Discuss about the FWO 7-Eleven Inquiry.
The Australian Fair Work Ombudsman made an inquiry regarding the underpayment of wages in June 2014 as was committed by the 7-Eleven Australia. Similarly, the FWO inquired into the falsification of the records of workers regarding their employment. The Ombudsman allegations of concern can be defined as systematic non-compliance of 7-Eleven with the country’s workplace laws (Thomsen, 2016). The ombudsman found that several 7-Eleven franchisees falsified employment records deliberately to facilitate the underpayment of remunerations. However, the inquiry discovered that the firm’s approach never detected or addressed the issues of non-compliance adequately. The commission accused the organization of intimidation, threats, and retaliation against the underpaid employees (Thomsen, 2016). The Senate inquiry also found that workers were intimidated and beaten (Woodley, 2016). Based on the significance of the 7-Eleven inquiry, this paper conducts an assessment regarding the company’s compliance with industrial relations laws like pay and conditions.
The Fair Work Ombudsman had received various complaints regarding 7-Eleven’s compliance with the industrial relations laws since 2008. It had emerged that the employees of the company had raised concerns about the “significance underpayment of wages” (FWO, 2016). The systematic of non-compliance with the laws was a grave issue that the FWO could not compromise. The FWO linked the low payment to false employment records. Given the continued allegations regarding the franchisees’ noncompliance with the workplace laws, the FWO identified about eight issues (Lannin, 2016). The FWO discovered that the franchisees had a history of noncompliance. Since 2008, the FWO received regular reports from different stakeholders, especially employees regarding the significance underpayment of wages (AG-FWO, 2016). With the inaccurate records, the company has managed to underpay the workforce against the federal workplace laws. For instance, the firm reduced the working hours recorded. Through this strategy, the employer wanted to indicate that it paid its workers higher rates than the actual payment.
The FWO had gathered intelligence and information regarding the allegations of underpayment and mistreatment of workers (FWO, 2016). The inquiry was to examine the franchisees’ operating model thoroughly. Through the inquiry, the FWO would resolve the individual requests of employees as the company failed to address noncompliance issues, network, and supply chain (Lannin, 2016). The Fair Work Act provided the rationale for the FWO inquiry because the allegations could have been contrary to this Act. The inquiry was purposeful, as the Fair Work Ombudsman wanted to identify the basis of allegations relating to the serious noncompliance (AG-FWO, 2016). The FWO wanted to assess the responsibility of the firm’s head office in the issue and the role of its operating model in promoting the unlawful practice.
The FWO launched the investigation into the issues and allegations raised by the workers and related stakeholders. In its effort to uncover the truth, the FWO made unannounced visits leading to the following outcomes.
Upon conducting the site visits, the inspectors of FWO reviewed and compared the pay records, CCTV footage, the interview records, and the time records were obtained. The inspectors made follow-up calls and called employees for interviews upon visiting the site (Habbit, 2016). The move ensured the inspectors verified the information provided. Through thorough testing and reviewing of evidence, the inspectors identified various inconsistencies regarding the employee paid rates, conditions of work, time records and rosters (Marin-Guzman, 2016). The Fair Work inspector discovered the presence of inaccurate records in the company. The FWO found that most stores had inaccurate records and promoted significant underpayments. With inaccurate records, it made it difficult for the inspectors to identify the unmet entitlement. In fact, the investigated stores excluded specialist payroll provider mandated in processing pays.
It was unfortunate that 7-Eleven used manual methods in processing wage payments. The company’s accountants entered the hours worked manually into the company’s payroll system. During the manual entry system, the officers could enter different penalty hours but fail to enter the rate to be paid (Habbit, 2016). These system parameters affected the franchisees in making proper payment because inaccurate records were manipulated thus affecting the payroll system (Marin-Guzman, 2016). The misleading and false records contravened the fair work regulations. The production of such records affected the employees. The FWO found it difficult to assess the employee entitlement accurately. The inquiry discovered that employers decided for workers on their actual rate of pay ($10-$17) per hour.
The inquiry realized that many employees were lone rangers. The employers never engaged them in their decisions. With lack of participation, even the inspectors found it difficult to investigate the stores (Ferguson, 2017). In one store, for instance, only one employee volunteered to engage in the formal interview. Interestingly, many employees opted for anonymous interviews for fear of victimization. Some employees provided false accounts of wages thus making the information inconsistent (Lannin, 2016). For example, some workers provided answers, which served their interests because they continuously changed their answers. During the forensic investigation, some stores acknowledged the presence of false records while some relied on fabricated records. This justified the franchisees contravened the wage provisions.
The FWO discovered that most of 7-Eleven’s franchisees were from China, India, and Pakistan. The majority of the workers are visa-holders and male international students. According to the inquiry, the FWO received assistance request from many visa-holders who accounted for about 12 percent. The visa-holders claimed that they were paid $10-$12 per hour (FWO, 2016). In Australia, employers have no authority to undercut minimum wage. These employers should also avoid keeping inaccurate time-and-wage records. It further emerged that 7-Eleven took advantage of the international students’ inability to understand the workplace rights (Sivaraman, 2016). In fact, most of the visa-holders are afraid to seek the help of Commonwealth regulators. For instance, they work for more than 50 hours per week instead of the 40 hours.
The FWO has called the convenience store to acknowledge that its business model created an environment that promoted illegal work conditions and wage fraud (Ferguson & Danckert, 2016). The report of the inquiry revealed that the firm and its networks compounded the wage fraud because it failed to use the recommended processes and systems address and detect worker exploitation. The workers revealed to the FWO about the systematic wage abuse. The FWO compelled the franchise operator to comply with the federal workplace agreement. Based on the findings, the head office had received employee grievance but failed to act (James, 2016 ). Therefore, the investigation discovered breaches in workplace laws.
In the Australian industrial relations, the union movements have completely declined. This followed the government’s efforts to merge the unions thus making them irrelevant (Schofield-Georgeson, 2017). The FWO inquiry exposes the lack of worker representation because even the employees feared to share their tribulations in camera. They prefer providing information anonymously to conceal their identity. In fact, the Union membership has dropped thus justifying the increased cases of worker exploitation. Today, the country has experienced the increase in casual jobs. The growth of such jobs has prevented workers from joining unions and engaging enterprise bargaining. The decline of union movements is signalling the death of collective bargaining (Sivaraman, 2016). This makes Australian industrial relations landscape to look different. The inquiry raises various gaps relating to the role of government and unions.
The E-Eleven presents the horrific stories relating to exploitation and abuse of vulnerable workers (Phillips, 2015). It raises the question whether unions in Australia exist. Since time immemorial, unions helped the government in enforcing the workplace laws and policing workplace abuses. However, the 7-Eleven case, the unions seemed to have taken the back stage. The retail workers’ union never raised any alarm yet the employees were exploited. It took the courage of a whistleblower, a consumer advocate to raise the alarm thus revealing the 7-Eleven scandal. In most cases, active unions enforced workplace conditions and standards (Schofield-Georgeson, 2017). In Australia, the government has under-resourced the FWO thus making it impossible to improve workplaces and protect the Australians rights.
The continued de-unionisation campaign has promoted workplace deregulation thus leaving vulnerable workers exposed to exploitation. The adoption of Fair Work Act (2009) provided a balance for workers. However, the continued anti-union campaigns have reduced the union density and power (Disclaimer, 2017). The employers have used the absence of unions to exploit workers without significant consequences. The activities and abuse in 7-Eleven form an evidence of a powerless union including the FWO (Schofield-Georgeson, 2017). It emerges that unions face challenges to implement the federal workplace laws. In fact, the union officials are denied the legal rights to visit members in various workplaces. These officials can only access workplace if they have the right-of-entry card. They should also give a 24-hour notice to the employer before visiting (Phillips, 2015). Sometimes, the employer can challenge their visit in the FW Commission. With the 24-hour’s notice, the employer can get an opportunity to hide the incriminating evidence.
Similarly, the union officials rarely have the right to check employment records. The employer can insist that such meetings be held in an appropriate environment thus discourage workers from meeting their representatives. Many employers also use plethora tactics to overcome the collective bargaining (Cox, 2016). These employers know that without the collective bargaining agreement, the union can rarely challenge the employer using the enforceable dispute resolution mechanisms. With the fear of insecurity of migrant workers, the hurdle to engage them becomes difficult. Currently, the FWA has granted employers the least help. For instance, this law completely restricts union activities (Phillips, 2015). The abuse and exploitation of visa-holders offer the unions an opportunity to consider this new group of workers. The precariat or insecure workers need protection from their bosses.
Since the 2000s, the country has experienced a steady growth of short contracts, casualization, labor hires and independent contracting. The labor unions have remained adamant to represent these insecure workers. Most unions are concentrating on protecting their bases of an island of privilege instead of the insecure workforce (Sivaraman, 2016). Despite the continued efforts to restore the role of labor unions in the workplace, the union movements have engaged in corruption scandals, leadership tussles, and witch-hunt over trade union royalties (Cox, 2016). These practices have tainted the reputation of trade unions. The Australian government must recognize the significance of insecure workers by protecting their workplace rights. It thus must allocate sufficient resources to support the operations of the Fair Work Ombudsman. It should further use the senate to adopt stringent regulations and laws to protect workers against employers’ blackmail (Cox, 2016).
The payroll noncompliance presents long-term implications to the organization as demonstrated below.
The noncompliance with payroll regulations damages franchise brand thus imposes a harmful long-term effect. In most cases, many stakeholders believe that payroll noncompliance destroys the brand of an organization. The negative brand effect would make it difficult for a franchise to attract quality talents. For instance, the employees are unwilling to work for franchises, which exploit them and underpay. The perception of the community about such organizations remains negative (Phillips, 2015). To this effect, the firm’s performance and recruitment strategies will suffer. Everyone will view the company negatively thus makes it impossible for it to expand its market share and attract new customers and employees.
Payroll noncompliance exposes an organization to financial risks, especially when the employees are dissatisfied. The knock-on effect of employee dissatisfaction remains incomparable. For instance, the affected workers would be demotivated, disengaged, and they would give substandard customer services. The noncompliance can also expose the firm to back payments and significance fines. For instance, 7-Eleven was fined millions of dollars for underpayments thus made it suffer the financial risks (Phillips, 2015). Therefore, the company found itself in a difficult situation because it had to look for money to pay the workers leading to potential losses. The franchisors, which fail to comply with payroll regulations, make their brands unattractive to various franchisees. The overall effect is evident in the losses of the business.
The Fair Work Act of 2009 protects the interests of individuals in low-wage industries. Under this Act, the managers are expected to treat their workers fairly including shaping their working conditions (Hardy). This law was enacted to protect workers by providing remedy regimes. The FWO has used this law to hold managers and directors of companies accountable for contravening the federal workplace laws. The Fair Work Bill 2017 introduces new provisions that protect the workers against exploitation (Disclaimer, 2017). In the new provisions, the employee, the FWO, or union can bring a holding company or franchisor to the Federal Circuit Court or the Federal Court for breaching the employment agreement. According to this provision, the court can impose a maximum penalty worth 300 and 60 penalty units for bodies corporate and individual respectively (ACCI, 2015). This implies that a holding company or franchisor is liable for contravening any prescribed provisions.
The Fair Work Amendment Bill 2017 protects the vulnerable workers. Under the proposed law, the liability is extended to the individuals engaged in the franchisees’ affairs. In subsection 558(1) of the bill, the franchisor entities are liable for contravening the FWA, especially where the entities are aware of the contraventions (Disclaimer, 2017). For instance, if the franchisor is aware of alleged underpayment or systematic noncompliance, the firm will be liable for denying its workers their entitlement as provided for under the FWA (ACCI, 2015). The Australian Chamber of Commerce has made its position known regarding the underpayment practices. The Chamber condemns such practices by franchisors or franchisees because they defy the immigration law and legal obligations deliberately (Disclaimer, 2017). According to the Australian Chamber, the exploitation of vulnerable employees attracts legal liability. In fact, the FWO has taken to court about 42 percent of the visa-holder vulnerability cases, where the body sought damages and compensations for the underpaid workers (ACCI, 2015). The FW Act offers an opportunity for the vulnerable workers to get justice. Anybody or the organization contravening the Act can be held responsible as provided for under the FW Act section 550.
Conclusion
7-Eleven workers have experienced serious abuse and exploitation from their employer. Based on this article, it is evident that the employer underpaid them, encouraged them to breach their visa conditions, and falsify records. The Fair Work Ombudsman inquiry found that these serious allegations were factual. Apparently, the FWO is under-resourced to act in such cases and protect the rights of insecure workers. The union movements have also failed in their responsibility to protect the interests and workplace rights of members. In fact, the government has undermined the role of unions in Australia thus allowing employers to abuse and exploit workers. Although the FWO demonstrated the reasons to conduct the inquiry into the 7-Eleven issues, the FWA has denied the commission the power to enforce the industrial relations regulations. It thus depends on the courts to stamp its authority.
ACCI. (2015, November 27). Victoria Inquiry into the Labour Hire Industry and Insecure Work. Retrieved August 31, 2017, from https://economicdevelopment.vic.gov.au/__data/assets/pdf_file/0018/1311363/Submission-ACCI.pdf
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Disclaimer. (2017, May 25). Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 Explanatory Memorandum. Retrieved September 1, 2017, from Commonwealth of Australia Explanatory Memoranda: https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/bill_em/fwavwb2017525/memo_0.html
Ferguson, A. (2017, February 12). 7-Eleven Inquiry a Chance to Fix Whistleblower Protection. Retrieved August 31, 2017, from Financial Review: https://www.afr.com/business/legal/7eleven-inquiry-a-chance-to-fix-whistleblower-protection-20170212-guax8z
Ferguson, A., & Danckert, S. (2016, April 9). 7-Eleven: Fair Work Ombudsman Says Admit Exploitation Complicity. Retrieved August 30, 2017, from The Sydney Morning Herald: https://www.smh.com.au/business/workplace-relations/fair-work-ombudsman-calls-on-7eleven-to-admit-exploitation-comp
FWO. (2016, April 9). Statement on 7-Eleven. Retrieved August 30, 2017, from Australian Government: https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/april-2016/20160409-7-eleven-presser
Habbit, C. (2016, April 13). FWO: 7-Eleven Could Have Acted Earlier and Done More . Retrieved August 29, 2017, from Convenience Impulse Retailing: https://c-store.com.au/2016/04/13/fwo-7-eleven-could-have-acted-earlier-and-done-more/
Hardy, T. (n.d.). Who Should be Held Liable for Workplace Contraventions and on What Basis. Retrieved August 30, 2017, from Research Gate: https://www.researchgate.net/profile/Tess_Hardy/publication/303699676_Who_Should_Be_Held_Liable_for_Workplace_Contraventions_and_On_What_Basis/links/58e44
James, N. (2016 , April 9). Statement on 7-Eleven. Retrieved August 9, 2017, from Fair Work Imbudsman: https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/april-2016/20160409-7-eleven-presser
Lannin, S. (2016, December 7). 7-Eleven and Fair Work Sign Deal to combat Exploitation Using Biometrics, CCTV. Retrieved August 28, 2017, from ABC News: https://www.abc.net.au/news/2016-12-07/7-eleven-and-fairwork-sign-deal-to-combat-exploitation/8099538
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Thomsen, S. (2016, May 12). The Inquiry for 7-Eleven’s Underpaid Workers Just Imploded, and Allan Fels has Gone Ballistic . Retrieved August 30, 2017, from Business Insider: https://www.businessinsider.com.au/the-compensation-panel-for-7-elevens-underpaid-workers-just-imploded-and-allan-
Woodley, N. (2016, February 5). 7-Eleven Workers Physically Intimidated and Beaten, Senate Inquiry Hears . Retrieved August 31, 2017, from ABC News: https://www.abc.net.au/news/2016-02-05/7-eleven-workers-physically-intimidated-and-beaten/7144460?pfmredir=sm
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