Legal

Former 7-Eleven operator penalised $168,000 for underpaying workers after judge finds “deliberate disregard” for correct entitlements

Dominic Powell /

A former 7-Eleven store operator has been penalised $168,000 as a result of legal action by the Fair Work Ombudsman, with the Federal Circuit Court judge slamming the operator’s actions as involving a “deliberate disregard of the employees’ workplace entitlements”.

Jim Chien-Ching Chang, the former operator and franchisee of a 7-Eleven store in West End, Brisbane, admitted he had underpaid eight staff nearly $20,000 between 2013 and 2014, with flat rates paid as low as $13 per hour.

Chang was fined $28,000 by the Federal Circuit Court in Brisbane, and his company, JS Top Pty Ltd, was fined an additional $140,000.

The franchise has since been sold by the operator and is now run by an entity unrelated to the alleged underpayments.

This case brings the total amount in penalties against 7-Eleven franchisees through actions instigated by the Ombudsman to $1 million, and employment lawyer Peter Vitale says this case sticks out due to the apparent “very deliberate nature” of the breaches to the Fair Work Act.

“In other cases, there’s often been suggestions of some ignorance of minimum entitlements, but in this case, it was weighed in the favour of heavy penalties due to the [judge finding] the employer being well and truly aware of his obligations,” Vitale told SmartCompany.

Judge Michael Jarrett found the franchisee was not only underpaying staff but showed a deliberate disregard of workplace entitlements and the franchise established a “course of conduct designed to conceal that deliberate disregard”.

The largest underpayment of a single employee was close to $14,000. A statement from the Ombudsman confirmed all underpayments have since been rectified.

Additionally, Judge Jarrett found the business was not motivated by poor cashflow, finding instead the company’s profit was “enhanced by the underpayments concerned”.

Bianca Mazzarella, senior associate at McDonald Murholme lawyers, says even if the business had been struggling financially, that would be “no excuse either way” when it comes to paying below award wages.

“Arguably the Fair Work Ombudsman and the courts might be more sympathetic if the business has a reason for doing it rather than just for profits, but in this case, it was a clear breach,” she says.

Any view of the courts that there was “disrespect” of the law in underpayment cases can also increase penalties, Mazzarella says.

In a statement, Fair Work Ombudsman Natalie James said sticking to the Fair Work Act is not negotiable for businesses.

“The deliberate nature of the underpayments and the lengths that Mr Chang went to in order to hide his conduct from us and from the 7-Eleven head office is of grave concern. Mr Chang was fully aware of his lawful obligations and chose to manipulate the system in order to undercut the entitlements of vulnerable workers,” James said.

“We are pleased that the Court has seen fit to penalise such blatant conduct and hope that this serves as a warning that such behaviour will be penalised.”

Both Vitale and Mazzarella advise that businesses should be endeavouring to be compliant with the Fair Work Ombudsman wherever possible, and while it might extend some leeway for businesses that commit inadvertent breaches, deliberate breaches and concealment will only buy trouble, says Vitale.

“You’re only making things worse for yourself if you don’t cooperate with the regulator. If you’re in breach of the law you will be found out, so openness is key,” Vitale says.

“Businesses should try to rectify any underpayments or Fair Work Act breaches with their employees and the Fair Work Ombudsman so these cases never make it to court at all,” Mazzarella says.

SmartCompany was unable to contact Chang or JS Top Pty Ltd for comment prior to publication.

Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on TwitterFacebookLinkedIn and Instagram.

Advertisement
Dominic Powell

Dominic Powell is a journalist at StartupSmart and a tech and music geek. When he’s not writing, you can find him reading or browsing record shops.

We Recommend

FROM AROUND THE WEB

  • Jan Deane

    I am not condoning in any way the underpayment of workers, but it seems to me that the business model of the 7-11 franchise is flawed and probably relies on staff being underpaid for the franchisee to make any kind of profit.
    7-11s were probably little goldmines back in the day, but now, with dozens in Melbourne CBD plus lots of other convenience stores and mini-supermarkets, the franchisors have shot themselves in the foot by saturating the market. I am sure many franchisees would regret ever getting involved.