Caltex Australia has set up a $20 million fund to compensate employees who have been underpaid across dozens of its franchisee stores.

The petrol giant has been conducting an audit of 133 of its retail sites across the country and said in a statement on Monday it had uncovered “underpayments of entitlements by some franchisees”.

It has terminated agreements with 19 franchisees covering 43 sites for underpayment or “or other non-compliance with workplace audit requirements”.

The network-wide audit is still ongoing and will be completed over the next 12 months, with further franchisees expected to be terminated. The company has 805 company-operated sites and 650 franchisee sites.

“Caltex deplores this illegal and unfair practice and is committed to stamping it out anywhere in its network,” the company said in a statement.

The $20 million repayment fund will allow franchisee employees to claim underpayments for the period from 2015 to date, and the company said it would be “administered with fair criteria for assessment of claims”.

The company said it would seek to recover the costs of the fund from franchisees responsible for underpayments.

The action follows Fair Work Ombudsman’s raids of Caltex service stations across the country in November 2016, which found student visa workers were being paid as little as $12 an hour, or less than half the award rate.

The Australian Financial Review reported in January that more than 100 franchisees were believed to have sought legal advice over the audits and some were considering a joining a class action, claiming the franchise model had left them little option but to cut corners.

However, Caltex cited a review of its franchisee model that confirmed its model allowed franchisees to “draw a wage, make a profit and pay their employees’ lawful entitlements”.

“The review of the model and the audits undertaken reveal there is no correlation between site profitability and underpayment of franchisee employees.”

“The responsible franchisees will remain liable for any underpayments to their employees and the Caltex fund will not prejudice the ability of franchisee employees to seek redress from their employers.”

Caltex has invited employees from terminated franchisees to come forward if they believe they have been underpaid.

Under the rules of the repayment fund, franchisee employees can make claims within three months of a franchisee exiting the Caltex network or, for franchisees who have already exited, in the three months from May 31, 2017.

Caltex said it would also offer employment to employees affected when a franchisee exits and Caltex takes over operation of a site.

The company’s $20 million repayment fund follows 7-Eleven setting up a similar fund after underpayments were uncovered across its franchisee network. So far, 7-Eleven has paid out more than $90 million to employees from the fund.

Extracted from the Australian Financial Review.