7-Eleven half pay scam laid bare

7-elevenBy Anthony Main, UNITE Secretary

In late August a joint Fairfax and Four Corners investigation shone a spotlight on one of Australia’s biggest corporate scandals. The convenience store giant 7-Eleven was exposed for being complicit in wage theft worth tens of millions of dollars.

The rort commonly known as the ‘half pay’ scam was first exposed by UNITE, the fighting union for fast food and retail workers in Victoria, back in 2008. At that time UNITE was approached by a group of 7-Eleven workers from Geelong. They complained that the franchisee they worked for was manipulating wage records and underpaying them by half.

When UNITE investigated the complaints it became apparent that this was no isolated incident. Visits to stores across Melbourne and Geelong showed that not one franchisee was adhering to the law. While details varied store to store the common theme was that all franchisees were sending false information to 7-Eleven head office who were responsible for the central payroll system.

Franchise owners were able to fob off complaints about underpayments due to the fact that they almost exclusively hired international students. These students were desperate to work and had restrictions on their visas meaning they could not work more than 20 hours a week.

The low pay they were offered up front compelled them to work more than 20 hours in order to make ends meet. The franchisee would tell them that if they complained they would be reported to the immigration authorities and deported. Hence the whole swindle was kept in place by means of coercion and intimidation.

UNITE organised a series of protests and pickets at 7-Eleven stores in 2008 and 2009 and recruited the group of Geelong workers to the union. Negotiations with the franchise owner saw the workers put on secure hours and Award wages resulting in an initial 55% pay increase. At the same time discussions ensued about the amount of back pay owed.

When other 7-Eleven workers heard about the progress being made they too wanted to join the campaign. Worried that UNITE’s influence could spread rapidly, 7-Eleven head office decided to intervene. They removed the franchise owner at the first unionised store in Geelong and the UNITE members were sacked before any agreements on back pay could be reached.

UNITE attempted to pursue the money owed but were stonewalled by company lawyers. With the franchisee refusing to pay up the union organised for a joint claim for back pay to be made via the Fair Work Ombudsman. As part of the process the Fair Work Ombudsman agreed on a sort of amnesty for the workers whereby no information about their visa breaches would be passed on to the Immigration department.

Protests against 7-Eleven continued and this put pressure on the Fair Work Ombudsman to pursue legal action against the Geelong franchisee. That action was eventually successful in the sense that the courts found the franchisee guilty of underpaying staff and issued fines of $150,000. Unfortunately the franchisee claimed he was broke and wound up the company. The workers were never paid the money that was stolen from them.

During this time UNITE’s campaigning led to the Fair Work Ombudsman auditing dozens of 7-Eleven stores across the country. While they found hundreds of thousands of dollars in underpayments UNITE explained that this was just the tip of the iceberg.

In a face to face meeting UNITE organisers told Fair Work Ombudsman officials that a simple audit of the books would not show up the full extent of the underpayments taking place. It was recommended that a comparison be done between the time and wages records and the cash register reconciliation forms. In most stores the employees log in and out of the cash register and a comparison with time sheets would show that people were not being paid for all the hours they worked.

Similar requests for an audit were made in a face to face meeting with the then 7-Eleven Chief Financial Officer, David Ginsberg. Again despite knowing full well about the scam head office refused to act.

That 7-Eleven head office did not take the matters seriously is unsurprising. The owners of the company have made hundreds of millions of dollars in profits over the years and much of it can be attributed to the unique franchise model that they have in place which institutionalised the super-exploitation of migrant workers.

The Fair Work Ombudsman in recent weeks has acted as if they did everything possible to stop the rort. Nothing could be further from the truth. They knew what the issues were, and where to look to find the true extent of the rip off. They decided not to intervene and as a result they along with 7-Eleven head office should be held to account.

That the full extent of 7=Eleven’s dodgy practices have come to light now is to be welcomed. Undoubtedly the fact that a law firm has seen scope to launch a class action which holds head office responsible for the underpayment of wages has helped to push things along.

In response to the damning publicity they have received 7-Eleven has gone to panic stations. With the Fair Work Ombudsman launching a new investigation into the company 7-Eleven have agreed to an internal audit led by former head of the Australian Competition and Consumer Commission, Allan Fels.

Already they have agreed to buy out any stores that want to cancel their franchise agreements and to extend income support to smaller stores. Head office has indicated that they will also fast track back pay owed to workers, and despite for years claiming it is the franchisees that are responsible for wages it seems that they are now open to covering the bill. Most likely this is an attempt to head off the legal action planned but it may be too little too late.

Nationally 7-Eleven has around 4000 workers and despite being in operation since 1977 the main union that represents retail workers, the Shop, Distributive and Allied Employees Association (SDA), has never made any attempts to organise the shops. It was for that reason that UNITE, a much smaller organisation, was forced to get involved.

With next to no resources UNITE managed to lift the lid on the 7-Eleven scam and help to recover several hundred thousand dollars in stolen wages. With more support from the broader trade union movement much more could have been done to stop this theft of workers’ wages. While the media coverage is important the long term solution to dealing with wage theft is to organise workers into fighting trade unions.

The tame cat model of unionism that the SDA offers is utterly incapable of solving the problem. This is highlighted by the fact that the Labor Party, which they are affiliated to, supports the 20 hour work restriction on student visas. It is precisely this restriction that has given greedy employers like 7-Eleven the tool they needed to profiteer at the expense of vulnerable migrant workers.

UNITE will continue to campaign against the super-exploitation of workers and for a brand of combative trade unionism that can reverse the trend towards wealth inequality in Australia. We urge all those who want to see an end to scams like the one perpetrated by 7-Eleven to join us in the fight.