Franchising

Caltex denies employee underpayments amid allegations franchise bosses told workers to lie to Fair Work Ombudsman

Emma Koehn /

Caltex service station

Source: AAP/Paul Miller

Service station franchise owners were tipped off by oil giant Caltex ahead of raids by the Fair Work Ombudsman, and workers say they were told by bosses to lie about their wage rates, according to reports about employee underpayments at the company.

However, Caltex has disputed the claims and told SmartCompany this morning it provides support to all franchises in its network.

A report by Fairfax alleges that some employees at Caltex stores were paid as little as $12 an hour, and that after the Fair Work Ombudsman notified Caltex that it would be completing unannounced site audits in stores, employees said they were pressured by bosses not to reveal their actual working conditions.

This morning Caltex said in a statement all of its 85 company-operated sites “comply with all Australian laws, including those related to wages and conditions”.

The Fair Work Ombudsman told Fairfax it informed Caltex of its plans to conduct audits to ensure that owners were compliant when on-site visits occurred. Caltex rejects the idea of a “tip off”, saying that messages that flowed from head office across the network were meant to “ensure full cooperation with the auditing process should their site be inspected”.

Caltex is listed on the Australian Securities Exchange and operates 85 company-owned sites, along with 650 franchise sites across Australia, with a net profit after tax for the first half of 2016 of $318 million. The company said it was not aware of any breaches at the sites it operates, including franchised stores, and says that it conducts annual review processes with all franchisees.

However, over the past 12 months Caltex has terminated franchise agreements with five franchisees because “fraudulent or deceptive conduct”, which was uncovered through internal investigations.

A Caltex spokesperson told SmartCompany it has processes in place to help franchises that are experiencing financial challenges.

“Caltex assigns business managers to support every site in its retail network. The business manager’s role is to work with the franchisee to act as their key point of contact and to work collaboratively to achieve the goals outlined in each franchisees individual site business plan,” the spokesperson said.

The Caltex network also includes more than 500 sites operated by Woolworths and supplied by Caltex, which the company says are run “entirely independently”. In October reports confirmed Caltex had made a bid to buy the Woolworths fuel business, which would elevate its share of the petrol market to 40%.

Director of the Franchise Advisory Centre Jason Gehrke says franchise owners need to keep in mind that they are responsible for comply with the relevant entitlements for their business – and in cases where there is no information on an issue, or they are unsure, they should feel comfortable contacting the watchdog for help.

“At the end of the day, the payment of the employee entitlements rests with the franchisee,” he says.

“But they can even reach out to Fair Work and ask them [about this] – just because they’re also the watchdog, doesn’t mean they will not help businesses be compliant.”

When entering into a franchise opportunity, it’s important to remember that even if you are intending to follow regulations closely, the strength of a franchise network can also be a major weakness when some behave badly, Gehrke says.

“A highly compliant franchisee can still be at risk of their reputation and credibility being affected if another franchisee is doing the wrong thing,” Gehrke says. When researching potential opportunities, it’s important to be mindful of this and consider whether any past misdemeanours that might be uncovered when researching an opportunity are systematic, or a one-off occurrence.

“This can be lack of compliance in HR, or in any other area,” Gehrke says.

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Emma Koehn

Emma Koehn is SmartCompany's senior journalist.

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