As oil refiner and petrol station giant Caltex continues to battle widespread wage fraud scandal across its franchise network it has come to light that it considered changing its name.

A name switch would have saved the company tens of millions of dollars a year in licence fees to multinational Chevron Texaco.

It is understood that Caltex came within a whisker of asking shareholders to approve the name change to CTX at the annual general meeting held in late March, but it got cold feet. It is understood that it got as far as including it in its notice to shareholders before pulling it after conducting further investigations that revealed it could hurt petrol sales in the short term.

Caltex is rumoured to pay Chevron Texaco – which recently settled a landmark case with the Australian Taxation Office in a deal estimated to be worth $1 billion – at least $100 million a year in licence fees as part of a trademark licensing agreement for the use of Caltex, Star Mart, Star Shop and Vortex, among other brands. Caltex refused to reveal the size of the fee but sources close to the company said it was well below $100 million.

Whatever the case, it is believed that Chevron has been in Australia for the past week visiting Caltex branded petrol sites to keep tabs on how its brands are being used. It has prompted speculation that Chevron’s visit could result in a significant increase in fees.

Whether the licence fees cost Caltex $100 million or less, it must be tempting for a company battling reptutational damage from an underpayment scandal as well as paying a fortune to use the brand of a multi-national, to start afresh.

It must be doubly so when it is seeking to transform its business as it grapples with the longer term trend of declining income from fuel and the hole it has to fill in the wake of the loss of the Woolworths contract. (The ACCC will release its decision on a Woolworths sale to BP on November 30).

The wage fraud scandal isn’t about to go away either. Earlier this week, the Fair Work Ombudsman Natalie James told parliament that the wage fraud investigation into Caltex was ongoing and likely to result in compliance outcomes.

James was critical of a $20 million compensation scheme Caltex set up for underpaid workers on the basis it had failed to engage with the regulator to develop the fund or report those individuals it had breached or terminated. She said the ombudsman had no oversight or visibility as to whether workers were being compensated appropriately.

Underpaid workers are also questioning the fund. Almost six months after Caltex set it up, only 131 workers have applied and of those 51 have been paid a total of $1.2 million. In sharp contrast, 7-Eleven has had an uncapped scheme going for two years and has paid out $150 million to more than 3000 workers.

Given Caltex’s own figures show that 49 franchisees who owned 113 sites have been terminated due to wage related issues and another 9 franchisees representing 21 sites have also left the system due to their having competitive interests or the franchise agreement expired, and others have settled rather than participate in a company wide audit, the worker figures are disturbingly low and raise serious questions.

Professor Allan Fels previously described the fund as bogus and a “public relations stunt” requiring regulatory scrutiny. One worker described it as a “hoax”, while others said it makes low ball offers and uses the information to terminate franchisees.

“Caltex has a market capitalisation of almost $9 billion but it has an image problem.”

Abused and threatened

Zafar Aziz is one of a number of workers who has contacted me in recent weeks about the Caltex fund.

He feels Caltex used him.”Caltex used me and tore me up like I was a piece of tissue paper,” he said. “I gave them documents, signed a statutory declaration and gave evidence about my boss, then they refused to pay me.”

Aziz worked for four different Caltex stores including a store in Hamilton in Victoria from 2012. When he called Caltex to report the underpayment, he was told to lodge a claim. He was then called and followed up with interviews that required him to give details about the franchisee.

He says he was shocked when he then received a call from the franchisee. “He abused me and threatened me,” he said.

He says Caltex had used his testimony to terminate the franchisee’s rights to a store.

Then on October 20 Aziz received an email saying: “I wish to advise that as your time at Hamilton was before the start date of the Fund of 1 January 2015, unfortunately it is not eligible.”

Aziz said he was disgusted. “They used me.”

The email suggested he lodge claims for two other sites he had worked at, including Islington and Caltex Woolworths at New Lambton.

“What am I to do?” he said.

Caltex is facing allegations it is exploiting the chain’s wage fraud scandal to seize control of hundreds of service stations run by franchisees at fill a hole caused by the loss of the Woolworths deal. Franchisees can pay hundreds of thousands of dollars for a single service station franchise site.

Caltex is allegedly doing this by conducting mandatory audits across its network.

Through those audits, Caltex can seize hundreds of stores. Stores which franchisees have paid a fortune to buy can have their agreements torn up with little or no compensation if workplace laws are violated at any level. Some sites sell on the resale market for up to $1 million.

For franchisees, termination can mean financial devastation as many lose the store, receive no compensation and are left with a big bank debt they have to repay.

On top of the audit process, franchisees whose five to 10-year franchise agreements are due to expire are either not being renewed or put on short-term contracts while the retail operating model review is in progress.

In a statement Caltex said 292 sites had been audited to date, of which 126 were still ongoing. Of the sites terminated, Caltex has converted a number to corporate stores. It said in a statement it now runs 229 corporate stores, or Calstores, compared with 138 in the first half of 2016.

Caltex has a market capitalisation of almost $9 billion but it has an image problem. It has created a toxic relationship with its franchisees and workers believe the compensation scheme is a sham.

It only goes back two years and workers have a short window to lodge a claim. Successful claims receive an ex gratia payment instead of the full amount and workers aren’t protected from franchisees. It is little wonder so few have applied.

Caltex has decided to stick with its name – for now,. Chevron might be the one taking a closer look at what Caltex is doing to one of its key brand names. It might find it isn’t pretty.

Extracted from: The Sydney Morning Herald

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