Adele Ferguson & Sarah Danckert, 07 December 2015

At least 100 franchisees at the scandal-ridden 7-Eleven convenience store giant have signed up for legal action against head office as the deadline looms to sign a new profit-sharing agreement.

Franchisees have until 5pm on Monday to sign up to the deal, which includes changes to the profit split between head office and franchisees. Those who sign up will have the deal backdated to September 1.

A letter obtained by Fairfax Media reveals 7-Eleven has sweetened the deal with an offer to pay for the first $25 million of back-pay claims brought by current and former workers. Franchisees would then pay the next $5 million and any payments after that would be split 50-50 between head office and franchisees.

There are thousands of workers, past and present, who suffered wage exploitation at 7-Eleven, with some estimating the wage fraud bill could be as high as $300 million if enough staff come forward.

Professor Allan Fels, who is heading the panel, said he had written to the government, asking for amnesty so that foreign workers could come forward without fear of losing their jobs.

“If the government would agree to our requests to grant amnesty then more people would come forward and the repayment bill would be so high as to be a massive deterrent to all other businesses involved in underpayment of wages.”

7-Eleven billionaire and co-founder Russ Withers set up an “independent panel” headed by Professor Fels to review claims of wage fraud. Professor Fels told Fairfax Media the panel had received 1000 claims, which is double that of a few weeks ago. He said the panel expected to start making compensation payments to workers before Christmas.

The panel was set up days after a joint investigation by Fairfax Media and Four Corners revealed systemic worker exploitation throughout 7-Eleven’s network of 620 stores.

Fairfax Media can reveal hundreds of franchisees have met with the lawyer preparing the class action, Stewart Levitt from Levitt Robinson Solicitors, in the past few weeks to discuss their options.

Mr Levitt confirmed 40 store owners had formally signed up to the class action and another 60 had registered their interest.

The lawyer, who successfully ran a class action against Storm Financial, said he would seek to negotiate with head office on behalf of the group of franchisees, before filing a class action against the company.

“The wage rorts and the oppression of many working class investors under the 7-Eleven and other similar franchise models is widespread,” Mr Levitt said.

Mr Levitt said if franchisees had received proper disclosure at the outset they would not have entered into a franchise agreement on the basis they were not given the full picture of the costs of running a franchise, including paying labour costs for a business that runs 24 hours a day, seven days a week.

A 7-Eleven spokes man said franchisees had the right to pursue such matters. He refused to comment on how many franchisees had signed the new agreement and how many had signed up with the law firm. “There has been a positive response but no final numbers yet,” the spokesman said.

Franchisee sources told Fairfax Media a key concern with the new agreement was that it didn’t provide all stores with enough of an income boost to offset a new clause in the contract that places all future liability for the underpayment of workers on the franchisee. Some franchisees were also concerned that the new deal doesn’t address what will happen to the low-income-generating franchisees when their contracts expire.

The 7-Eleven spokesman said this was not an admission by the company that its model had contributed to the underpayment of staff.

Mr Levitt said the $25 million offer would not be enough to cover the full amount of claims brought against a store owner or any fines issued by the Fair Work Ombudsman.

Professor Allan Fels, who is running the wage review panel on behalf of the company, described the $25 million offer from head office as a “significant step forward” but he said it had no effect on the operations of the panel.

“It’s not on our radar,” he said. “They are at fault in that they admit in some cases that some of the franchisees at the bottom of the pile shouldn’t have to pay but others aren’t quite as deserving.”

Professor Fels said the payment of workers had taken longer than he had hoped but the hold-up was the result of head office calculating the superannuation and tax payment components of the back-pay adjudications by the panel.

Extracted in full from the Sydney Morning Herald.