biggest-cases of systemic wage

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Adele Ferguson[email protected]; [email protected]www.afr.com I Monday 31 August 2015
7-Eleven head office involved in wage fraud cover-uprrhe country’slsage:ehain, t .7-Eleven, would have to – be one of the worst-and biggest-cases of systemic wage abu se in corporate history. or What is particularly disturbing about the franchise chain is that the exploitation of workers has been going on for years, under. everyone’s nose. The overwhelming feedback from an expose by ABC’s Four Corners and Fairfax Media is that 7-Eleven is the tip of the iceberg and Australia has a dark side to its labour market that is spiralling out of control. With 1.3 million workers In Australia on visas, equivalent to onein 10 of the workforce, it I s a big issue that has wider economic implications. Besides undermining the award system, ills potentially robbing the Australian Taxation Office of hundreds of millions of dollars a year in tax. At 7-Eleven alone, wage fraud could be tens of millions of dollars a year, In 7-Eleven’s case, many of the thousands of workers are students on visas, who are only allowed to work 20 hours a week without breaching theirvisa conditions. It makes them vulnerable to abuse. The Fair Work Ombudsman has conducted three separate raids-in the past six years and its findings are getti ng worse – yet the abuse goes on. Fair Work’s latest raid in September 2014 found that 60 per cent of (he 20 stores raided had payroll issues. This is double the findings of a previous raid in 2011. Given the persistent and systemic nature of the underpayment of wages, Fair Work will need to comedown hard. Fair Work and its effectiveness as a regulator ‘sunder scrutiny from a Senate inquiry into wage abuse and visas. Senator Deborah O’Neill made ‘tele& at a recent Senate hearing that more was needed vibe done. This could include reviewing the structure of the regulator, beefing up its powers and increasing its budget, Fair Work is midway into an investigation Into 7-Eleven. Most crucially, it is now looldng at where the responsibility lies: with the franchisees or head office. An internal review of 225 stores by 7-Eleven head office between July and August found more than two-thirds of stores had payroll compilance issues. Some we re repeat findings. The explosive documents obtained in a Joint media investigation by Four Corners and Fairfax Media reveal that the reviews of payroll compliance date back to last September. Each month reviewed exposes massive payroll problems. For instance, between October 13 and November, 9 last year, head office reviewed 83 stores and found that 47 had payroll compliance issues such as underpayment of wages and falsification of payroll sheets, which is fraudulent. Between Apr116 and May3.97 stores were reviewed with 55 per cent showing payroll compliance issues. The best month vvas over the Ch ristmas season when 75 stores were reviewed with on ly17 stores, or 23 per cent, flagging compliance issues. A database of recorded meetings between 7-Eleven head office and franchisees paints a damning picture of what is really going on. For instance, on the Gold Coast, one franchisee is told on Augus t 5, 2015: “Last week’s roster and timesheets match, however, thepaystiMinaiyonlyshows payment tofdur pedple. You have7 people mr.4.; MA OR’ – . –
7-Eleven is the tip of the iceberg and Australia has a dark side to its labour market that is spiralling out of control.on your roster …You admit to not paying staff, for not paying penalty rates and for not keeping payment records for staffyou claim are on your accountant’s payroll system You are required to back pay all staff’ that have worked in your store.” Ina statement on Saturday, 7-Eleven said it was “extremely disappointed” that a number of franchisees were not meeting their obllgations. It said it was “deeply concerned” at the personftl impact on those who had been ripped off and “the damage such actions cause to franchisees who are trusted and reliable and responsible small business owners meeting their obligations as employers”. It said it didn’t condone such actions and would take appropriate ac don. The problem with this is that 7-Eleven head office’s “appropriate action” to date hasn’t been good enough. Another problem is that it doesn’t acknowledge that underpayment of wages and falsifying payroll have become institutionalised and head office is well . aware of it. The repercussions have not been enough to stop it gohig on. Why? if head office catches a franchisee not paying proper wages, they are told to pay them back. In the more egregious cases, head office slaps them with a bre_ach notice. 7-Eleven hasn’t been reporting this illegal behaviour to the regulator -or police – but has been dealing with it internally, effectively covering it up. 7-Eleven is a big corporation, generating earnings before interest and tax of $143 million in 2015, according to its latest financial statement obtained in this investigation. It makes more money than a lot of companies on the Australian Securities Exchange. The business model is unlike most other franchise models. Under the 7-Eleven franch Ise agreement, head office takes 57 per cent ofgross profit and the franchisee takes the rest Out °fits’cut, head office pays the rent (some of the properties are owned by 7-Eleven), supplies all the equipment and fittings, utilities and hack office services including payroll. From its 43 per cent takings, the franchisee pays a raft of other running costs including all staff wages. A 7-Eleven franchise can fetch anywhere between $300,000 and $L7 million, depending on its size, location and whether a petrol station is attached. One store for sale in a busy Melbourne suburb is bei ng sold for almost Slmillion. The sale document estimates that payroll for the period was about $171,000. After this is deducted from gross profit, it leaves the franchisee with a net income of $90,000. However, if all wages are incl uded and properly paid for, the income would be • close to $40,000. After interest repayments are deducted, the figure would be even less. It leaves little roam for paying full freight salaries. Some stores earn less than this, which raises the question: what would happen to these stores if they were forced to pay the correct wages? Some would go broke. Put simply, the model goes to the heart of underpayment of wages. There are 401)0 workers across the 7-Eleven network, most of than students on visas. Fair Work set up a specialist Overseas Workers Team in mid 2012 to help combat – the exploitation of overseas workers in Australia. Earlier this month, it announced a new program to “foster” relationships with international student bodies and multicultural communities. Ina statement it said it was working closely with the Australian Border Force targeting visa fraud, illegal work and the exploitation of foreign workers. Some businesses make the excuse they don’t know the employment system. Fair Work recently busted an Asian takeaway food shop in Melbourne for undepaying a student worker $12,000. The business operator told Fair Work he thought it was OK to pay a mutually agreed flat rate as the student from Taiwan had posted on asocial media site she would work for $12 an hour cash in hand, This shadowy tabour market needs to come into the light which requires commitment from regulators and politicians before it gets further out of control.Rear Window
Will Glasgow weasgoweInfr.com.au IlvttlertjawmdglasgosvWhen Turnbull met FitzSimonsIt happened In the Brisbane Qantas Chalrman’sClub. But don’t blanne”Long haul’ Leigh Clifford. Thisstoush isnlabout a Id ines-it’s a cM I war In theAustral Ian republican movement Som eone hide the champagne flu tes1 Afewweeisago,Communications M intster MalcolmTumbull found himself In the Qa ntasV1P section wi th the newcha Ir-nnan of the Australian Republ ican Move-nnent, Peter FltiSimons, the Fairfax columnIstauthorand former Wal la by forwa rd.Thei re nsul ng excha nge was characterised to us bya third pa rty as “robust”. At ti m es, there were I nches- if that -between the pairof alpha males. Turn bul I seemed to be put out by Fil2Simons’slackof a ppreciation of the Member forWentworth’s I nvolveme nt in the”off with her head” movement. Th e trigger seems to become questioning from alou ma I ist over Tu mbull’s passion for the cause ahead of Fit’s(well-received)speech at the National PressClublastWednesday. Turnbull was, of course, the rnovem ent’s cliairmanfrom1993to2000–a not unimportant pa rt of itshistory. FitzSimons, however, was not a bout to takes backward step- not in the Chal rma n’s Club,of all places. That’s understandable. Aftera II, Fitz stands approximately seven feet tali and weighs aboutthreetofour Malcol m Tu mbuils. Nonetheless, withthe fea dessness that marked his forme rcareer advising and sonnetimestaking on bi II ionaIre moguls such as KerryPacker, Turn bu II expressed his repu blican credentialsin no uncertaintemns. „ Some sayth ey haveV nce made up. But F112’Scolumn In the SundayFairfax papers did look a touch provocative. In Fltz’s defence of his friend Joe Hockey’s decision to be thejointco-head of a Republican Parliamentary Friendship Grou p, g uess which Cha I rma n’s CI ub member did n’t get a shout-out?’We have supportevetywhere, an dJoe’s pa ssion for the republic Is matched by Ch ristoph e r Pyne,Marise Payne and Wyatt Roy for starters.” if the om Ission of a certa In people’s choice for the Lodge wasaccidental,wevvilleat a red ba nda nna -a Ithoug h we should note thatTu rn bul I got a shout- outin the Press Clubaddress. As to al I this c riticisnn of the Treasurer for ag reel ng totake on the Friendsh ip gig, Fitz wrote: “If we were to get morethan a n hour of Joe inthenextsixmonths, itwou Id surprise me.” Wh lch is probably rig ht-u nless these ru mours about a reshuffleof theTreasury portfolio cometrue. It’s alsoworth remembering that Hockey hasspurned his prim e m Inisteron this subject before. Remember his decision to remove Quee ri El Izabeth N’s head from the five dol la r note -a decision promptly reversed a ftera n irate cal I from histhen-PM, John Howard? •I. More Rear Window p37ISSN 0404-2918
For tnore on gas story, watch7-Eleven: The Price of Convenienceon Four corners, ABC, 8:30prn, Monday:
Iv Eat briefing p7.2 Ctappardes index p2

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