Wage Fraud Scandal: Exploitation of International Students at 7-Eleven

This essay delves into the 7-Eleven wage fraud scandal, exposing the exploitation of international student employees. It highlights the systematic underpayment, abuse, and harsh working conditions faced by these vulnerable workers, often forced to work extra hours to survive. The essay examines the role of the Fair Work Ombudsman, the Australian Taxation Office, and the franchisees, revealing the financial and ethical consequences of these practices. It analyzes the corporate responses, including business plan revisions and legal actions, and discusses the political pressure that led to legislative changes. The essay concludes by emphasizing the ongoing challenges in protecting vulnerable workers and the need for continued scrutiny and reform to prevent future exploitation.

Running Head: Editorials 0
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Wage fraud (7-eleven):
Effect on International Student Employees

Editorials 1
The Australian
Workers being exploited and scammed: Wage fraud of 7 eleven!
The wage scam of 7 eleven is something that everyone talks about but is not aware of the
major facts that Financial Review team is going to reveal.
Ideally 7 eleven is one of the biggest convenience store chains that is known for its 24/7-hour
services. The Fairfax Media and ABC’s Four Corners expose the truth behind the closed
doors of the big profits earned by 7 eleven (Ferguson, 2015).
The Fair Work Ombudsman administered three different incursions in last six years, and the
outcomes are devastating. Thousands of foreign students on visas working in Australia, are
allowed to work only for 20 hours a week and at a fixed basic pay as per the visa conditions
and the local laws. Breach of which has led to abuse of the workers, they are paid way less
than what they are supposed to, hence, being forced to work for extra hours in order to
survive leading to breach of various laws.
Also, it is not just about the abuse to the workers but also the Australian Taxation Office is
being robbed off of the taxes worth millions of dollars, hence, effecting the Australian
economy.
Approximately, 50% less wages have been paid to the workers over the years, as per the
investigation. The amount under paid or the workers who were fully paid but were forced to
return half of their earnings to the head office or the managers, being the victims of ‘Half Pay
scam’ were never recovered nor will be in future as the franchisee business has been shut
down already. Payroll compliance issues in more than 60% of the 7 eleven stores that have
been through the investigation, throughout Australia have been detected (Adele Ferguson,
2015).

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Harsher working conditions, continuous long working hours, being abused, watched and
threatened again and again by the head office has resulted in workers being afraid to stand
against such wage fraud due to the fear of being deported back to their country or
cancellation of the existing visa.
Another scenario that has to be evaluated is the jobs being given to non-visa holders. People
who have not legally migrated or have expired visas are also considered for jobs at 7 eleven
(Miller, 2017).
As per “The Australian’s” heavy approach towards business along with its scientific
consensus, wage fraud in Australia has resulted in awareness amongst the companies and big
names in the market. Regular audits are made in order to avoid such controversies and wrong
doings. Such abuse of power and negligence on companies’ part is unacceptable. It can be
thus, concluded that, due to certain threats or danger to one’s survival in the country, people
do not come forward and help the government know about such discrepancy.

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The Financial Review
The case of 7 eleven has resulted in the breakdown of corporate bureaucracy and crisis upon
self-regard.
The wage fraud investigated by the Four Corners and Fair Fax in September 2015 exploded
like a bomb, and changed the future of 7 eleven franchisees throughout the country. Upon
going through the contracts made by the franchisee, Professor Alan Fels’s opinion concluded
that a franchisee could make so much profit only by some illegal behaviour of underpaying
the workers or abusing them. (Bornstein, 2017).
Michael Smith, director of 7 eleven, and also a prior member of audit and risk committee and
strategy committee walked away as the chairman of Australian institute of company directors
(Ferguson, 7-Eleven wage abuse scandal has lessons for all directors, 2015).
Warren Wilmot stepped down from the position of chairman of 7 eleven franchise council in
Australia, also resigned as the chief executive of the franchisee on September 30. The
conditions related to payroll compliance saw such a downfall that if a store was given the
score of zero, it saw a loss of 2 percent in the score.
Amidst the investigations, various new cases where the same act occurred were reported. An
estimate of the average pay-out that was calculated amounted to approximately, $40,000 out
of the $16.7 million of 421 cases upon which determinations were made out of the total
underpayment claims of 3000.
As the investigation continued, an amount of $10 million of the claims was paid and the
panel kept on receiving around 100 cases every week. Mr. Angus McKay, the new chief
executive of the franchisee, blamed everything on the workers, saying that they were trying to
make fraudulent cases against the company.

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By 2009, eight of 7 eleven franchisees were dragged to the court by The Fair Work
Ombudsman resulting in a charge of $214,000 (Chung, 2016).
As soon as the scam’s revelations got in the light, the corporation overhauled the business
plan that beforehand had a chance of 57 percent profit towards head office while only forty
three percent to the franchisees.
Under the revised business plan, as per the report from Fairfax; franchisees started taking
splits from the profit earned at stores, due to which they saw a direct 4.5 percent income raise
which estimates to around $30 million average to the 620 shop owners.
Warren Wilmont, the chief executive of the 7 eleven declared that if a franchisee does not
wish to continue the process or does not wish to participate anymore, the corporation will
refund the fee paid for franchisee as well as help the franchisee holders to sell the store in
case any payment for goodwill has been made.
First of all, the wage fraud along with the political pressure building up through opposition
has resulted in Michaelia Cash, the employment minister to influence her colleagues from the
cabinet to do something, hence, the Protecting Vulnerable Workers Bill was introduced.
Under this proposal, the franchisors could be held responsible for the violations of the
franchisee’s place of work where they exert important impact on the franchisee; only if they
ought to know or had known about the underpayment; also, they did not take appropriate
measures to avoid the violations (Bornstein, 2017).
Even after such steps the situation of underpaid workers has not improved yet.

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References
Adele Ferguson, S. D. (2015, August 29). 7-Eleven: Investigation exposes shocking
exploitation of convenience store workers. Retrieved from Sydney Morning Herald:
https://www.smh.com.au/business/workplace/7eleven-investigation-exposes-
shocking-exploitation-of-convenience-store-workers-20150828-gja276.html
Bornstein, J. (2017, July 27). Wage fraud will continue until politicians stop it. They can –
but will they? Retrieved from The Guardian:
https://www.theguardian.com/commentisfree/2017/jul/27/wage-will-continue-until-
politicians-stop-it-they-can-but-will-they
Chung, F. (2016, May 13). Panel member says ‘jury is out’ on whether 7-Eleven can survive
without underpaying staff. Retrieved from news.com.au:
https://www.news.com.au/finance/business/retail/panel-member-says-jury-is-out-on-
whether-7eleven-can-survive-without-underpaying-staff/news-story/
8f9545ba197f4b58482d05c260ba5586
Ferguson, A. (2015, October 5). 7-Eleven wage abuse scandal has lessons for all directors.
Retrieved from Financial Review: https://www.afr.com/companies/retail/7eleven-
wage-abuse-scandal-has-lessons-for-all-directors-20151004-gk0rhp
Ferguson, A. (2015, August 31). 7-Eleven: Wage abuse claims puts scrutiny on Fair Work
response. Retrieved from Financial Review:
https://www.afr.com/companies/retail/7eleven-wage-abuse-claims-puts-scrutiny-on-
fair-work-response-20150830-gjavxh
Miller, P. (2017, December 6). 7-Eleven: The Price of Convenience. Retrieved from Four
Corners: https://www.abc.net.au/4corners/7-eleven-promo/6729716

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