Another 7-Eleven store has been found guilty of systematically exploiting its workers, this time in Brisbane, with the Federal Court handing out a record fine of more than $408,000 against the owners.
The legal action launched by the Fair Work Ombudsman is just one of eight against 7-Eleven franchisees in the past seven years. This is the fourth to be determined and the $408,348 total – Brisbane businessman Sheng-Chieh Lo was penalised $68,058 and his company, Mai Pty Ltd, a further $340,290 – is the biggest penalty ever in an FWO case.
Judge Michael Jarrett found that 12 employees, including a number of international students, at the store in Boundary Road, West End, were short-changed total of $82,661 in the 12 months between September 2013 and 2014, receiving flat rates as low as $13 an hour. Lo tried to conceal the underpayments by creating false records and making entries into the 7-Eleven head office payroll system.
Even when some of the money was paid back, Lo made staff to secretly repay thousands of dollars to him and his wife. More than $35,000 in wages remain outstanding, with individual underpayments ranging from $1673 to $21,966.
Judge Jarrett said Lo used “a sophisticated system of data manipulation and false record keeping” to systematically exploit his staff.
“Mr Lo’s contempt is demonstrated by his persistent attempts to deceive the Fair Work inspectors investigating the relevant complaints and his insistence, undertaken in a secretive way, that any amounts he paid to the relevant employees to make good (Mai Pty Ltd’s) defaults should be immediately paid back to him,” he said.
Lo’s Brisbane store was one of 20 7-Eleven outlets targeted by Fair Work inspectors for surprise night-time visits across three states in September 2014.
After initially providing the inspectors with false records to try to cover-up the underpayments, Lo showed them selective bank records as evidence his workers had been back-paid.
However, he had already arranged for the employees to repay the money. After inspectors discovered the ruse, Lo initially denied it, before admitting the plan.
Jarrett found there had “been no suitable credible expression of regret” and “Lo continues to justify his actions without accepting responsibility for them”.
He said a high penalty was required as “a general deterrence in the retail industry and, specifically, in relation to 7−Eleven franchises, given the number of complaints received against 7−Eleven franchisees since 2010”.
A larger problem
A major underpayments scandal involving the nation’s biggest convenience store chain emerged last August amid claims that stores were paying staff as little as $10 an hour.
A joint Four Corners and Fairfax Media investigation into the chain’s payroll compliance found 60% of 7-Eleven franchisees raided were underpaying staff.
In the wake of the revelations, the CEO, and chairman, 7-Eleven’s billionaire owner Russ Withers, resigned last year. The company set up an independent panel led by former ACCC boss Professor Alan Fels, to compensate underpaid workers. Last month new CEO Angus McKay dismissed it in a spectacular falling out with Fels, announcing it would be replaced by an in-house assessment group.
Fels previously said the 7-Eleven franchise model only works if franchisees underpay workers.
One concern raised by Judge Jarrett in the Brisbane case was that Lo appeared to have sought to absolve himself and his company of any responsibility for the outstanding underpayments, and purportedly referred employees to 7-Eleven’s unpaid wages panel for recovery of their wages.
Coincidentally, 7-Eleven announced this afternoon that it had approved its first round of payments under the new assessment team, six weeks after taking control of the process, with 21 claims, worth $686,000, approved.
The total number of wage repayment claims submitted now stands at 4,008. Three have been withdrawn in that time and 305 new claims lodged.
The company’s wage repayment website says 442 claims have been finalised, valued at $17.409 million.
At the time of his departure, Fels said his panel had assessed around 350 claims at an average of around $38,000, costing 7-Eleven around $11 million.
Last month in another FWO case, a 7-Eleven fuel outlet at 354 Flushcombe Road, Blacktown, in Sydney’s west, was fined a record $214,200 for deliberately short-changing two migrant employees by $49,426 and falsifying records. The men were often paid the equivalent of $10 an hour.
The Federal Court judge in this case found the franchisee had engaged in “a sustained and deliberate process of deception” and made false entries into the 7-Eleven head office payroll system.
Fair Work Ombudsman Natalie James said her office is currently in discussions with 7-Eleven “about a robust and transparent arrangements that will satisfy the Agency that Head Office is taking the necessary steps to build a franchise operating model that ensures workers employed in its network are correctly paid into the future”.
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