Adele Ferguson, 30 March 2016

Workers at 7-Eleven have received almost $10 million in compensation after the franchise giant set up an “independent” panel following revelations of systemic wage fraud across the franchise network.

The panel, headed by former ACCC chairman professor Allan Fels, has received almost 3000 claims from past and present exploited foreign students on visas which is equivalent to an average payout of $33,284.

Some workers were paid as little as $10 an hour, some were threatened with deportation if they spoke up, some were beaten and some were forced to pay tens of thousands of dollars for visas.

Professor Fels said in the past few weeks he had seen fewer examples of workers coming forward with reports that stores were still ripping off staff. He said it was early days, but it suggested 7-Eleven was starting to hold franchisees to account. “I strongly encourage 7-Eleven to stay vigilant and keep holding franchisees to account,” he said.

The update on compensation payouts comes days after a senate inquiry into foreign workers on visas released a 373-page report recommending that Treasury and the ACCC conduct a review into the Franchising Code of Conduct to investigate whether franchisors should take some responsibility if their franchisees are exploiting workers.

It also comes as the Fair Work Ombudsman is preparing a report into 7-Eleven following a lengthy investigation that included raids and legal action against a number of franchisees.

Since 2009 Fair Work has conducted three separate raids and found chronic problems with underpayment of wages. Its report is expected to look at the role of head office and whether it has been complicit.

7-Eleven set up a compensation scheme last September after a joint Fairfax Media and Four Corners investigation exposed systemic wage abuse and falsification of payroll records across the 620 7-Eleven franchised stores. An insider at head office said wage fraud was rampant and senior management were aware and covered it up.

The appointment of Professor Fels to spearhead the panel gave the compensation scheme credibility given his public rebuking of the convenience store giant and claims that the only way 7-Eleven franchisees could make money was by ripping off their workers.

It was a smart move given the outpouring of contempt for the brand since the stories broke. It no doubt took a leaf out of supermarket giant Coles’ book, which appointed former Victorian premier Jeff Kennett to oversee a refund of more than $12 million to suppliers. (Kennett reported Coles to the ACCC over false “baked fresh” bread claims almost three years ago.)

To join the panel, known as the Fels Wage Fairness Panel, 7-Eleven agreed to have no staff involvement in the panel or the panel’s assessments. In addition, all panel assessments could not be contested by head office.

It also changed its business model after revelations that at least 138 of the 620 stores made $300,000 or less in income in 2015, which is not enough to pay full freight wages and other costs.

Fels says the panel has paid almost $10 million in back pay to workers but would like to accelerate the number of claims it has so far processed. “Claims processing is a time consuming activity and is influenced by the amount of information the claimant provides, the complexity of the claim and the number of skilled persons available to perform the task.”

In comparison to compensation schemes such as Commonwealth Bank’s open advice review program, the Fels panel is looking good. According to its latest report, CBA has paid out $2 million in compensation so far, with 171 offers made in a scheme that has become ridiculed for its glacial speed. The scheme was set up in 2014.

In the past couple of years a number of companies that have been caught doing the wrong thing have been forced to introduce compensation schemes. They include National Australia Bank and Macquarie. Each have their own strengths and weaknesses.

But at the end of the day, the way a scheme is set up and the speed at which victims are compensated says a lot about the company’s commitment to righting wrongs.

7-Eleven recently appointed Angus McKay as the new chief executive to help rebuild its reputation. McKay will have his work cut out for him as he attempts to build a culture of transparency rather than one that turned a blind eye to wrong doing. In the meantime, he will be bracing himself for the findings of the Fair Work investigation and the fallout from the Senate report.

Extracted in full from the Sydney Morning Herald.