7-Eleven Scandal

Background • The first choice of Australia in convenience is 7-

ElevenStores Pvt. Ltd.
Information of the • It is a private company, the ownership of which is in
Company the hands of the Withers and Barlow family.

• The company possesses the license for operating the

franchise stores in Australia which has been provided
to it by 7-Eleven Inc. which is US based.

• The first store in Australia was opened in 1977. At

present the company is operating over 615 stores in
New South Wales, Australian Capital Territory,
Queensland, Victoria and also in Western Australia.

• Through its elaborate network of stores, the company

has been conducting over 185 million transactions in
a year. It serves an average of six customers in one
second and generates a sales of nearly $3.6 billion.
• The company operates approximately 55.000 stores in
10 nations (7-Eleven, 2016).
 How the 7-Eleven Scandal Unravelled
• The wage fraud scandal of 7-Eleven was exposed by Fairfax Media and
Four Corners in a joint media investigation in August, 2015.
• It reported systematic wage abuse along with falsification of payroll
records throughout the network of 620 stores. 138 out of 620 stores
were reported to have made $300,000 or lesser income during 2015 that
was not sufficient for paying full freight wages and also other costs. As
per a head office insider this fraud was rampant and the senior
management attempted to cover it up.
• FWO called &-Eleven to admit that the business model contributed to an
environment which provided encouragement to wage frauds along with
illegal conditions of working throughout the franchise network. The
problem was compounded by 7-Eleven as it failed to use processes and
systems for detecting or addressing deliberate exploitation of the
workers (Ferguson & Danckert, 2016).
 Facts Related to the 7-Eleven Case
• The largest convenience store chain of Australia, 7-Eleven has been under fire for
paying most of its staff wages as less as $10 for an hour before tax. The own figures
of the company indicate that almost two-thirds of the stores of the company have
been ripping off the workers.

• At times the workers were made to work continuously for nearly 16 hours without a
proper break. The rate of $10/hour is far below the award rate which is supposed to
be over $24 per hour. This rate does not consist of the penalty rates for working on
public holidays, weekends and nights.

• The employees were mostly international students whose visa conditions did not
allow them to work for more than 20 hours in a week. However, they were working
a longer hour which was a breach of their visa conditions. This provided the
franchisees with the leverage of threatening to go to the authorities for getting their
visas cancelled in case they made any complaints related to their working conditions
or their salary.
Facts Related to the 7-Eleven Case
• The employees were mostly international students whose visa conditions did
not allow them to work for more than 20 hours in a week. However, they were
working a longer hour which was a breach of their visa conditions. This
provided the franchisees with the leverage of threatening to go to the
authorities for getting their visas cancelled in case they made any complaints
related to their working conditions or their salary.
• The illegal activities of the franchisees of 7-Eleven extended far beyond the
wage frauds and also included blackmail along with withholding the drivers
licenses and passports of the staff.
• The documents which were reviewed as a result of joint investigation indicated
that the franchisees continued flouting the law and also to underpay their
employees even though they had been caught by Fair Work Ombudsman
(FWO).
• A full scale investigation has been launched by FWO into the “wage scandal”
across the network of stores belonging to 7-Eleven (Ferguson et al., 2015).
 District Managers who now own stores
• District managers were allegedly complicit in the
Who All Were scandal and it appears that they now own the
Involved? franchisees of 7-Eleven. Thus, it is possible that they
had a role in underpaying their own workers.

Franchisees who are now preparing to avoid claim

payments
• The franchisees who are now attempting to hide their
activities from the Head Office of 7-Eleven and plan to
empty out the money along with folding the company
when recovery of claim money is sort by 7-Eleven.

Franchisees who made the underpayment to the workers

in order to survive

Employees of the Head Office

• The company’s district managers, regional managers
and senior management who had awareness related
to the exploitation of the workers and illegal wages
being paid to them. However, they turned a blind eye
to it and are still working for the company (Fraser,
2016).
 • Fairfax Media and the ABC's Four
Ongoing Corners program carried
Investigations investigations and reported on the
employment practices of some of the
7-Eleven franchisees in Australia.
• The legal minimum wage in Australia
is $24.69. However, several 7-11
employees were paid half that
amount or lesser.
• Initially they reported that they were
paying employees the “legal
minimum wage”, but then reported
that the employees were paid for half
the hours that they actually worked.
 Timeline of Events
1 Aug 2015 – Start of Investigations into the wages of the employees
• Fairfax Media and the ABC's Four Corners program reported on the employment practices of
certain 7-Eleven franchisees in Australia.
15 Sep 2015 - More Scandals come to light
• The managers started paying correct wages to the employees but they also asked employees to pay
half of the pages earned by them back in cash to the managers. In case they refused they will not
only lose their jobs but also deported.
18 Sep 2015 – Investigations of the Accusations
• Announcement by 7-11 that it would investigate the wage fraud accusations and hired Deloitte for
assisting in investigation audit.
30 Sep 2015 - Resignations
• The Australian founder as well as chairman, Russ Withers of 7-11 stores resigned. Chief executive
Warren Wilmot also resigned.
5 Feb 2016 - Forced to return wages
• The “Fels wage fairness panel” which conducted the investigations reported to the “Senate
Employment Committee” that as per 188 determinations made by it, 7-Eleven was liable to make a
payment of $4.36 million to workers. It revealed that workers were underpaid an average of
$23,000 each.
Is the Case a
Violation of
Human Dignity?
•The case is definitely a violation of
human dignity as most of the staff
comprised international students. As
per their visa conditions they could
work for only 20 hours in a week.
•They were blackmailed by the
franchisees that if they lodged
complaints for being paid low wages
to Fair Work Australia, they would be
handed over to the authorities for
breaking the regulations related to
visa and would face deportation
risks.
•Thus, the vulnerability of the
students was taken advantage of
(Ryan, 2016).
 • A company in Australia working on
Social Catholic Social Catholic Training is Anti-Slavery
Training Australia. It has shown commitment to
engage a broad audience for activities
that are aimed towards ending
injustice, exploitation and violence.
They closely work with a network of
groups and people and comprises many
community and non-government
organisations. Agencies and
departments of the government,
organisations which are faith based,
law firms, academics, etc. (Anti-Slavery
Australia, 2016). It can assist the
workers of 7-Eleven in fighting against
their exploitation and injustice.
 Critical Evaluation
Several factors were responsible for the widespread misconduct in
the store network of 7-Eleven. These consisted of -
• Lack of meaningful compliance for monitoring or auditing
franchisees’ stores by the 7-Eleven franchisor
• Poor handling of employee complaints by 7-Eleven. This included
requirement of employees to be identified to the relevant
franchisee prior to the investigation of their complaint
• The demographics of the employees of 7-Eleven, most of whom
were international students who worked on student visas and
were reluctant in reporting misconduct by their employers, and in
certain cases, had been threatened by their employers against
complaining to FWO.
 Critique of the Company
• The company's head office has been accused of  having knowledge regarding the issue for years and
adopting a "deny, deny, deny“ motto.
• In a submission to the Senate inquiry, advocate Michael Fraser had mentioned that he first alerted the head
office of 7-Eleven regarding wage fraud in December 2012 and awareness must have existed at the highest
levels.
• Something so widespread which was existing for decades, was not possible without the support of head
office (Ferguson & Danckert, 2016).
• Everybody working possesses the right to remuneration which is favourable and just along with an existence
which is worthy of human dignity and if necessary it has to be supplemented with other social protection
means. The actions of the 7-Eleven franchisees have caused a serious damage to the trust as well as
confidence between the employees and the company and have offended the dignity of work concept
(Australian Lawyers Alliance, 2016). So far they have not been able to deal with it in a proper manner.

• Resolution
• 7-Eleven needs to publicly accept that it has an ethical and moral responsibility for required standards of
conduct from all individuals and franchises that are involved in its enterprise
• Implements arrangements of effective governance which will ensure compliance with all relevant
Commonwealth laws
• Reviews its operating model (Australian Government: FWO, 2016).
 • The franchise business model in Australia ha
Other Companies Involved ve resulted in similar types of wage frauds fo
in Labour Scandals in r instance in Pizza
Australia Hut (Taylor, 2015).
• Myer faced accusations of exploitation when
the department store was found to be a part
of a labour scandal that involved its
subcontractor, Spotless, along with the
alleged cheating of cleaners who worked in
the stores of Myer. The allegations
comprised under-payment as well as denial
of employee entitlements by means of an
illegal practice called “sham contracting”
(treatment of an employment relationship
as a contracting arrangement that is
independent for avoiding employer
obligations).
• Pizza Hut has also been facing accusations
of using sham contracts for cheating staff
(Sinclair, 2015).
 Bibliography
• 7-Eleven, 2016. About 7-Eleven Convenience Stores. [Online] Available at: http://www.7eleven.com.au/about-us
[Accessed 7 October 2016].
• Ferguson, A. & Danckert, S., 2016. 7-Eleven: Fair Work Ombudsman says admit exploitation complicity. The Sydney
Morning Herald, 9 April.
• Ferguson, A., Danckert, S. & Toft, K., 2015. 7-Eleven: Investigation exposes shocking exploitation of convenience store
workers. The Sydney Morning Herald, 29 August.
• Fraser, M., 2016. 7-Eleven wage scandal update: Head office, franchisees, backpay claims etc. The Arbitrator, 19
February.
• Ryan, G., 2016. 7-Eleven Scandal an Ethical Failure of Leadership. [Online] Available at:
http://planforpersonalsuccess.com/7-eleven-unethical/ [Accessed 8 October 2016].
• Sinclair, A., 2015. Myer, 7-Eleven and Pizza Hut scandals show many workers don't get a fair go. The Guardian, 10
December.
• Taylor, C., 2015. Pizza Hut franchisees facing wage scandal. [Online] Available at:
http://www.hcamag.com/hr-news/pizza-hut-franchisees-facing-wage-scandal-209032.aspx [Accessed 8 October 2016].
• Australian Lawyers Alliance, 2016. 7-Eleven workers and their rights in Australia. [Online] Available at:
https://www.lawyersalliance.com.au/opinion/7-eleven-workers-and-their-rights-in-australia [Accessed 20 October
2016].
• Australian Government: FWO, 2016. Identifying and addressing the drivers of non-compliance in the 7-Eleven network .
[Online] Available at: A Report of the Fair Work [Accessed 20 October 2016].
• Anti-Slavery Australia, 2016. Anti-Slavery Australia: Working to Abolish Slavery. [Online] Available at:
http://www.antislavery.org.au/what-we-do/who-we-work-with.html [Accessed 20 October 2016].
 Thank You
Any Questions?