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 “managers” and as being “second-in-charge”. The store owner’s incorrect classification of employees resulted in serious underpayments.

Judge Jarrett also found that the store owner was liable as an accessory for his companies’ failure to keep payslips and maintain accurate records, as is required under the legislation.

In court, the store owner claimed he didn’t 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 “no stranger to the business”. 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 25th 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 companies’ records to match the information given to 7-Eleven’s system and hide the underpayments.

Judge Jarrett stated the store owner’s business model “relied upon a deliberate disregard of the employee’s workplace entitlements and a course of conduct designed to conceal that deliberate disregard”.

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 owner’s payment practices were serious contraventions of industrial law and workers’ rights. However, he was willing to reduce the final penalties due to the store owner’s 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.