Allan Fels says 7-Eleven’s $173m wage theft bill should have been higher

“But it was clear that there was another $100 or $200 million to come and they didn’t want that.”

Professor Fels was dumped by the company in mid-2016 as claims grew.

Allan Fels said the $173 million represented only a fraction of the chain’s unpaid wages.Credit:Steven Siewert

He said there were about 20,000 people who had worked at 7-Eleven during the seven to 10 year period he examined in 2015, meaning the 4043 workers who have been repaid to date was a “shortfall”.

Only $8 million of claims were added after his removal, he said.

The company said at the time it moved the repayment process in-house so it could apply its own standards and subject claims to more scrutiny.


“We have every intention of processing every claim. My one caveat on that is we’re only going to pay valid claims.” 7-Eleven’s chief executive Angus McKay said in 2016.

Mr McKay said on Friday the internal process had been widely promoted and claims were assessed independently by Deloitte.

“This process has always been about ensuring we paid workers what they were owed.”

The regulator signed a deed of compliance with the Fair Work Ombudsman in 2016 that required the company to improve its processes and undergo three pay audits, the last of which was in 2019.

Friday’s final report from the ombudsman did not include any penalties against 7-Eleven Stores Pty Ltd, the franchisor behind the chain, which is ultimately owned by billionaire Russ Withers and his family and that of his late sister, Beverley Barlow.

Underpayment was rife in 7-Eleven convenience stores.

Underpayment was rife in 7-Eleven convenience stores.Credit:Wolter Peeters

Allegations of underpayment were not made against the head office because it was not the workers’ legal employer, though the ombudsman found it knew some stores had flouted the law and didn’t “adequately detect or address” the problem.

Industrial laws have since been changed to make it easier for regulators to pursue franchisors over problems within their store networks.

Mr McKay welcomed the ombudsman’s report, which noted the chain had spent $10 million on improved systems like punch clocks to record shift times.


“With ongoing support from staff across our network, we are incredibly pleased with the progress we have continued to make,” Mr McKay said in a statement. “I said we would be accountable for our actions and take ownership of our remediation journey. I truly believe we have done just that and will continue to do so.”

Sandra Parker, the Ombudsman, said she wanted 7-Eleven to go into another compliance agreement to ensure the company remains accountable.

“Franchisors can now be held responsible for their franchisees’ conduct and may be subject to enforcement action, court proceedings and penalties if their franchisees have breached the law,” Ms Parker said.

The regulator sued 11 7-Eleven franchisees over pay issues in recent years, with a cumulative total of $1.8 million in penalties awarded against them, equivalent to about 1 per cent of the underpayments nationally.

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7-Eleven repays $173m to workers after some franchisees falsified records in underpayments scandal | Business

Employees of 7-Eleven franchises have been paid back $173m in underpaid wages, interest and superannuation, according to the fair work ombudsman.

The workplace regulator said on Friday that 7-Eleven had implemented payroll improvements after a report in 2016 found that some franchisees had “deliberately falsified records to disguise the underpayment of wages” and 7-Eleven had failed to detect or address the breaches.

In 2015, the ABC’s Four Corners revealed unlawful practices at 7-Eleven franchises, including systemic underpayment and instances of workers forced to withdraw their wages to pay back their employers to disguise underpayment.

The reports bolstered union campaigns to expose what they call “wage theft”, which persuaded the federal government to introduce higher penalties for underpayment, including potential criminal offences for the most serious cases.

In December 2016, 7-Eleven entered a “proactive compliance deed” publicly acknowledging its responsibility for addressing past non-compliance.

In an update on compliance activity, released on Friday, the fair work ombudsman (FWO) said that between September 2015 and February 2020, 7-Eleven Stores Pty Ltd paid back $144.5m in wages, $19.5m in interest and $9.6m in superannuation.

Payments compensated 4,043 current and former franchise employees with an average payout of $21,903.96. None of the money has been recovered by head office from franchisees.

The FWO has also brought 11 litigations against 7-Eleven franchisees, resulting in courts awarding more than $1.8m in penalties for operating unlawful cash-back schemes, paying unlawful flat rates to workers, and falsifying records.

7-Eleven has implemented a biometric time-recording system, called Kronos, which mandates that franchise employees clock-on using their thumbprints.

Facial recognition of employees is used to confirm shift lengths and identify payroll anomalies. In one anonymised case study provided by the FWO, this resulted in backpay for an employee who began a shift five minutes earlier and finished one hour and six minutes later than payroll systems had recorded.

7-Eleven now uses centralised payroll systems, preventing franchisees changing workers’ rates of pay. Pay slips are also generated centrally.

The FWO, Sandra Parker, said 7-Eleven “has implemented extensive high-tech systems, training and employee assistance programs across its business”.

“Through our compliance partnership, the franchisor has delivered on its commitment to address past breaches by its franchisees and lead a network that meets its lawful obligations to workers,” she said.

“We will continue to monitor compliance in 7-Eleven outlets and encourage head office to consider entering into a second compliance partnership to ensure ongoing accountability.”

The 7-Eleven chief executive, Angus McKay, welcomed the release of the FWO report.

“I said we would be accountable for our actions and take ownership of our remediation journey,” he said. “I truly believe we have done just that and will continue to do so. We remain absolutely committed to ensuring continued compliance with all workplace laws and regulations across our Australian network.”

In 2017, the Coalition introduced laws to increase the maximum civil penalties for serious contraventions of the Fair Work Act.

Franchisors and holding companies are now responsible for contraventions by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable steps to prevent them.

In September 2019, the attorney general and industrial relations minister, Christian Porter, began consultation for possible new criminal penalties for deliberate and systemic underpayment.

After the outbreak of Covid-19, consultation on the issue was moved to roundtables conducted between unions and employers, from which Porter is expecting to produce an industrial relations reform bill before the end of 2020.

The Australian Council of Trade Unions secretary, Sally McManus, has said she is concerned the reforms could cut workers pay and conditions. But one area of consensus was that unions had agreed the government should subsidise small businesses’ access to payroll software to improve compliance with pay laws.

There was also “95% agreement” on a simpler and faster system to correct wage underpayments, allowing employers to agree in the Fair Work Commission to pay money back in return for protection from civil penalties in court proceedings, she told Guardian Australia earlier in October.

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