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’s Japanese parent pushes U.S. expansion with $21 billion deal for Speedway

Seven & i Holdings Co., the world’s largest convenience store franchiser, agreed to buy Marathon Petroleum Corp.’s Speedway gas stations for $21 billion, betting that an expanded U.S. footprint will deliver growth amid the uncertainty of the pandemic.

The transaction, to be paid in cash and partly financed using debt, will add about 3,900 stores to 9,800 locations operated by the retailer’s U.S.-based 7-Eleven unit, the Tokyo-based company said in a statement Monday. Seven & i shares fell as much as 8.4% by midday, the biggest intraday decline since March.

The deal is the second-largest purchase of a U.S. target this year and the biggest yet for Seven & i, a retail giant with 69,000 stores worldwide including 7-Eleven outlets and Ito-Yokado supermarkets in Japan. Seven & i spent $3.3 billion three years ago to buy Sunoco LP gas stations and convenience stores in a push to expand its U.S. footprint.

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“This is a historic first step as we seek to become a global retailer,” Chief Executive Officer Ryuichi Isaka said on a conference call Monday.

Marathon follows a long line of energy companies that are shedding retail networks to focus on making fuel. The deal, the biggest in the oil sector since the coronavirus outbreak, comes as retailers look to shift their focus amid the coronavirus pandemic, which has further upended a sector already being impacted by the onset of e-commerce. Marathon said it will use $16.5 billion in after-tax proceeds to reduce debt and bolster dividend payments.

The Japanese retailer was seeking a deal earlier this year to buy Speedway, the second-largest chain of its kind in the U.S., but hit pause after offering $22 billion, Bloomberg News has reported.

Isaka has overseen a broad restructuring of the Japanese firm since taking the helm in 2016, with a focus on expanding in the U.S. Seven & i has been pressured by a saturated convenience store market in Japan and a tight labor market that makes its 24-7 operating model challenging.

“Japan’s convenience store market is at its limit as the population ages,” said Hiroaki Watanabe, a logistics analyst and author of a book on Japan’s convenience store industry. “There will be a short-term impact from the coronavirus in the U.S., but long-term the population there will keep growing.”

North America accounted for about 40% of the company’s sales in the latest fiscal year, up from about a third five years ago. Speedway’s store count has tripled since 2011 across 36 states.

Investor Pressure

Late last year, Marathon faced months of pressure from investors including Elliott Management Corp. and D.E. Shaw & Co. for sweeping changes to improve its performance. Elliott had been pushing for Marathon to break itself up into three separate businesses: refining, retail and pipelines.

The company wrapped up a strategic review of MPLX LP, its publicly traded oil pipeline affiliate, ultimately deciding to retain its stake in the midstream business. Investor pressure also led to Gary Heminger stepping down as CEO in March after 45 years at the company.

American fuel makers like Marathon have been struggling to recover amid fears that a second viral wave will force more drivers off the road, particularly in some of the nation’s most populous states.

Seven & i will raise about $1 billion by selling off overlapping U.S. stores after the transaction, Isaka said on the call.

Marathon took a $12.4 billion charge in the first three months of this year while also suspending share buybacks and slashing spending by 30%.

In terms of scale, the proposed deal is less than the $31.4 billion that Aon Plc is paying for Willis Towers Watson Plc, according to data compiled by Bloomberg.

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