Analyzing Corporate Responsibility in the 7-Eleven Wage Scandal Case

This case study examines the 7-Eleven wage scandal, where the company and its managers were fined for violating workplace laws, including underpaying migrant student workers. The Fair Work Ombudsman (FWO) investigated the case, revealing a cash-back scheme where employees were forced to return a portion of their wages. The reports highlight the exploitation of vulnerable workers and the legal penalties imposed on the employer. Efforts were made to compensate the underpaid employees and implement measures to prevent future wage theft, but questions were raised about the effectiveness of these measures. Both reports conclude that the employer was at fault for exploiting international students and that strict action was necessary to address the issue.

Corporate Responsibility
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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Summary/Conclusion.................................................................................................................5
References..................................................................................................................................5
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Introduction
The Director of the company Jing Qi Xia and her store manager of 7-Eleven, Ai Ling Lin
were fined by the Federal Circuit Court for a number of violations regarding workplace law,
which include failure to pay least per hour rates, failure to pay casual loadings, failure to pay
for public holiday penalty rates and for untruthful and deceptive salary records, which
followed lawful action carried out by the Fair Work Ombudsman (FWO) against the culprits.
The investigations were conducted by the Ombudsman wherein, it was found that three 7-
Eleven employees, who were migrant students from China, between 21 and 45 years of age
and were exploited by the company (Acharya, 2016). Ms. Xia implemented cash-back
scheme in 2015 and informed her staff members through Chinese messaging application “We
Chat” that their salaries would be $15/hour and would require to hand back a part of their
salaries in a safe drop box present in the 7-Eleven store.
Discussion
As per the report of Sydney Morning Herald, the case was highlighted as “7-Eleven operator
fined $335,000 in wage scandals” wherein, workers required to draw and return a share of
their salaries to their employer. The report revealed that the former operator of 7-Eleven
outlet has been found to have poorly paid huge number of dollars to the retail employees
throughout 2015-16 (Le, 2016). The collective fine on the owner and the store manager was
$335,664 for underpaying as well as pay unlawful flat $11.50/hour and every so often even
$3.98/hour to the employees. It has also been specified in the report that the employees used
to transfer amount right in the account of manager Ms. Lin who used to transfer it to the
account of employer. So, the employees were working with the hourly rates of only $8.53 as
found by the Ombudsman. It was also mentioned in the report that Acting Fair Work
Ombudsman Kristen Hannah held that the employers who have demoralized the migratory
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employees would be exposed and would have to face grave legal penalties. It was also stated
by the Ombudsman that it will not be tolerated that the employers are demanding pay back
any portion of wages from their employees (Willacy, 7-Eleven: Covert video captures worker
being forced to pay back wage in cash, 2016). She added that the pay-back structure was
principally inacceptable as it is challenging the migrant employees, who are already
susceptible to linguistic and social hindrances and are hesitant to raise their voice about their
rights and needs (Toscano, 2019).
Similarly, the report of Financial Review also mentioned about the revelation of
underpayments to migrant student workers by article heading “Can 7-Eleven chairman
Michael Smith fix the company after wages scandal?”. The article emphasized that the
chairman of 7-Eleven Michael Smith made every possible effort to fix the issue. He was
helped by the director of Medibank and Fairfax, Linda Nicholls, who advised him to search
for the employees who had been underpaid and get them paid what is appropriate (Durkin,
2017). It was also stated that the company contacted around 15000 current and former
employees, most of them were afraid of repercussions from their employers or for being
informed to immigration. The report claimed that more than $150 million had been repaid to
the underpaid employees (Willacy, 2016). It has also been mentioned in the report that the
company entered in compliance deed with FWO to present biometric payroll system that
could prevent a franchisee from swiping the salaries of their employees along with
centralized payroll, data analytics and reporting (Karp, 2016). The report claimed that FWO
Natalie James stated that 7-Eleven franchise required a cultural shift in order to make real
progress in resolution of the issue. This article provided information in more detailed form
that even with optimistic valuation of 7-Eleven’s compensation program by Smith, there were
various questions raised (Syfret, 2015). It stated that former competition watchdog Allan Fels
was primarily appointed by the company to operate an autonomous arbitration panel for the
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staff compensations, which was shut down by the company as per Fels in order to minimise
the pay-outs (Willacy, 2016).
Summary/Conclusion
After having analysed both the reports, it has been realized that both the reports have claimed
that the employer is in grave fault to exploit international students who were employed at 7-
Eleven store. They were underpaid by their employer based on cash-back scheme and the
amount paid from their salaries were going to the owner’s account. The Federal court took
strict action against the employer and all associated parties and put huge penalty on them for
exploiting international students. So, both the articles have provided enough information
related to the case.
References
Acharya, M. (2016, November 4). After 7-Eleven wage fraud, Caltex service stations under
investigation. Retrieved from sbs.com.au:
https://www.sbs.com.au/yourlanguage/hindi/en/article/2016/11/04/after-7-eleven-
wage-fraud-caltex-service-stations-under-investigation
Durkin, P. (2017, November 30). Can 7-Eleven chairman Michael Smith fix the company
after wages scandal? Retrieved from afr.com: https://www.afr.com/boss/how-
chairman-michael-smith-is-saving-7eleven-20171102-gzdk75
Karp, P. (2016, February 5). 7-Eleven workers beaten and forced to pay back wages, Senate
inquiry hears. Retrieved from theguardian.com:
https://www.theguardian.com/australia-news/2016/feb/05/7-eleven-workers-beaten-
and-forced-to-pay-back-wages-senate-inquiry-hears
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Le, T. (2016, November 22). International student employees forced by 7-Eleven store to pay
back wage in cash. Retrieved from meldmagazine.com.au:
https://www.meldmagazine.com.au/2016/11/international-students-forced-7-eleven-
store-pay-wage-cash/
Syfret, W. (2015, September 1). Everything We Know So Far About 7-Eleven Australia’s
Wage Fraud Scandal. Retrieved from vice.com:
https://www.vice.com/en_us/article/4wbnqg/everything-we-know-so-far-about-7-
eleven-australias-wage-fraud-scandal
Toscano, N. (2019, January 18). 7-Eleven operator fined $335,000 in wage scandals.
Retrieved from smh.com.au: https://www.smh.com.au/business/workplace/7-eleven-
operator-fined-335-000-in-wage-scandals-20190118-p50s81.html
Willacy, M. (2016, November 21). 7-Eleven: Covert video captures worker being forced to
pay back wage in cash. Retrieved from abc.net.au:
https://www.abc.net.au/news/2016-11-21/covert-video-captures-711-workers-being-
forced-to-pay-back-wage/8033808
Willacy, M. (2016, December 14). 7-Eleven: More workers speak out about 'cash back'
scams. Retrieved from Abc.net.au: https://www.abc.net.au/news/2016-12-14/7-
eleven-workers-speak-out-about-cash-back-scam/8113622
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