7-Eleven franchisee pays penalty for exploitation

Australia’s leading convenience retailer, 7-Eleven is no stranger to publicity.  In the past three years the company has twice been named as Franchisor of the Year by the Franchise Council of Australia.  It’s an Award that recognises best practice in business franchising.

So it was shocking to see 7-Eleven in the news last week for all the wrong reasons. The operators of a 7-Eleven franchise in Victoria were ordered to pay penalties of $150,000 for a number of breaches to employment laws relating to underpayment and record keeping. The operators were also ordered to pay the workers almost $90,000 owed in wages.

The employer’s conduct was described as a “systematic and significant exploitation of highly vulnerable workers”. And this from a company that is recognised for best practice in business franchising!

While the breaches may have come about due to ignorance of Australian employment law, the magistrate noted that this was no excuse for non-compliance. Correct entitlements for employees must be paid and that all employers, regardless of size, must ascertain and comply with minimum entitlements.

The exploitation affected young international students, aged 18 to 26. They were paid flat hourly rates of between $9 and $12 when they were entitled to be paid much more for many of their shifts which included casual, shift, weekend and public holiday penalties. Some of the students were also illegally required to undertake several weeks of unpaid on-the-job training before starting their paid employment at 7-Eleven.

With the franchisee ignoring IR training and regular updates from the 7-Eleven head office, the magistrate found that the breaches were not a result of “naive ignorance” but the franchisee “must have been wilfully blind to the well known legal obligations of every small business operator”.

As the magistrate pointed out, “Compliance should not be seen as the bastion of the large employers with human resources staff and advisory consultants (accountants, consultants, lawyers) behind them”. Indeed, HR and employment relations compliance is for every business.

I think this case highlights two points. First it reinforces the need for all businesses, no matter what their size, to understand Australian workplace laws and observe compliance obligations. The consequences for inaction or ignorance are heavy penalties and fines.

Secondly, as a franchisor, best practice business processes around IR needs to be just that. In this instance, one rogue franchisee has cast the entire 7-Eleven network in a very poor light.

Having tighter rules around employer obligations and insisting their franchisees use modern HR tools can only add to best practice outcomes.

Of course fines for non-compliance are just as big for smaller companies as they are for larger companies.  However, while many smaller operators are unlikely to have the HR resources in-house to comply with Australian workplace laws, they can leverage cost effective HR services in the cloud. In the same way that a business turns to their accountant rather than the Australian Tax Office for help with business advice and tax minimisation strategies, those same businesses can turn to an expert service for help with HR and employment relations issues – and not go alone with the Fair Work Ombudsman.

Related Stories