“The business model will only work for the franchisee if they underpay or overwork employees” – Former ACCC chairman Allan Fels.

Work more less pay?

A joint investigation by the ABC’s Four Corners and BusinessDay has discovered that a chain of 7-11 franchises have utilised a common payroll fraud system known as the “half-pay scam”

Under this half-pay method employees are only being paid for half of their hours work – putting this into perspective, a worker foregoes a 40 hour week for an average of $12 per hour against an award rate of $24.69 per hour. Exploitation.

Additionally, the franchisee would purportedly alter the roster and fudge time sheets to make it appear as though the staff member had only worked half of their hours.

From this, it became evident in the investigations that “ghost-workers” (individuals that don’t actually work at the store) were used in order to compensate for the unaccounted hours of the week and justifying the payments as being correct for the staff.

How to cheat a 7-11 employee

Make them pay you, for their work.

7-11 must have thought that it would be a good idea to repair the relationships between the out-of pocket employees by actually paying them within the required award rate. Nonetheless, The Four Corners and Fairfax Media investigated into the illegal practice and found yet again another malpractice, revealing that 69 per cent of the 225 stores surveyed during a four-week period between July and August this year had payroll compliance issues, including the underpayment of staff and falsification of payroll records. This malpractice was referred to as the ‘Cash Scam’, a corrupt and deceptive method employed in order to regain expenses in the form of employee wages.

Employees that worked under these cash scam conditions were expected to pay a percentage of their weekly wage back to the franchise in cash (outside of the surveillance camera’s vision). Any employee that refused to pay would subsequently lose their job and were threatened with deportation.

As a result, a number of claims for back-pay arose with the Shop, Distributive and Allied Employees’ Association (SDA). SDA national secretary Gerard Dwyer, stated that the union would assist these workers in taking legal action to win back what is rightfully theirs.

Calls for reform

In line with this scandal, Greens MP and spokesman for industrial relations Adam Bandt has drafted a private member’s bill that would have a significant impact on the country’s franchise industry, if passed.

This bill, introduced to combat ‘half-pay scams’, aims to amend the Fair Work Act to make parent companies, or franchisor’s, more responsible for the behaviour of their franchisees, specifically when it comes to the underpayment of wages.

This responsibility, extended to the creation of rights that enabled any underpaid workers in a franchise arrangement to make a claim against the head office, rather than the current system which required workers to chase the franchisee; who would threaten them with the sack or deportation for foreign workers.

According to Bandt, the amendment would not only redirect the onus onto the franchiser, who would have to make good on the repayment of wages to workers, but also assist in bringing about a shift in culture.

He states that “Instead of leaving it to vulnerable workers to uphold the law through expensive legal action, head offices would take more responsibility for what goes on in the stores that carry their name”.

Bandt gave notice of the bill yesterday, with optimistic reactions, and will extend this by introducing it to Parliament in October.

Stick around for updates on the franchise overhaul.

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Dominic Woolrych

Dominic is the CEO of LawPath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.