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Springfield, Oregon, USA – January 6, 2014: 7 Eleven convenience store at dusk with lights on and an suv parked out front.

7-Eleven says model not “dependent” on underpayment and will repay staff

After a joint investigation by Fairfax and Four Corners uncovering widespread underpayment of staff by 7-Eleven franchisees, 7-Eleven has said in a statement that it will pursue franchisees to repay money owed to present and former staff.

Chief Executive Officer, Warren Wilmot said “the viability of the 7-Eleven system is in no way, never has been and never will be, dependent on franchisees underpaying their staff.

“This doesn’t let off the hook any franchisees doing the wrong thing, because we will pursue them to repay any money owed to former or present staff,” Mr Wilmot said.

The statement comes as a 7-Eleven insider told Fairfax Media that the company had been in panic mode for at least a month since the joint investigation discovered a large-scale cover up by head office and evidence that 620 stores were struggling to break even.

The insider told Fairfax Media “we see the payroll figures on all but a handful of franchisees and most of the payroll is so low, either the franchisee is working a million hours a week or their staff are getting paid below award.”

The Fair Work Ombudsman has raised concerns about systemic underpayment of wages and entitlements and false-record keeping practices in relation to vulnerable employees. Many employees are international students from non-English speaking backgrounds.

Fair Work Ombudsman, Natalie James has expressed concern to 7-Eleven’s head office about the behavior of some employers, saying franchisors are expected to take more responsibility and pay greater attention to workplace compliance by its franchisees.

Ms James said “while we are not experts in the field of franchise models and financial viability, our Inquiry has raised concerns about the 7-Eleven model.

“We are exploring whether the model places significant pressure on a franchisee’s ability to meet statutory obligations, predominantly through a lack of cash flow. In some cases, we suspect it is the reason franchisees have underpaid staff.

Yesterday, the Fair Work Ombudsman announced that it had commenced legal proceedings against a 7-Eleven store in Sydney which allegedly underpaid two migrant employees almost $50,000 and created erroneous records for the workers.

7-Eleven will establish an independent panel to receive and examine claims including underpayment of staff by franchisees, and offer a fee refund for any franchisee wanting to opt out.

“The key factor here is that the panel will receive, review, and process any claim of underpayment, and authorise repayment where this is appropriate,” said Mr Wilmot.

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Daniel Jacobs

Daniel Jacobs

Daniel Jacobs was editor of Dynamic Business.

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