7-Eleven has blamed two industry codes for standing in the way of its ability to terminate agreements with franchisees that underpay workers.

The company has called for the Franchising Code of Conduct and the Oil Code to be amended to give franchisors the right to terminate a franchise agreement in the case of serious non-compliance with workplace laws.

“Unbelievably, underpayment (no matter what the amount) does not entitle a franchisor to terminate a franchise agreement under the existing industry codes,” the company said.

“Termination for underpayment is only available to a franchisor if it can be demonstrated at the requisite level of proof that the underpayment has occurred in a way that involves fraudulent conduct.

“7-Eleven’s experience demonstrates that the burden of proof is unreasonably difficult to meet.”

7-Eleven said it supported a Fair Work Ombudsman investigation into a 7-Eleven franchisee’s alleged dismissal of a worker who refused his employer’s request to repay an amount he had been paid. It said it conducted its own investigation into the allegations but was unable to find the level of evidence required for the company to take its own action under industry codes.

A 7-Eleven Franchisee in Brisbane is facing court for allegedly dismissing a worker by removing him from the roster after he refused to repay his employer $731.06 he had been paid for accrued annual leave and leave loading.

Caltex has terminated agreements with 49 franchisees at 113 sites.

“Caltex has been able to terminate our agreements where we have the requisite evidence to support the termination,” a Caltex spokeswoman said.

“Even with clear evidence of wage underpayment, it has been a challenging process and does take considerable time.”

Caltex said it would support a Franchising Code of Conduct that ensured the obligations of franchisors were carefully balanced with rights to take action, consistent with obligations under the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017. This included the ability of franchisors to obtain workplace information from their franchisees to conduct thorough workplace audits and to terminate franchise agreements in certain circumstances.

The Australian Competition and Consumer Commission regulates the franchising code, which requires a franchisor to give a franchisee reasonable written notice that it proposes to terminate the franchisee agreement. If a breach of the code is remedied within 30 days, the franchisor cannot terminate the agreement unless the franchisee has acted fraudulently.

An ACCC spokesman said while the Franchising Code and Oil code do not provide a franchisor with the right to immediately terminate an agreement for non-compliance with workplace laws, the codes allow a franchisor to terminate an agreement if the franchisee breaches it and fails to remedy the breach in reasonable time. It can also terminate an agreement immediately if the franchisee operates the business in a fraudulent manner.

The spokesman said that while underpaying employees may not itself be fraudulent, related actions by the franchisee such as falsifying records could be fraudulent.

Bruce Billson, Franchise Council of Australia executive chairman, said it was aware that some franchise agreements do not expressly provide for audit and termination rights of franchisees where compliance irregularities emerge.

“A franchisor’s right to terminate a franchise agreement in the case of serious non-compliance by a franchisee is a matter of consultation with the sector and key regulators at this time,” Mr Billson said.

“The Franchising Code of Conduct has been reviewed and strengthened in recent years and the FCA is very involved with key stakeholders to ensure that the Code continues to provide a robust regulatory framework for the sector.”

Correction: The previous version of this story said Caltex had terminated agreements with 71 franchisees at 129 sites. Caltex later updated these figures to 49 franchisees at 113 sites.

Extracted from: The Sydney Morning Herald