Editorial Task: Australian Financial Review Essay

Question:

Discuss about the Editorial Task for Australian Financial Review.

Answer:

Eleven Head Office Involved in Wage Fraud Cover-up

7-Eleven, the largest convenience store chain of Australia, is now presenting itself as one of the biggest and worst cases of systematic wage abuse in the history of a corporate world, tweeted Adele Ferguson (www.afr.com, 2017). The only disturbing factor concerning the franchise chain is nothing, but the exploitation of workers that has been going for many years under everyone’s nose, said Wolter Peeters. However, Rod Clement has given clear explanation of the situation, Stating in this way. “At this franchise chain, wage abuse would stand for about $ 10 million per year, but more specifically in the case of 7-Eleven most of the workers are students on visas and they are in thousands (Lim, Chae & Jeon, 2014). These students are only allowed to work 20 hours a week, according to the visa condition and this make them more vulnerable to wage abuse.”

In the light of this situation, the fair work ombudsman has conducted three different raids and found in the past six years that the situation is getting worse and the students are still facing wage fraud, getting under payment wage (Sivaraman & Turner, 2016). However, in September 2014, it has been found that around 60% of the 20 7-Eleven stores had a payroll issues, which is double the records of 2011 issues. Contributing to this context, Senator Deborah O’Neill at a Senate hearing made a clear statement that apart from conducting raids, there are more to be done, including reviewing of the regulatory structure and beefing up the chain’s power since the fair work and its effectiveness are under inspection on the account of wage abuse especially for workers on student visas (Smith, 2015). In addition to these, Fairfax Media and Four Corners had made a joint investigation on wage fraud practiced by around two-third of the chain stores and found that payroll of each month address massive payroll problems (Tonts, Plummer & Argent, 2014).

The joint media, based on its investigation had described the underpayment, falsification. They explained that after reviewing 83 stores between 13 October 2014 and 9 November 2014, and found around 47 stores had a payroll compliance issues, including falsification of payroll sheets and underpayment of wages. Moreover, the review between April 6 and May 3, around 55% of 97 stores shows payroll compliance issue (Fraser, 2016). With such disappointing practice of franchise stores, 7-Eleven expressed in a statement, stating that “our franchise stores are not worthy of meeting their obligation, which is extremely disappointing for us and we are not going to entertain such action, instead we will take appropriate steps against it”.

7-Eleven promised that they will make their franchise stores pay back the full wage if they are found not paying proper wages, but if still the stores do not follow the instruction, the head office will slap them with a breach notice in more egregious cases (Schaper, 2015). However, Australian Taxation Office reviewed that 7-Eleven has generated EBIT of $ 143 million in 2015 and accounted for the largest company by earnings than any other companies in Australia on ASX.

Some franchise stores on the other hand in their favour commented that “would it be right for us to pay correct wages, even though we are not making enough earnings to at least pay to the head office”. However, the fair work ombudsman extremely condemned this excuse, claiming that some business make such excuses rashly without knowing proper employment system (Brittingham, 2014). Further he also explained that it is very important to bring shadowy aspect of labour market into the light, before the control of the regulators and politicians go out of our hand.

Editorial 2: The Australian Newspaper

Dated: 02-09-2015

Article: The buck stops with us: 7-Eleven

The article in “The Australian” has shown different perspective of the 7-Eleven case. Russ Withers, the chairman of 7-Eleven commented that “the bottom line is, we are responsible for whatever had happened, it happened on our watch”. The chairman of the convenience store chain explained the situation with disappointment, where according to him, significant underpayment of wage practice and payroll issue practice were conducted under the watch of management and head office (www.theaustralian.com.au, 2017). However, Russ made a promise to the head office on behalf of all the franchise store chain to its head office, that the franchise store chain is ready to pay any underpaid wages balance. Mr Russ, however, made this comment under the wake of Fairfax and Four Corners media report, where it is specifically mentioned, “majority of the store chain business are still underpaying wages to the workers.”

Mr Russ Withers presented his view of the issue, by saying that “it is quite easy for us to blame the franchisees for their responsibility of recruiting employees or workers (Lim, Chae & Jeon, 2014). Hence, it is no good to say that it is solely the problem of franchisee and not mine”. However, the bottom line is we are responsible for whatever had happened, it happened on our watch. In fact, the former chairman Alan Fels, with his view to the company’s franchise model, tweeted that “we had started with zero and now operating as 620 stores in Australia for 38 years and we still believe the underpayment of wages to the workers is relatively small”. Hence, whatever the majority of franchisees are doing, they are doing the right thing, at least according to me (Manton, 2014). In this context, Mr Russ also said, “this is embarrassing for us, that even though the franchisee stores are involved in such practice and the head office also aware of it, still the head office is not trying to make any mass cover-up yet”. In this aspect as well, the joint media, based on its investigation had described the underpayment, falsification (www.afr.com, 2017). They explained that after reviewing 83 stores between 13 October 2014 and 9 November 2014, and found around 47 stores had a payroll compliance issues, including falsification of payroll sheets and underpayment of wages (Kavanagh & McRae, 2017). The fair work ombudsman also forced one owner of store in Melbourne to deliberately admit the short-changing their staff by $10,000 and doctoring employment records to cut costs.

However, based on the investigation by Australian Taxation Office, the ATO members reviewed that 7-Eleven has generated EBIT of $ 143 million in 2015 and accounted for the largest company by earnings than any other companies in Australia on ASX (Tonts, Plummer & Argent, 2014). Thus, in both the articles the articles, it has been found that it is very important to bring shadowy aspect of labour market into the light, before the control of the regulators and politicians go out of our hand. Moreover, Mr Russ Withers, the chairman of 7-Eleven commented that “the bottom line is, we are responsible for whatever had happened, it happened on our watch” (Sivaraman & Turner, 2016). In addition to these, he also made a promise to the head office on behalf of all the franchise store chain to its head office, that the franchise store chain is ready to pay any underpaid wages balance (Li & Whitworth, 2016).

References

7-Eleven: Wage abuse claims puts scrutiny on Fair Work response. (2017). Financial Review. Retrieved on 16 May 2017, from

Baxendale, R., & Baxendale, R. (2017). The buck stops with us: 7-Eleven. Theaustralian.com.au. Retrieved 16 May 2017, from

Brittingham, M. (2014). History of the WET and the WET producer rebate. Wine & Viticulture Journal, 29(1), 66.

Fraser, M. (2016). Investigating 7-Eleven: Who are the real bad guys?. Griffith Journal of Law & Human Dignity, 4(2).

Kavanagh, M., & McRae, E. (2017). Employment law: Protecting vulnerable workers amendment to fair work act. Governance Directions, 69(4), 241.

Li, Y. T., & Whitworth, K. (2016). When the State Becomes Part of the Exploitation: Migrants’ Agency within the Institutional Constraints in Australia. International Migration, 54(6), 138-150.

Lim, S., Chae, H., & Jeon, H. (2014). The Effect of Experience Marketing on Brand Attitude and Brand Loyalty of Beauty Salon Franchise Stores. Fashion business, 18(5), 42-55.

Manton, E. (2014). The diverse drivers of relative changes in excise taxes on beer and spirits in Australia, 1902–2012. Drugs: education, prevention and policy, 21(3), 197-204.

Schaper, M. T. (2015). Invited policy paper: Competing in the online marketplace: Contemporary issues for SMEs and their regulators. Small Enterprise Research, 22(1), 69-78.

Sivaraman, G., & Turner, P. (2016). The 7-Eleven wages scandal: The need for law reform. Precedent (Sydney, NSW), (135), 53.

Smith, K. (2015). Unite calls for amnesty for 7-Eleven workers. Green Left Weekly, (1069), 3.

Tonts, M., Plummer, P., & Argent, N. (2014). Path dependence, resilience and the evolution of new rural economies: Perspectives from rural Western Australia. Journal of Rural Studies, 36, 362-375.

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