerce people into working longer shifts for less pay. Under a Australian student visa, an individual is only allowed to work 20 hours a week, but as mentioned, many workers reported working 40 hours and being paid for 20. In response to the specific issues raised over exploited workers on student visas, the Greens have said they will instigate a Senate inquiry.

Speaking to Fairfax media, one 7-Eleven insider condemned attempts to cover up wage fraud, noting it was impossible for a company with a 24-hour staff to be profitable without ripping off employees. "They can't run 7-Eleven as profitably and successfully as they have without letting this happen. The reality is it's built on something not much different from slavery," the unnamed individual said.

Since the story broke, the Shop Distributive and Allied Employees' Association, a union for retail employees, has reported that several employees have contacted them with more accounts wage fraud, leading to a further concern over underpayment of superannuation. The association has vowed to win back lost wages and is launching a hotline for employees who have been exploited.

As condemnation for the company grows, head office and franchisees insist the other is at fault. While Fair Work Ombudsman Natalie James told Four Corners and Fairfax Media they were investigating whether head office was complicit in the fraud, 7-Eleven's general manager of operations Natalie Dalbo has defended the company. She insists the choice to underpay staff fell to the franchisees, and was motivated by greed not desperation. But speaking to the ABC, former consumer watchdog Allan Fels notes that while there is no excuse for underpaying staff, franchise owners were put in an impossible situation by the aggressive franchise agreements.

Over the weekend, the chain's Dallas-based chief operating arm was bombarded with tweets demanding an explanation. And on Saturday night they responded, tweeting, "We're aware of the matter here in the USA & do understand that 7-Eleven Australia is currently investigating this matter fully."

In a following statement 7-Eleven's parent company said: "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." They promised they would take action against any franchisee found to be breaking Australian law.

At home, Australian 7-Eleven issued a media statement yesterday promising to establish an independent panel to "receive, review and process" claims of underpayment. CEO Warren Wilmot even went as far as announcing they'd refund the franchise fee of anyone who no longer wanted to participate in the system. With stores valued between $400,000 and $1.7 million, a wide scale buyback could cost tens of millions of dollars. So don't be surprised if those $4 cans of coke get even more expensive in coming months.

Follow Wendy on Twitter

Like this article? For more local content like VICE on Facebook