7-Eleven Franchise and Labor Practices

This assignment delves into the structure and operations of 7-Eleven franchises, highlighting the reasons behind their popularity as a franchise opportunity. However, it also critically analyzes the significant controversies surrounding 7-Eleven's labor practices, including allegations of wage theft and exploitation of workers. The analysis draws upon various sources such as official company statements, news articles, and legal documents to provide a comprehensive understanding of both the positive and negative aspects of 7-Eleven's business model.

Running Head: Law 1
Law

Law 2
Introduction:
Inquiry was commenced by Fair Work Ombudsman (FWO) in June 2014 in lieu of allegations
related to underpayment of wages and maintaining false employment records against the leading
retailer of Australia named as 7-Eleven Australia Pty Ltd (7-Eleven). This inquiry conducted by
FWO investigated almost three allegations by conducting inspections of sites and analysis of
record keepings. This inquiry conduct investigations on other matters also which were requested
by the employees of 7-Eleven. Results of these investigations are shocking as it shows non-
compliance of various provisions of Fair Work Act 2009 (FW Act) and Fair Work Regulations
2009 (FW Regulations), and it also shows that company made false entries in their records
(FWO, 2016).
This report states various frauds committed by 7-Eleven stores and investigation conducted by
FWO against the company. It also states the result of these investigations and consequences
faced by company. Subsequently, paper is concluded with brief conclusion.
About the company & history of non- compliance:
In Australia, 7-Eleven was considered as largest retailer of petrol and convenience on the basis of
its market share and number of franchisee awards. Stores of 7-Eleven were operated under the
license of US-based business 7-Eleven Inc., which was responsible to develop franchisees of 7-
Eleven in Australia. 7-Eleven Inc. was actually incorporated in 1927, and it was determined as
largest operator of franchisee and licensor of convince stores (7-Eleven, 2017).

Law 3
First store of 7-Eleven in Australia was initiated in 1977 in Melbourne. In 1978, more stores
were opened by the company which includes first franchise store, first fuel site, and also first 24-
hour site. All these stores were considered as key elements of the operating model of 7-Eleven.
On 31st December 2015 almost 626 7-Eleven stores were operated in Australia throughout the
Australia. It must be noted that, almost 70% of these stores sell fuel and traditional merchandise.
Allegations on 7-Eleven stores were not new and FWO receives various reports related to these
allegations from 2008 onwards from the employees of the stores. These employees continuously
alleged the underpayment of wages from the stores of 7-Eleven. Concern of FWO was
increasing because these underpayments of wages were directly linked with the inaccurate
records of the stores. As employers of stores show less working hours of employees for the
purpose of showing that employees higher rates of pay, but in actual situations were completely
different (7-Eleven, 2017).
Underpayment of wages & Workplace Ombudsman’s audit:
Allegation were received by Workplace ombudsman in 2008 from an unregistered organization
which represents the workers of fast food and retail sector, that stores of 7-Eleven were involved
in the practice of double hours scam. Double hour scam means stores of 7-Eleven made records
and pays only half amount to their workers actually worked. In other words, workers of 7-Eleven
receive only half amount as compared to amount which should have been paid by employers
under award rates. During the period of 2008-2009, number of stores established in Melbourne
and Sydney are audited by FWO. The result of the audit conducted by FWO in Melbourne shows
fraud of $112000 wages, and these wages were recovered for 88 employees in five stores. FWO
instructed 6th Store to credit almost 1000 hours of annual leave back in the records of 12

Law 4
permanent staff members. In the store of Sydney, FWO conduct audit and it shows fraud of
$50000 which were recovered for 80 workers at 15 stores.
The main issue identified by FWO in the audits was the underpayment of wages and
underpayment of penalty rates related to weekends and nightshifts. However, sufficient
evidences were not present which shows that double hour scheme was widespread, and FWO
also noted that generally underpaid workers young international students at young age and stores
of 7-Eleeven mainly exploit these students (FWO, 2009).
Education and Audit campaign by FWO:
During the period of September 2009 and February 2010, education and audit campaign was
conducted by FWO in 56 stores of 7-Eleven situated in Melbourne and Geelong. This campaign
was the result of allegations received by FWO that young employees engaged in this sector were
being exploited and also because of the request received from 7-Eleven for providing advice and
guidance for the purpose of establishing compliance system in franchisees.
FWO address all the audited business and provide information related to the education and
compliance elements, and it also provides self-audit checklist. Almost 56 audits were conducted
by the FWO and it was found that almost 70% of the business compliant with the FW Act and
30% business contravened the FW Act. Stores which contravened FW Act were involved in
almost 24 types of contravention, and these contraventions were:
 Almost 7 issues related to underpayment of wages were found.
 10 issues related to non-payment of weekend penalty rates were found.
 3 issues related to non-payment of public holiday penalty rates were found.

Law 5
 1 issue related to non-payment of overtime rates were found.
 3 issues were found related to incomplete details in pay slips (ABC, 2015).
In total fraud of $32378 was found and this amount was recovered for almost 62 workers of 7-
Eleven stores.
Legal proceedings were recommended by the FWO in January 2010 against the Boston Pty Ltd
and also against the former operators of 7-Eleven stores that were Hao Chen and Xue Jing.
Investigation was conducted by the inspectors of FWO after receiving the request from six
employees who were international student and worked at Geelong and South Yarra stores of 7-
Eleven. It must be noted that these stores were engaged in flat rate pay and fail to pay base
hourly rates and penalty rates defined by the awards of applicable rate industry.
Investigation conducted by inspectors of FWO shows that stores only record half working hours
of employees for the purpose of showing that they paid double to the employees. This can be
understood through example, if employee in the store working for 40 hours per week at $12 per
hour then it would be recorded as 20 hours at $24 per hour.
Later, this fraud was referred by Media as the ‘half pay scam’, and in April 2011 penalties were
awarded by Magistrate Court of Victoria in following manner:
 Boston Pty Ltd- $120000
 Hao chen- $20000
 Xue Jing- $10000 (FWO, 2011).

Law 6
Issue related to pay-roll tax:
Another whistle was blow for the convince stores of 7-Eleven, and investigation was conduct
against the franchisees by the state governments of Victoria and NSW because of the alleged
failure of stores to pay their payroll tax due to state. This was the issue which was alleged
against the company after the half pay scam. Separate investigation was conducted by state
government which was revealed under the freedom of information, and this information was
requested under the transparency laws of NSW and lodged by Labor MLC Daniel Mookhey to
the Office of State Revenue (Ducknley, 2016).
Documents revealed in the investigation shows that state revenue department of Victoria initiated
an investigation against the in headquarter of 7-Eleven established in Melbourne and also in the
franchisees of 7-Eleven established in Victoria related to the concerns about payroll tax
compliance.
Management of 7-Eleven stated in relation to these claims made by NSW Labor, that claims
made by NSW for non-payment of payroll tax were disgraceful and untrue. These claims were
highlighted in the weekend after documents related to Freedom of Information was requested by
the NSW Labor’s Daniel Mookhey, in which he found that 7-Eleven was not registered under the
payroll tax in the state. He further stated that documents revealed those convenience stores of 7-
Eleven and its franchisees failed to pay payroll tax of last three financial years in NSW.
These claims were rejected by the 7-Eleven and further stated that company paid almost $9
million as the payroll tax in NSW and Victoria in last three financial years. Management also

Law 7
stated that company fulfills all its tax obligations whenever it become due and company does
avoid its payroll tax obligations (SMH, 2016).
Office of State Revenue in NSW stated that 7-Eleven is registered for their payroll tax in the
state and it has met all its obligations towards relevant tax commitments. This statement of OSR
was given after the OSR released its response related to the Freedom of Information which
suggests that 7-Eleven is not registered for payroll tax in NSW. Later OSR clarified that it was
an error on their part and OSR corrected this error publicly. OSR further stated that 7-Eleven
paid almost $9 million tax in last three financial years in NSW and Victoria.
However, last year in October 7-Eleven actively requested the SRO in Victoria to provide their
advice whether any state tax implications are due on their part during their wage repayment
program. It must be noted that on this matter 7-Eleven working with the SRO of Victoria who
also represents the other states for the period of 12 months. These discussions are well advanced.
Therefore, this company was proactive, transparent and compliance al its obligations related to
state tax (7-Eleven, 2016).
Conclusion:
As stated above, various investigations are conducted by FWO and state government against the
7-Eleven stores. Fair Work Ombudsman conducts its investigation in June 2014 in lieu of
allegations related to underpayment of wages and maintaining false employment records against
the leading retailer of Australia named as 7-Eleven Australia Pty Ltd (7-Eleven). In this,
company and its former representatives was heavily penalized by the Court.

Law 8
Later NSW state government conducts investigation against the franchisees because of the
alleged failure of stores to pay their payroll tax due to state. In this government admits its error
and announced publicly that company fulfill all its tax obligations in last three financial years.
References:
7-Eleven, (2017). Welcome To 7-Eleven Australia. Viewed at:
http://franchise.7eleven.com.au/why-7-eleven.html. Accessed on 21st September 2017.
FWO, (2016). Identifying and addressing the drivers of non-compliance in the 7-Eleven network.
Viewed at: https://www.google.co.in/url?
sa=t&rct=j&q=&esrc=s&source=web&cd=7&cad=rja&uact=8&ved=0ahUKEwiRv-
C147XWAhUNTo8KHa1rCQcQFghRMAY&url=https%3A%2F%2Fwww.fairwork.gov.au
%2FArticleDocuments%2F763%2F7-eleven-inquiry-
report.pdf.aspx&usg=AFQjCNG4B0Ov9wMA6hexyckXAD0fwQvEBg. Accessed on 21st
September 2017.
7-Eleven, “Reasons to become a franchisee”, 7 Eleven Pty Ltd. Viewed at:
http://franchise.7eleven.com.au/why-7-eleven.html. Accessed on 21st September 2017.
Fair Work Ombudsman, (2009). Watchdog’s random audits recoup $112,000 for city
convenience store workers. Viewed at: accessed at https://www.fairwork.gov.au/about-us/news-
and-media-releases/2009-media-releases/july-2009/20090725. Accessed on 21st September 2017.

Law 9
Fair Work Ombudsman, (2011). Convenience store operators fined $150 000 for underpaying
international students. Viewed at:
https://www.fairwork.gov.au/about-us/news-and-media-releases/2011-media-releases/april-
2011/20110427-bosen. Accessed on 21st September 2017.
ABC, (2015). How 7 Eleven is ripping off its workers. Viewed at: http://www.abc.net.au/news/2015-08-
29/7-eleven-half-pay-scam-exposed/6734174. Accessed on 21st September 2017.
Fair Work Ombudsman, (2009). City convenience stores back-pay workers $50,000 after watchdog
investigation. Viewed at: https://www.fairwork.gov.au/about-us/news-and-media-releases/2009-media-
releases/july- 2009/20090708. Accessed on 21st September 2017.
Dunckley, M. (2016). 7-Eleven head office paid payroll tax, says state revenue office. Viewed at:
http://www.smh.com.au/business/retail/7eleven-head-office-paid-payroll-tax-says-state-revenue-
office-20160929-grrayd.html. Accessed on 21st September 2017.
SMH, (2016). NSW, Victoria investigate 7-Eleven over payroll tax. Viewed at:
http://www.smh.com.au/business/workplace-relations/nsw-victoria-investigate-7eleven-over-
payroll-tax-20160922-grmn67.html. Accessed on 21st September 2017.
7-Eleven, (2016). NSW confirms 7-Eleven compliance with payroll tax obligations. Viewed at:
https://www.7eleven.com.au/media-centre/article/nsw-confirms-7-eleven-complies-with-payroll-
tax-obligations/article/nsw-confirms-7-eleven-complies-with-payroll-tax-obligations. Accessed
on 21st September 2017.