The troubled convenience chain 7-Eleven should have acted faster to deal with franchisees falsifying payroll records. That’s just one of the findings by the Fair Work Ombudsman in a report on the enquiry into the franchise business.
Natalie James, Fair Work Ombudsman, has been quite clear that 7-Eleven did not take action, or sufficient action, soon enough.
Some employees, James said in a statement, “felt 7-Eleven was aware of high non-compliance throughout its network but was either disinterested or ignored their concerns.
“Our Inquiry suggests that the payroll section of the store review process did not sufficiently interrogate store practices or records, to uncover signs of non-compliance where a franchisee sought to hide it.
“Head office controlled the settings of the system in which the franchisee employers operated.”
James said the Inquiry was hampered by “a widespread lack of co-operation from the range of parties involved”.
There was, she said, “a wholesale disregard for minimum wages in some stores”.
“There is a culture of acceptance that working at 7-Eleven means a lower rate of pay and conditions than is lawful. It also appears to be considered standard practice that long hours are worked, training is unpaid and leave is not taken.”
According to the Ombudsman, “The level of control exerted over franchisees by 7-Eleven gives them little scope to impact their profitability within the franchise model.”
The beleaguered convenience chain has made significant steps to rectify the system with changes to both the franchise model and the payroll system and these have been welcomed by the Fair Work Ombudsman.
However it will take a sustained effort and the long term commitment of resources to rebuild a culture of compliance, James suggests. “False record-keeping appears to be ingrained within aspects of the network”.
7-Eleven statement
7-Eleven has responded to the release of the report.
Chief executive Angus McKay said the Ombudsman’s report will “further inform and strengthen our Strategic Reform Program” and in a statement outlined some of the changes.
“A special investigations unit, store audits, improved time and attendance processes, which will soon be replaced by a biometric system, and a compulsory centralised payroll system form the core of our approach.”
The chairman of 7-Eleven, Michael Smith, said “we have readily and willingly accepted the Report because what it advocates is aligned with many of the reforms that 7-Eleven has already initiated.”
But he also suggested the Franchising Code was not well placed to deter non-compliance.
“7-Eleven has long believed the Codes have not kept pace with the changing face of the industry generally and change is required to ensure they provide clear and appropriate deterrence and sanction mechanisms that drive ethical behaviour.”
Franchise Council support for compliance
Bruce Billson, chairman of the peak body for the sector, the Franchise Council of Australia, of which 7-Eleven is a member, previously told FranchiseBusiness in relation to workplace breaches: “A Code review may be helpful to make it absolutely clear that grievous breaches of workplace legislation can place a franchise agreement in jeopardy.”
In a statement issued in anticipation of the Fair Work Ombudsman’s Report, Billson said the FCA had a long history of working to ensure the sector is compliant.
“All business owners have responsibilities and obligations and the FCA will continue to work closely with the relevant Government agencies to make sure all franchise owners are aware of these requirements and fulfil them in an accurate and timely way.
“Let’s be clear. Public reporting of the work of the FWO makes it clear that pay and workplace entitlement irregularities have been found right across the economy. All business owners, not just franchisees, have responsibilities and obligations.”
Billson said education and awareness-raising initiatives are important for the franchise sector.
“More recently, we have supported the development of a draft Workplace Standard outlining the expected roles of franchisors and franchisees in the context of workplace compliance.
“We also support the extension of the personal liability of directors of businesses that don’t meet their workplace payment obligations.”
The Fair Work Ombudsman recommendations
The report has four recommendations for 7-Eleven:
- Enter a compliance partnership with the FWO, accepting it has moral and ethical responsibility to ensure its stores meet community and social expectations for equal, safe and fair work opportunities for all employees
- Implement effective governance arrangements that ensure compliance with all federal workplace laws
- Review its operating model to ensure regular review of the financial viability and legal exposure of franchise agreements and engage an external, independent party to self-audit its compliance
- Set up a staff consultative forum with employee representatives from across the network that is separate from franchisees.
7-Eleven chairman Michael Smith said he and the CEO Angus McKay are already working on a Compliance Partnership with the Ombudsman.
"A crucial part of ensuring we succeed in eradicating and preventing activities that deprive individuals of their rights and entitlements and positioning 7-Eleven as an industry leader in reform is a co-operative effort between the company and the FWO.”
- You can download the Fairwork Ombudsman's report here.