A class action of Franchisees against 7-Eleven, that alleges the Franchisees were misled about the viability of sites without underpaying workers, has been settled for $98 million. The $98 million settlement amount includes $45 million in legal fees and commissions. The Federal Court has approved the $52 million that will flow to franchisees, but has reserved judgement on the suitability of the $45 million in legal fees and commissions noting that this element of the settlement may be reduced by order of the court.
In 2015, following revelations of systemic underpayments by 7-Eleven franchisees and 11 prosecutions of franchisees that resulted in $1.8 million in penalties, 7-Eleven completely changed its operating structure, bringing payroll inhouse and reviewing the franchise offer and operation.
The class action case, launched in 2018, related to the franchise system in operation prior to 2015. The case alleges that 7-Eleven engaged in misleading conduct when it communicated to franchisees about the viability of a site they were franchising. The case alleges that the sites were only viable if underpaying workers.
The franchisees sought to go further and add a claim that 7-Eleven “forced” the franchisees to underpay workers, however the Federal Court rejected this claim and refused permission for that to be added to the case.
In discussing the settlement 7-Eleven noted that “the settlement of the class actions for $98 million is without admission of fault, liability or wrongdoing” and highlighted the extensive changes and investment improved technology, systems and processes that are geared “to ensure that, as far as is possible, wage theft cannot occur again and for enhanced education and training for franchisees in relation to their responsibilities in this regard,”
7-Eleven CEO Angus McKay outlined that ”We are seeing the positive results of the significant efforts we have made together with our franchise network. We intend to continue to adapt and improve and look forward to continuing to provide great products and service to our customers in Australia”. In discussing the settlement itself Mr McKay noted that 7-Elven “is pleased this matter has reached an acceptable resolution”.
The settlement has been agreed by the parties and has been approved by the Federal Court, with the court reserving the right to lower the $45 million included in the settlement that pertains to legal fees and commissions.
The settlement is in addition to the $173 million in wages and superannuation that 7-Eleven paid to workers of franchisees.
“While this is a civil contracts case it is a reminder for all businesses to closely review contracts to ensure that they not only require compliance to all laws by all parties, but also that they do not, in fact or in operation, allow or endorse non compliant behaviour” explains ACAPMAs Elisha Radwanowski.
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This article is general in nature and covers things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation by calling 1300 160 270 and speaking to one of ACAPMA Employment Professionals its free for members. ACAPMA membership is affordable at only $810 per year for a single site and valuable with sites gaining HR advice support and representation as well as a raft of other benefits and discounts.
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Elisha Radwanowski BCom(HRM&IR)