It looks like 7-Eleven just picked a huge fight with the employment umpire

Photo: Joe Raedle/ Getty Images.

The Australian government’s employment umpire, the Fair Work Ombudsman (FWO), says an offer by 7-Eleven to pay for oversight of the company’s new panel dealing with underpaid workers is “unacceptable and ludicrous”, shooting down a key element in the credibility of the franchised convenience store empire’s proposal.

Yesterday 7-Eleven announced the independent panel, chaired by former ACCC boss Allan Fels, to deal with underpaid 7-Eleven workers, would wind up on Friday and future compensation claims would be assessed by an in-house team.

The FWO released a statement today saying it was concerned about the decision.

In dismissing the Fels panel, 7-Eleven claimed the FWO would provide oversight of its proposed internal assessment, and offered to also compensate the government authority for any additional costs.

In response, the FWO says “the suggestion that we would accept funding from 7-Eleven to oversee its activities in this space is both unacceptable and ludicrous”.

7-Eleven’s decision to dismiss the panel chaired by the respected economist and lawyer has the potential to add to the company’s list of problems, which led the CEO and chairman, 7-Eleven’s billionaire owner Russ Withers, to resign last year.

Professor Fels accused the company of attempting to undermine and discredit the panel, and claimed that underpaid workers were being intimidated and threatened to stop them lodging claims for underpayment. He accused 7-Eleven’s new CEO Angus McKay of breaking existing commitments and said the company’s decision was designed to destroy trust by any workers who were underpaid and deter any further claims.

7-Eleven’s actions also have the potential to become a major election issue over worker’s rights and corporate ethics.

Today, the FWO acknowledged there may be concerns by some underpaid employees about coming forward to an internal 7-Eleven process, urging them to contact the authority directly on 13 13 94.

There have been allegations that employees were threatened with being reported to immigration if they spoke out, but the FWO says it has struck a deal with Border Force to ensure they will be safe.

Meanwhile, 7-Eleven’s Angus McKay told Melbourne’s 3AW today that the Fels panel was sacked because he’d heard rumours of fraud and that “people are trying to game the system”.

Fels fell out with McKay over new standards of evidence 7-Eleven said it wanted to prove claims. Fels said franchisees were destroying documentation and accused the head office of abetting the process.

Fels said yesterday the allegation was a ruse to take the assessments in house and reduce liability, which he estimates could be as high was $100 million. He says the new standard is “impossible”.

His panel had assessed around 350 claims at an average of around $38,000, costing 7-Eleven around $11 million.

The scandal over the systematic underpayment of 7-Eleven workers emerged last year. Workers were being paid $10-$12 an hour, less than half the award wage.

The FWO said today it was waiting for details on how the new internal panel would work, and confirmed it had current, ongoing investigations into a number of 7-Eleven franchisees.

“There is also a real prospect that we will take legal action against more 7-Eleven operators,” the FWO said.

The authority has launched legal action against eight 7-Eleven franchisees since 2009.

The latest case, finalised last week, saw the 7-Eleven fuel outlet at 354 Flushcombe Road, Blacktown, in Sydney’s west, 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.

In penalising owner Harmandeep Singh Sarkaria $35,700, and his company Amritsaria Four Pty Ltd $178,500, federal court judge Justin Smith said Sarkaria had engaged in “a sustained and deliberate process of deception”.

The judge said there was evidence of substantial non-compliance by other 7-Eleven franchisees

“The contraventions were not accidental, but, rather part of a deliberate scheme aimed at maximising financial benefit to the respondents. In other words, this was part of the respondents’ business model,” judge Smith said.

“I am not convinced that he is truly sorry for his conduct.”

The court found Sarkaria made false entries into the 7-Eleven head office payroll system, routinely saying the employees had worked only 10 hours a week, despite them working significantly more hours.

The entries gave the appearance that the employees were paid about $25 an hour, just above the legal minimum wage.

Last month the Fair Work Ombudsman released the findings of its Inquiry into the 7-Eleven franchise network.

“We are yet to be satisfied that 7-Eleven is meeting the expectations we have of it following the public release of our findings,” the FWO said in a statement today.

“The Fair Work Ombudsman remains of the view that 7-Eleven must accept it has moral and ethical responsibility for ensuring that all workers across its franchise network are paid their minimum lawful entitlements and take urgent steps to build a culture of compliance with workplace laws within the organisation.”

Here is the full FWO report into 7-Eleven.

It said in part, that they had “significant engagement with the 7-Eleven head office between 2009 and 2014 and expected to see improvements in compliance”.

“We did not,” the FWO said.

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