Convenience store giant 7-Eleven yesterday signed a Proactive Compliance Deed with the Fair Work Ombudsman in a plan that is hoped to end long-running underpayment issues in its franchises.
The deed, which the Fair Work Ombudsman (FWO) states will establish “a new standard” for Australian franchise businesses, requires 7-Eleven stores install CCTV cameras and biometric scanners in an effort to eliminate the underpayment of staff.
Last year multiple 7-Eleven stores were found to be underpaying workers thousands of dollars, and a report from the FWO in April this year found many staff members were being forced to give “cash backs” due to franchisees claiming they were unable to pay government rates.
New measures outlined in the Compliance Deed will aim to eliminate the possibility of these infringements occurring by taking almost all payment responsibility away from the franchisees themselves.
“The measures in this deed are the most robust and comprehensive that any franchise brand has in place in Australia,” Fair Work Ombudsman Natalie James said in a statement.
“The deed establishes a framework for 7-Eleven to detect, investigate and rectify underpayments within its network now and into the future. It also maintains commitments to backpay workers underpaid in the past.”
Employment lawyer at TressCox Lawyers Peta Tumpey told SmartCompany the changes outlined in the deed were “unprecedented”.
“It’s going to create a major precedent in terms of proper process and conduct in what a business should start to do to put itself in good standing with the FWO,” Tumpey says.
However, Tumpey notes 7-Eleven should “get some credit” for its willingness to work with the FWO.
“It’s wrong to think that 7-Eleven has been forced to do this, they should get some credit for jumping up and saying they wanted to sort it out,” she says.
“They were obviously very interested in encouraging the Ombudsman to not show more legal action.”
7-Eleven chief executive officer Angus McKay said in a statement he had “consistently said we want to be judged on our actions”.
“Our resolve is unquestionable. 7-Eleven immediately fronted up and owned the issue of wage underpayment in our network of franchised stores,” McKay said in a statement.
“We will continue these efforts, and our ongoing collaboration with the Fair Work Ombudsman and others, to ensure our franchised store network operates at the highest standard we and the community expect.”
New hardware and system changes
7-Eleven stores will now be required to be fitted out with biometric scanners which are owned and operated by 7-Eleven to allow monitoring of staff shift times. Staff rosters will also be required to be provided to 7-Eleven on a weekly basis, or recorded in the new biometric system.
CCTV cameras will also be installed in all stores within 12 months in order to monitor the point of sale location and the front of stores to prevent any further instances of franchise owners asking staff pay some cash back. 7-Eleven franchisees will not be permitted to alter any CCTV services operating in the stores where the cameras are fitted.
However, Tumpey believes these specific requirements are “not at risk” of becoming a precedent, believing 7-Eleven was trying to “throw as much in the ring as possible”.
“I don’t know how utilised it will be, will they have a person that checks the system every day, or will it just be randomly checked every so often?” she says.
“It’s a good idea but I’m not sure how effective it will be, it does seem a bit excessive.”
Franchisees will also be required to use a centralised payroll system, which will specify lawful minimum pay rates for employees in all stores. The payroll system will also be unmodifiable by franchisees, and all payments will be made electronically rather than cash.
With a lot of power being taken away from franchisees, Tumpey thinks there could be “some risk” some could be unhappy, but she believes it’s more likely franchisees will welcome the changes.
“If it got more severe than just payroll I could see some of them being unhappy, but I think more of them will be grateful,” Tumpey says.
“This means they don’t have to handle payroll themselves.”
Repayment in the hands of the franchisor
In accordance with the deed, 7-Eleven will establish an Internal Investigations Unit to ensure compliance across all franchisees when it comes to payments and issues surrounding underpayment.
This unit will report to both the FWO and 7-Eleven quarterly and will allow employees to complain directly about issues with franchisees. Tumpey believes this is a good move, and notes that it is also unprecedented.
“This hotline will allow any employee of any franchisee to ask questions that usually would be directed at the FWO,” she says.
Any issue of underpayment reported to the unit will go to 7-Eleven, who then requires the franchisee of that employee to rectify the issue within 30 days. If the issue is not rectified within that time, 7-Eleven itself will then rectify the underpayment.
7-Eleven is also required to appoint an internal auditor to assess time and payroll data, which Tumpey says is a move which could be seen implemented again in the future.
“It won’t allow a company to say they were ignorant about correct pay rates or anything like that, I wouldn’t be surprised if lawyers start advising businesses to always employ someone in this role,” she says.
“We could even see this potentially morph into an actual requirement in the law.”
Not a cheap move
While the plan aims to iron out any issues with 7-Eleven and its franchisees, Tumpey warns it won’t be cheap.
“They have committed themselves to spending millions of dollars of costs in hiring new people and implementing new hardware and software,” she says.
“That being said, signing this deed will go a long way to improving the company’s culture internally.”