In the past week, two separate 7-Eleven franchisees were fined $140,000 in the Federal Circuit Court of Australia, after being found guilty of miss-classifying employees, serious underpayments and deceptive payroll practices.
The owner of two 7-Eleven stores in Brisbane was found to have knowingly breached his obligations under the Fair Work Act by failing to pay staff according to the correct award classification.
Incorrect classifications under the retail industry award
Judge Jarrett found that two employees had been incorrectly classified as retail level one employees when in fact they performed work of a retail level three employee. The employees provided supervisory assistance and were responsible for the general running and security of the store, especially when the store owner was absent. Indeed the store owner himself often referred to them as โmanagersโ and as being โsecond-in-chargeโ. The store ownerโs incorrect classification of employees resulted in serious underpayments.
Judge Jarrett also found that the store owner was liable as an accessory for his companiesโ failure to keep payslips and maintain accurate records, as is required under the legislation.
In court, the store owner claimed he didnโt know that there were higher penalty rates for shifts completed over the weekend or that the rates his companies were paying failed to meet the legal minimums.
Judge Jarrett rejected this argument and said the store owner was โno stranger to the businessโ. He had received franchisee training and Award wage rate summaries each year from 7-Eleven Corporate Headquarters.
Misrepresenting employee records
In a second case decided on the 25thย of July, Judge Jarrett found a 7-Eleven store owner had deliberately manipulated payroll data to disguise underpayments.
Judge Jarrett found that the store owner knowingly entered incorrect hours of work and pay rates into the 7-Eleven payroll system. He also falsified his companiesโ records to match the information given to 7-Elevenโs system and hide the underpayments.
Judge Jarrett stated the store ownerโs business model โrelied upon a deliberate disregard of the employeeโs workplace entitlements and a course of conduct designed to conceal that deliberate disregardโ.
Fair work raids
These discrepancies were discovered during a tri-state FWO audit in September 2014, during which inspectors targeted 20 7-Eleven stores in surprise night-time visits.
The audit revealed that one employee was paid $13 an hour, well below the General Retail Award base rate, which lead to a $13,962 underpayment over a 13-month period.
The store owner personally received a $28,000 fine, while his company was fined $140,000. Judge Jarrett noted that the store ownerโs payment practices were serious contraventions of industrial law and workersโ rights. However, he was willing to reduce the final penalties due to the store ownerโs prompt rectification of the underpayments amounting to almost $20.000.
Both these cases highlight the high penalties that face store owners personally and their franchisee companies who fail to pay in accordance with the minimum obligations under the award and who have ambiguous payroll practices.