7-Eleven Inquiry: Largest Convenience And Petrol Retailers Essay

Question:

Discuss about the 7-Eleven Inquiry for Largest Convenience and Petrol Retailers.

Answer:

Introduction

7-Eleven is considered to be the largest convenience and petrol retailers in Australia. Fair Work Authorities of Australia was receiving regular reports on various inaccuracies in the employee wages records and actual payment since 2008. A number of inquiries took place and on various points 7-Eleven authorities were punished for various employees and wages related offense. April 2016, a report was submitted to Fair Work authorities who reflected that again underpayment of wages to employees and falsification of employment records were happening in Australia’s largest convenience retailers (Gollan, 2009). The inquiry disclosed that 7-Eleven is deliberately manipulating the records to cover the underpayment of wages and at a concerning level disobeying the rules of the Fair Work Act 2009 and Fair Work Regulations 2009. The report also examines the reason for such behavior and non-compliance of the franchisee of 7-Eleven model with Fair Work Act 2009. Few recommendations were made by the report to improve the working of the 7-Eleven regarding providing benefits and rights to the employees which they all were liable of (Bussell & Farrow, 2011).

Fair Work Act has called the management of the giant convenience store 7-Eleven to submit the business model that the company is following that helps in encouraging wage fraud and illegal work conditions in the franchise network across the world. As per the report, FWO states that 7-Eleven has intentionally mixed the issue of wage fraud in its franchise network by failing in using the systems and methods to find out the deliberate worker exploitation happening across the franchise network. After the report had got published, FWO concluded and asked 7-Eleven to enter into an obedience or compliance agreement. As per the report of FWO, it is being identified that workers have accepted the underpay culture of the company and therefore they work for lower wages and unlawful work conditions (James, 2016). FWO planned and taken numerous steps to stop this theory of accepting the things as they are. But this proved to be a challenging situation for FWO. Most of the franchisers of 7-Eleven were either new or recent migrants, and they were not aware of the industrial laws need to be followed by them in Australia. This created a lot of fraudulent practices regarding wages and worked hours of employees to gear up. It was expected from 7-Eleven that proper guidance would be provided to the franchisees by the employment system of Australia, but nothing of that sought happened. FWO could not take any step against the franchisee and the company because the franchisee does not come under the jurisdiction of FWO; it comes under the franchising code of conduct that is a part of Australian Competition and Consumer Commission. Still, FWO was working on the employee rights of 7-Eleven (Colvin, 2014).

In the last eight years FWO has conducted numerous raids and audits that have shown serious wage frauds and compliance issues. The report clearly states that many franchise stores of 7-Eleven has intentionally engaged themselves in paying their employees less wages and making them work for longer hours. They have not maintained proper records of the employees and their working hours and the payment made to them for their work. 7-Eleven generally hire visa-holder students who want money but are not permitted to work full-time. They get ready to work for just 10-12 $ per hour, whereas, Australia employment system has clearly stated the minimum hour wages to be paid to employees. FWO has clear proofs regarding the issues of wage frauds happening, but serious steps were not taken by FWO to control these issues. FWO has just sent some notices to the company and also given suggestions to it, but strict actions were not a part of it. FWO doesn’t have the authority to punish the franchisee stores those were found using fraudulent practices (Massey, 2015). All these years 7-Eleven has a reasonable basis to inquire about the frauds that were brought into light by the audits and raids of FWO. Still, FWO has not taken any responsible steps to solve these issues. 7-Eleven always said that they want to enter into the compliance with FWO, but every time they come up with different points that they want to negotiate with the FWO. Thus, they never actually followed the suggestions and recommendations made by the FWO. Whenever FWO inquired about the progress made by the 7-Eleven they were always told that the management of 7-Eleven would make sure that all the employees receive their wages they are entitled to. FWO has also stated that though 7-Eleven welcomed the changes in the business model and payroll system but these changes could have been brought earlier by the company. FWO has been sending the inquiry reports to the management of 7-Eleven, but they have shown a lack of commitment to introduce any big changes in its wage system or in the process of reviewing the stores and its working. These inquiry reports included the details on the fraudulent practices happening in the franchise stores across the network. FWO has audited around 55 stores out of which more than thirty percent of stores were following fraudulent practices in their wage system and records of employees. FWO initiated a program for the franchisors and franchisees to assist them in compliance issues in their business, which was declined by 7-Eleven (Cox, 2016).

The management of the 7-Eleven is being said that they have brought in a special investigation team that monitors the issues related to wages and records of employees, and also the biometric system will be introduced in the stores from mid 2016 as suggested by the FWO. This shows that 7-Eleven has accepted the fact that there are a lot of problems with the business model it is following. It accepts the responsibility of eliminating the unethical practices from its business (Perez, 2015). Though 7-Eleven says that it cannot cancel the franchisee for wage fraud due to the franchise contract which FWO contradict, as according to them 7-Eleven has full right to cancel the contract of fraudulent franchiser but it is not taking the steps to do that. FWO’s report specifies the weak position of FWO in comparison with other regulating laws and policies developed and regulating in Australia (Nadasen, 2012). FWO doesn’t have enough power that it can compel the employers and witnesses to be present in an interview that is needed to be taken to get a clear picture of the inquiry conducted on the issue. This report also pressurizes the government of Australia to consider the current laws and system of industrial relation and check whether the penalties for the fraudulent practices are strong enough to punish the culprits. If these penalties were strong enough then more than thirty percent of 7-Eleven franchisers would not have been indulged into fraudulent practises of wage fraud and manipulation of employee’s work records (Weiping Chen, 2011). There are many gaps in the system of industrial relations due to which 7-Eleven fraud took place. Mainly FWO doesn’t have enough power to deal seriously with the people who were going against the industrial law and not giving the required benefits to its employees that they were liable to. Lack of decision-making power is also a reason that gave 7-Eleven a chance to practice the frauds for such a long time. Even after the inquiry, audits and raids Fair Work Act were not able to decide the action that needs to be taken against the illegal practices practiced by the 7-Eleven (Nunweek, 2015). It was the government department’s mistake that gave power to such companies to misuse their power and exploit the employees and their rights. Recommendations were given to 7-Eleven by the FWO like setting up of a reserve fund that guarantees to repay workers if in case the franchisee fails to solve the wage discontinuity, running a fully fledged CCTV system in all the 7-Eleven franchises across the network, using biometric time recording system to record employee’s entry and exit, and inclusion of employee’s photographic identification. These recommendations were made by FWO to bring sustainability in the culture of compliance in the franchise network and to make sure that all the records are kept properly. All the recommendations made by FWO that guarantees the removal of fraudulent practices in the session (Creighton, 2011).

FWO has recommended few solutions to 7-Eleven that will help the employees to get their rights and benefits in future. FWO has suggested 7-Eleven to set up a guaranteed fund that will help to repay the employee’s in-case the franchisee fails to way its employees the negotiated wages. This way none of the employees will be exploited and will be paid for the work they did for the company. Secondly, FWO suggests that 7-Eleven franchisees should enter into a compliance partnership with Fair Work Act, which would help the company in understanding a better way to deal with their employees and also information about the rights and benefits that an employee should give to his employees (O’Neill, 2015). A biometric system needs to be installed in all the franchisees to keep the data of the working hours of the employees. A biometric system is a reliable method that will help the company to protect the employee’s data to get manipulated by the franchisers. 7-Eleven do audits of their franchisee which was not recommended by assessing the current situations of the franchisee network. FWO recommended engaging external auditing party that may conduct the annual audits of all the franchisees to get the correct picture of the actual accounts of each franchisee (el-Ojeili, 2009). This fraudulent practice taken up by the franchisers has left a very negative impact on the image of 7-Eleven. Therefore, FWO suggested to publicly accepting the responsibilities of their moral and ethics towards their staff. This will help in improving the image of the company in the market. If 7-Eleven develop their business model according to the recommendations made to it than all the complaints of employees regarding exploitation will come to an end (Dorsett & Lafferty, 2010).

Conclusion

This is the fact that the network of franchisee of 7-Eleven has been found guilty of exploiting their employees, and lot of improvement is required in the business model of 7-Eleven to help the employees to get their rights and benefits and also bound the franchisers, so that they also do not attempt any other fraudulent practices in the franchisee. For this FWO has been doing regular audits and inquiries to get the clear picture of the current situation of the working of the franchisees of 7-Eleven, but no effective actions were taken to stop these practices in last eight years. It is very important that effective and strong steps should be taken against the franchiser who tries to manipulate the employee’s records and so not pay them their actual wages set up by Australian Law. FWO do not have sufficient power so that it can punish the wrong doings which are a huge drawback in the industrial system of Australia. This gives the culprits a confidence to continue their wrong doings. 7-Eleven has promised that from now on their will no such fraudulent practices will occur in their franchisee, but this kind of promises has been made before also. So it becomes the Government duty to confirm that the company is actually following the rules set by the government to protect the rights of workers. Then only franchisers and management of 7Eleven will take the report of FWO seriously and follow rules of the government.

References

Bussell, S. & Farrow, J. (2011). Practitioner Review: Continuity and Change: The Fair Work Act in Aviation. Journal Of Industrial Relations, 53(3), 392-401.

Colvin, A. (2014). Book Review: Rediscovering Collective Bargaining: Australia's Fair Work Act in International Perspective. ILR Review, 67(1), 274-276.

Cox, D. (2016). 7-Eleven cash-back scheme 'still alive and kicking', union claims. ABC News. Retrieved 5 September 2016,

Creighton, B. (2011). A Retreat from Individualism? The Fair Work Act 2009 and the Re-collectivisation of Australian Labour Law. Industrial Law Journal, 40(2), 116-145.

Dorsett, S. & Lafferty, G. (2010). Good Faith and the Fair Work Act : Its Potential, in Light of the New Zealand Experience. The Economic And Labour Relations Review, 21(1), 53-67.

el-Ojeili, C. (2009). Reviews: Milan Zafirovski, Liberal Modernity and its Adversaries: Freedom, Liberalism and Anti-Liberalism in the 21st Century (Brill, 2007). Thesis Eleven, 97(1), 134-136.

Gollan, P. (2009). Australian industrial relations reform in perspective: Beyond Work Choices and future prospects under the Fair Work Act 2009. Asia Pacific Journal Of Human Resources, 47(3), 260-269.

James, N. (2016). Welcome to the Fair Work Ombudsman website. Fair Work Ombudsman. Retrieved 5 September 2016,

Massey, D. (2015). The Legacy of the 1968 Fair Housing Act. Sociol Forum, 30, 571-588.

Nadasen, P. (2012). Citizenship Rights, Domestic Work, and the Fair Labor Standards Act. J. Policy Hist., 24(01), 74-94.

Nunweek, J. (2015). Lessons from 7-Eleven’s scam. Overland literary journal. Retrieved 5 September 2016,

O’Neill, D. (2015). Divided opinion on the Fair Minimum Wage Act of 2013: Random or systematic differences?. Economics Letters, 136, 175-178.

Perez, T. (2015). The Fair Labor Standards Act: A Living Document. Industrial Relations: A Journal Of Economy And Society, 54(4), 529-532.

Weiping Chen,. (2011). Franchisee perceived relationship value and loyalty in a franchising context: assessing the mediating role of franchisee satisfaction and the moderating role of franchisee characteristics. Afr. J. Bus. Manage., 5(28).

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