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BFCSA: 7-Eleven Head Office has turned a blind eye to wage abuse for years. Owners made Billions on backs of the poorest people.

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7-Eleven Head Office has turned a blind eye to wage abuse for years.  Owners made Billions on backs of the poorest people.

7-Eleven creates new public relations disaster

Date May 14, 2016

Adele Ferguson

When the opening line of 7-Eleven's press release turned out to be a blatant lie it didn't bode well for what came next.  On Wednesday the scandal-ridden convenience store giant issued a misleading statement that head office and the Allan Fels Wages Panel had agreed to "transition" to an internal unit within 7-Eleven. In other words it wants to do it itself and it wants us to trust it to do it better than an independent panel led by Fels, the former chairman of the Australian Competition and Consumer Commission.  This is coming from a company that is battling a crisis in confidence, and a track record of years of underpayment of wages by its franchisees and a board that never acted on it.  Its current chairman, Michael Smith, who says he was put into the chairman's role to "fix it and clean it up" has been on the board since 1999. He was there when Fair Work conducted three separate raids on dozens of stores between 2008 and 2014, each time finding serious payroll issues.  Fels was sacked because he didn't agree with the company's decision to change the terms of reference. A key concern was sharing confidential information with the very franchisees who had threatened deportation if anyone spoke up.  The company is trying to spin the new panel as an earnest attempt at fixing things, but the new rules will stop the flow of claims in one hit.


Social media went into overdrive this week. The company was castigated for selling out thousands of exploited workers, workers who had helped create 7-Eleven founder Russ Withers and his sister Bev Barlow's billion-dollar-plus wealth. A wealth that has enabled them to purchase private jets, mansions and a property empire that looks like a game of Monopoly.  Politicians and the regulator waded in, along with commentators. It prompted one ABC radio talk back host Rafael Epstein to call out the new chief executive Angus McKay as a liar. "You have lied to me twice," he said. "You are lying to me now."  The situation has put the professional services firm Deloitte in a moral dilemma (Deloitte was part of the original panel). By agreeing to the new terms it will be complicit in selling out vulnerable workers it had previously told a Senate inquiry it was so passionate about defending. It seems money talks.


The 7-Eleven whistleblower, who came forward to Four Corners and Fairfax Media to help expose the scandal, said he was appalled at the turn of events.  He said since the scandal broke, bad behaviour among franchisees hadn't stopped, they had just moved on to a new scam: the cash back scam, where the correct amount is paid but the employee has to hand half back to his boss in cash.  "Numerous stores have been investigated yet terminations have been few," he said. "Staff had been wondering when we'd see some action from the new CEO and his first action has been to dismiss Fels."  The brutal reality is 7-Eleven has been trying to wind up the panel for months. It has been assuring franchisees that the bill will be less than $25 million and they will never have to pay a cent in back pay.  It seems the Fels panel was too effective and head office feared a franchisee revolt. Fels had settled with 400 workers and it had cost the company $14 million. With another 2000 claims being assessed and more workers recently lodging claims, the payout could have been as high as $100 million – the biggest wage fraud payout in corporate history.



The big issue was that when the payout reached $25 million, franchisees would have to start paying their share – something that was causing a lot of angst.  Against this backdrop there isn't much liquidity in the system. Franchisees complain that banks have virtually turned off the tap when it comes to lending money for 7-Eleven franchises. The upshot is few stores are being sold. If franchisees are terminated or are forced to pay out millions of dollars in compensation, how will they be able to sell their business? What will this pressure do to the model? Will that have an impact on the franchisor and the licence?  It is why many franchisees have been doing all they can to derail the panel. Rumours of fraud have been circulating for months and head office has zealously seized on it as a reason to change the terms of reference and take the panel internal "to do a better job".  This is the same head office that for years has turned a blind eye to wage abuse – and continues to do so – has denied its systemic nature to the media and a Senate inquiry and instead of fighting the dishonest franchisees, would rather abandon the exploited workers.  7-Eleven became embroiled in a public relations disaster in August. It seems to have created a new one in May.

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