7-Eleven Labor Exploitation Case Study

This assignment requires a critical analysis of the 7-Eleven labor exploitation case that occurred in Australia. Students need to delve into the details of wage theft, worker intimidation, and regulatory failures. The analysis should encompass legal aspects, ethical considerations, and the broader societal impacts of this case. It aims to evaluate how effectively laws and institutions addressed the issue and explore potential solutions for preventing similar occurrences.

Running head: THE FWO 7-ELEVEN INQUIRY i
The FWO 7-Eleven Inquiry
Student’s name and number
Institutional affiliation
Word count: 2501

THE FWO 7-ELEVEN INQUIRY ii
Table of Contents
Introduction................................................................................................................................1
Reason for the FWO Inquiry......................................................................................................1
Findings......................................................................................................................................2
Validity of records..................................................................................................................2
Employee participation...........................................................................................................2
Visa-holders............................................................................................................................3
Exploitation complicity..........................................................................................................3
Gaps in the Australian ER system..............................................................................................3
Protecting the rights of workers.............................................................................................4
The implications of the inquiry for the regulation of ER in Australia.......................................5
Franchise brand......................................................................................................................5
Employee dissatisfaction........................................................................................................5
Liability..................................................................................................................................6
Conclusion..................................................................................................................................7
Bibliography...............................................................................................................................8

Running head: THE FWO 7-ELEVEN INQUIRY 1
The FWO 7-Eleven Inquiry
Introduction
The Australian Fair Work Ombudsman made an inquiry regarding the underpayment
of wages in June 2014 as was committed by the 7-Eleven Australia. Similarly, the FWO
inquired into the falsification of the records of workers regarding their employment. The
Ombudsman allegations of concern can be defined as systematic non-compliance of 7-Eleven
with the country’s workplace laws (Thomsen, 2016). The ombudsman found that several 7-
Eleven franchisees falsified employment records deliberately to facilitate the underpayment
of remunerations. However, the inquiry discovered that the firm’s approach never detected or
addressed the issues of non-compliance adequately. The commission accused the
organization of intimidation, threats, and retaliation against the underpaid employees
(Thomsen, 2016). The Senate inquiry also found that workers were intimidated and beaten
(Woodley, 2016). Based on the significance of the 7-Eleven inquiry, this paper conducts an
assessment regarding the company’s compliance with industrial relations laws like pay and
conditions.
Reason for the FWO Inquiry
The Fair Work Ombudsman had received various complaints regarding 7-Eleven’s
compliance with the industrial relations laws since 2008. It had emerged that the employees
of the company had raised concerns about the “significance underpayment of wages” (FWO,
2016). The systematic of non-compliance with the laws was a grave issue that the FWO could
not compromise. The FWO linked the low payment to false employment records. Given the
continued allegations regarding the franchisees’ noncompliance with the workplace laws, the
FWO identified about eight issues (Lannin, 2016). The FWO discovered that the franchisees
had a history of noncompliance. Since 2008, the FWO received regular reports from different
stakeholders, especially employees regarding the significance underpayment of wages (AG-
FWO, 2016). With the inaccurate records, the company has managed to underpay the
workforce against the federal workplace laws. For instance, the firm reduced the working
hours recorded. Through this strategy, the employer wanted to indicate that it paid its workers
higher rates than the actual payment.
The FWO had gathered intelligence and information regarding the allegations of
underpayment and mistreatment of workers (FWO, 2016). The inquiry was to examine the
franchisees’ operating model thoroughly. Through the inquiry, the FWO would resolve the
individual requests of employees as the company failed to address noncompliance issues,
network, and supply chain (Lannin, 2016). The Fair Work Act provided the rationale for the

THE FWO 7-ELEVEN INQUIRY 2
FWO inquiry because the allegations could have been contrary to this Act. The inquiry was
purposeful, as the Fair Work Ombudsman wanted to identify the basis of allegations relating
to the serious noncompliance (AG-FWO, 2016). The FWO wanted to assess the
responsibility of the firm’s head office in the issue and the role of its operating model in
promoting the unlawful practice.
Findings
The FWO launched the investigation into the issues and allegations raised by the
workers and related stakeholders. In its effort to uncover the truth, the FWO made
unannounced visits leading to the following outcomes.
Validity of records
Upon conducting the site visits, the inspectors of FWO reviewed and compared the
pay records, CCTV footage, the interview records, and the time records were obtained. The
inspectors made follow-up calls and called employees for interviews upon visiting the site
(Habbit, 2016). The move ensured the inspectors verified the information provided. Through
thorough testing and reviewing of evidence, the inspectors identified various inconsistencies
regarding the employee paid rates, conditions of work, time records and rosters (Marin-
Guzman, 2016). The Fair Work inspector discovered the presence of inaccurate records in the
company. The FWO found that most stores had inaccurate records and promoted significant
underpayments. With inaccurate records, it made it difficult for the inspectors to identify the
unmet entitlement. In fact, the investigated stores excluded specialist payroll provider
mandated in processing pays.
It was unfortunate that 7-Eleven used manual methods in processing wage payments.
The company’s accountants entered the hours worked manually into the company’s payroll
system. During the manual entry system, the officers could enter different penalty hours but
fail to enter the rate to be paid (Habbit, 2016). These system parameters affected the
franchisees in making proper payment because inaccurate records were manipulated thus
affecting the payroll system (Marin-Guzman, 2016). The misleading and false records
contravened the fair work regulations. The production of such records affected the
employees. The FWO found it difficult to assess the employee entitlement accurately. The
inquiry discovered that employers decided for workers on their actual rate of pay ($10-$17)
per hour.
Employee participation
The inquiry realized that many employees were lone rangers. The employers never
engaged them in their decisions. With lack of participation, even the inspectors found it

THE FWO 7-ELEVEN INQUIRY 3
difficult to investigate the stores (Ferguson, 2017). In one store, for instance, only one
employee volunteered to engage in the formal interview. Interestingly, many employees
opted for anonymous interviews for fear of victimization. Some employees provided false
accounts of wages thus making the information inconsistent (Lannin, 2016). For example,
some workers provided answers, which served their interests because they continuously
changed their answers. During the forensic investigation, some stores acknowledged the
presence of false records while some relied on fabricated records. This justified the
franchisees contravened the wage provisions.
Visa-holders
The FWO discovered that most of 7-Eleven’s franchisees were from China, India, and
Pakistan. The majority of the workers are visa-holders and male international students.
According to the inquiry, the FWO received assistance request from many visa-holders who
accounted for about 12 percent. The visa-holders claimed that they were paid $10-$12 per
hour (FWO, 2016). In Australia, employers have no authority to undercut minimum wage.
These employers should also avoid keeping inaccurate time-and-wage records. It further
emerged that 7-Eleven took advantage of the international students’ inability to understand
the workplace rights (Sivaraman, 2016). In fact, most of the visa-holders are afraid to seek
the help of Commonwealth regulators. For instance, they work for more than 50 hours per
week instead of the 40 hours.
Exploitation complicity
The FWO has called the convenience store to acknowledge that its business model
created an environment that promoted illegal work conditions and wage fraud (Ferguson &
Danckert, 2016). The report of the inquiry revealed that the firm and its networks
compounded the wage fraud because it failed to use the recommended processes and systems
address and detect worker exploitation. The workers revealed to the FWO about the
systematic wage abuse. The FWO compelled the franchise operator to comply with the
federal workplace agreement. Based on the findings, the head office had received employee
grievance but failed to act (James, 2016 ). Therefore, the investigation discovered breaches in
workplace laws.
Gaps in the Australian ER system
In the Australian industrial relations, the union movements have completely declined.
This followed the government’s efforts to merge the unions thus making them irrelevant
(Schofield-Georgeson, 2017). The FWO inquiry exposes the lack of worker representation
because even the employees feared to share their tribulations in camera. They prefer

THE FWO 7-ELEVEN INQUIRY 4
providing information anonymously to conceal their identity. In fact, the Union membership
has dropped thus justifying the increased cases of worker exploitation. Today, the country has
experienced the increase in casual jobs. The growth of such jobs has prevented workers from
joining unions and engaging enterprise bargaining. The decline of union movements is
signalling the death of collective bargaining (Sivaraman, 2016). This makes Australian
industrial relations landscape to look different. The inquiry raises various gaps relating to the
role of government and unions.
Protecting the rights of workers
The E-Eleven presents the horrific stories relating to exploitation and abuse of
vulnerable workers (Phillips, 2015). It raises the question whether unions in Australia exist.
Since time immemorial, unions helped the government in enforcing the workplace laws and
policing workplace abuses. However, the 7-Eleven case, the unions seemed to have taken the
back stage. The retail workers’ union never raised any alarm yet the employees were
exploited. It took the courage of a whistleblower, a consumer advocate to raise the alarm thus
revealing the 7-Eleven scandal. In most cases, active unions enforced workplace conditions
and standards (Schofield-Georgeson, 2017). In Australia, the government has under-
resourced the FWO thus making it impossible to improve workplaces and protect the
Australians rights.
The continued de-unionisation campaign has promoted workplace deregulation thus
leaving vulnerable workers exposed to exploitation. The adoption of Fair Work Act (2009)
provided a balance for workers. However, the continued anti-union campaigns have reduced
the union density and power (Disclaimer, 2017). The employers have used the absence of
unions to exploit workers without significant consequences. The activities and abuse in 7-
Eleven form an evidence of a powerless union including the FWO (Schofield-Georgeson,
2017). It emerges that unions face challenges to implement the federal workplace laws. In
fact, the union officials are denied the legal rights to visit members in various workplaces.
These officials can only access workplace if they have the right-of-entry card. They should
also give a 24-hour notice to the employer before visiting (Phillips, 2015). Sometimes, the
employer can challenge their visit in the FW Commission. With the 24-hour’s notice, the
employer can get an opportunity to hide the incriminating evidence.
Similarly, the union officials rarely have the right to check employment records. The
employer can insist that such meetings be held in an appropriate environment thus discourage
workers from meeting their representatives. Many employers also use plethora tactics to
overcome the collective bargaining (Cox, 2016). These employers know that without the

THE FWO 7-ELEVEN INQUIRY 5
collective bargaining agreement, the union can rarely challenge the employer using the
enforceable dispute resolution mechanisms. With the fear of insecurity of migrant workers,
the hurdle to engage them becomes difficult. Currently, the FWA has granted employers the
least help. For instance, this law completely restricts union activities (Phillips, 2015). The
abuse and exploitation of visa-holders offer the unions an opportunity to consider this new
group of workers. The precariat or insecure workers need protection from their bosses.
Since the 2000s, the country has experienced a steady growth of short contracts,
casualization, labor hires and independent contracting. The labor unions have remained
adamant to represent these insecure workers. Most unions are concentrating on protecting
their bases of an island of privilege instead of the insecure workforce (Sivaraman, 2016).
Despite the continued efforts to restore the role of labor unions in the workplace, the union
movements have engaged in corruption scandals, leadership tussles, and witch-hunt over
trade union royalties (Cox, 2016). These practices have tainted the reputation of trade unions.
The Australian government must recognize the significance of insecure workers by protecting
their workplace rights. It thus must allocate sufficient resources to support the operations of
the Fair Work Ombudsman. It should further use the senate to adopt stringent regulations and
laws to protect workers against employers’ blackmail (Cox, 2016).
The implications of the inquiry for the regulation of ER in Australia
The payroll noncompliance presents long-term implications to the organization as
demonstrated below.
Franchise brand
The noncompliance with payroll regulations damages franchise brand thus imposes a
harmful long-term effect. In most cases, many stakeholders believe that payroll
noncompliance destroys the brand of an organization. The negative brand effect would make
it difficult for a franchise to attract quality talents. For instance, the employees are unwilling
to work for franchises, which exploit them and underpay. The perception of the community
about such organizations remains negative (Phillips, 2015). To this effect, the firm’s
performance and recruitment strategies will suffer. Everyone will view the company
negatively thus makes it impossible for it to expand its market share and attract new
customers and employees.
Employee dissatisfaction
Payroll noncompliance exposes an organization to financial risks, especially when the
employees are dissatisfied. The knock-on effect of employee dissatisfaction remains
incomparable. For instance, the affected workers would be demotivated, disengaged, and they

THE FWO 7-ELEVEN INQUIRY 6
would give substandard customer services. The noncompliance can also expose the firm to
back payments and significance fines. For instance, 7-Eleven was fined millions of dollars for
underpayments thus made it suffer the financial risks (Phillips, 2015). Therefore, the
company found itself in a difficult situation because it had to look for money to pay the
workers leading to potential losses. The franchisors, which fail to comply with payroll
regulations, make their brands unattractive to various franchisees. The overall effect is
evident in the losses of the business.
Liability
The Fair Work Act of 2009 protects the interests of individuals in low-wage
industries. Under this Act, the managers are expected to treat their workers fairly including
shaping their working conditions (Hardy). This law was enacted to protect workers by
providing remedy regimes. The FWO has used this law to hold managers and directors of
companies accountable for contravening the federal workplace laws. The Fair Work Bill
2017 introduces new provisions that protect the workers against exploitation (Disclaimer,
2017). In the new provisions, the employee, the FWO, or union can bring a holding company
or franchisor to the Federal Circuit Court or the Federal Court for breaching the employment
agreement. According to this provision, the court can impose a maximum penalty worth 300
and 60 penalty units for bodies corporate and individual respectively (ACCI, 2015). This
implies that a holding company or franchisor is liable for contravening any prescribed
provisions.
The Fair Work Amendment Bill 2017 protects the vulnerable workers. Under the
proposed law, the liability is extended to the individuals engaged in the franchisees’ affairs.
In subsection 558(1) of the bill, the franchisor entities are liable for contravening the FWA,
especially where the entities are aware of the contraventions (Disclaimer, 2017). For instance,
if the franchisor is aware of alleged underpayment or systematic noncompliance, the firm will
be liable for denying its workers their entitlement as provided for under the FWA (ACCI,
2015). The Australian Chamber of Commerce has made its position known regarding the
underpayment practices. The Chamber condemns such practices by franchisors or franchisees
because they defy the immigration law and legal obligations deliberately (Disclaimer, 2017).
According to the Australian Chamber, the exploitation of vulnerable employees attracts legal
liability. In fact, the FWO has taken to court about 42 percent of the visa-holder vulnerability
cases, where the body sought damages and compensations for the underpaid workers (ACCI,
2015). The FW Act offers an opportunity for the vulnerable workers to get justice. Anybody

THE FWO 7-ELEVEN INQUIRY 7
or the organization contravening the Act can be held responsible as provided for under the
FW Act section 550.
Conclusion
7-Eleven workers have experienced serious abuse and exploitation from their
employer. Based on this article, it is evident that the employer underpaid them, encouraged
them to breach their visa conditions, and falsify records. The Fair Work Ombudsman inquiry
found that these serious allegations were factual. Apparently, the FWO is under-resourced to
act in such cases and protect the rights of insecure workers. The union movements have also
failed in their responsibility to protect the interests and workplace rights of members. In fact,
the government has undermined the role of unions in Australia thus allowing employers to
abuse and exploit workers. Although the FWO demonstrated the reasons to conduct the
inquiry into the 7-Eleven issues, the FWA has denied the commission the power to enforce
the industrial relations regulations. It thus depends on the courts to stamp its authority.

THE FWO 7-ELEVEN INQUIRY 8
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