7-Eleven Case Study ASSIGNMENT 1 PDF

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assignment 1 case study...

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7-eleven pty ltd [Company address]

Contents Introduction.................................................................................................................................................2 Policies and Law that Allow the exploitation of Workers.............................................................................3 

Analysis.......................................................................................................................................3

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Intimidation................................................................................................................................3

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Scams..........................................................................................................................................4

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Policy..........................................................................................................................................5

Possible solutions........................................................................................................................................6 

Outline........................................................................................................................................6

Temporary solution..............................................................................................................................6 Amend the Fair Work Act.....................................................................................................................6 

Actions to take............................................................................................................................7

Conclusion...................................................................................................................................................8 Reference list...............................................................................................................................................9

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Introduction Wage theft is rapidly becoming a popular issue in the Australian workplace, with migrant workers experiencing widespread underpayment. Migrant workers represent nearly 11% of the Australian workforce with national surveys highlighting that the populace receives almost half of the legal minimum wage (Berg & Farbenblum 2018). In this essay I will analyze the case involving former Brisbane 7-Eleven operator Jason Yuan, which is an excellent example of how employers are violating worker entitlements through underpayments and exploitation. 7-Eleven first came to Australia in August 1977 when it opened its first store in Melbourne, it operated under the license of US based 7-Eleven inc. (Terry-Armstrong 2016). The essay will start with an analysis of the legal case that will identify the workplace policies, procedures, and cultures that shape ER in the organization and its position in the industry. Followed by the evaluation on the role of labor unions while outlining how workers can leverage these unions to seek reparations from employers. The Australian workplace needs structural reforms to address the various factors promoting the exploitation of vulnerable workers and guarantees for whistleblowers to encourage workers reporting their employers for any wrong doings.

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Policies and Law that Allow the exploitation of Workers Analysis Australian employers are taking advantage of migrant workers. According to the 2018 report by Fair Work Ombudsman, 21 7-Eleven employees were underpaid for over a year. The audit found they were underpaid a total of $31,507 (2018). The vulnerable workers received a flat rate wage despite working for long hours. Therefore, there were significant underpayments for jobs done during the weekends, public holidays, overtime, and shift work rates stipulated by the General Retail Industry Award 2010 (Fair work 2018). The audit also found that two other workers were receiving pay not equal to their work classification (Clibborn & Wright 2018, p. 210). The judicial ruling to punish the store highlights the continued lapse to ascertain compliance with labor laws by employers. The widespread violation also denotes how much foreign employees lack awareness of workplace laws and avenues for settling entitlements.

Intimidation Leadership in the 7-Eleven stores often has a disregard for minimum wage laws and guidelines (Clibborn 2018). Employees working for the company often receive half the legal minimum wage of $24.50 per hour as set by the award rate (Ferguson 2018). The managers exploit the vulnerable status of the migrant workers to threaten them with deportation if they were to report the underpayments (Forsyth 2017). The issue of Employee intimidation was so rampant that it took the efforts of whistle-blowers, former employees, and media investigation to publicize the issue (Terry-Armstrong 2016). Since employees are afraid of being reported, it is unlikely for an employee to confront their employer over unpaid salaries (Clibborn 2019). The complete disregard for minimum-wage laws also indicates the violations of human rights in Australian workplaces. This can be seen in the Article 23 of the Universal Declaration of Human Rights which states that “Everyone, without any discrimination, has the right to equal pay for equal work” (United Nations 1948).

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Scams Employee intimidation is not the only tactic applied in wage theft, as 7-Eleven managers also engage in the doctoring of duty rosters, timesheets, and financial documents to cover the understated wage bills (Mena Report 2017). It is also known that employer utilize the ‘half-pay scam’ in which employers record half of the relevant employee’s workhour which usually is 20 hours because most 7-11 employees are international students who are permitted to only work 20 hours per week (Forsyth 2017). Employees are also being paid in cash without pay slips which makes tracking the hours worked and the reparations. Another example of such scam is the ‘cash-back scam’ where employees are paid correctly according to the fair work act but were forced to pay part of the wages back (Berg and Farbenblum 2020). In addition to this, some employees were also forced to put in a deposit to get the job and if they were fired or complained they would not get their deposit back (Berg and Farbenblum 2017). Some were also placed into “training” which was more akin to slavery since they worked long hours with little to no pay, one employee was paid $325 for 691 hours of work or 47 cents per hour (Berg and Farbenblum 2018). These types of practices are not a recent occurrence, even Jason Yuan was given a letter of caution by FWO in 2013, five years before the lawsuit (Fair work 2018).

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Policy There have been arguments made that the issue of wage theft was caused by 7-11 Gross profit policy which some franchisees deem too restricting. Store Merchandise Gross

Franchisee Earns

7-Eleven Charges

Profit $ First $500,000 Next $500,000 ($500,001 -

50% 47%

50% 53%

$1,000,000) Amounts over and above

44%

56%

($1,000,000 - onwards) (7-Eleven Australia 2020) This split is completely acceptable due to the number of benefits that 7-11 provide to the owners such as building rent and outgoing, equipment purchase & maintenance, utilities, advertising, insurance etc. (7-Eleven 2018). While the franchisee only must provide the money from their share to pay the employees, manage work shifts etc. Compared to what the company must do, the split is beneficial which would suggest the wage theft is the result of greedy franchisees (Berg & Farbenblum 2018). In addition, 7-Eleven has recently released a new policy called the ‘Whistleblower Policy’ which is intended to encourage and enable team members of 7-Eleven stores Pty Ltd and Convenience Holdings Pty Ltd to raise concerns regarding misconduct, unethical or illegal activity, or malpractice in the Group without fear of intimidation or reprisal (7-Eleven 2020, p.3). This will significantly increase the number of employees who will be able to report on the owners, especially vulnerable employees because the policy has a confidentiality clause in which employees are able to disclose their identity and it will only be known by the recipient of the report, the whistleblower panel, and the investigator of the case. However, if the employee chooses not to disclose his/her identity, no one else will be informed (except the recipient of the report) unless legally obliged to do so or necessary for emergency (7-Eleven 2020, p.10).

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Possible solutions

Outline Temporary solution 7-Eleven created a private repayment program to address the pay claims of affected employees. According to Stewart et al., the company entered a partnership with Deloitte to audit the consistency of claims and assess the identity of claimants. The approach was used to address several scenarios, including cash-back, half-pay, and unpaid training (2018). In total this has paid out almost $10 million in compensation to the affected employees (Terry-Armstrong 2016). Amend the Fair Work Act The amendment of The Fair Work Act of 2009 should be made to increase the penalties and fines for committing wage theft and other illegal activities. The current level of financial punishment does not discourage businesses from underpaying migrant workers (Cavanough & Blain 2019, p.28). Therefore, the law is not effective in functioning as a deterrent. I would recommend the fines to increase to the level of the Australian Consumer Law which entails a fine of $10 million for corporations and $500,000 for individuals, in addition there should be a Jail sentence of two years in case of repeated offences this is because the offences made by the employers could be considered a human rights violation (ACCC 2020). This I believe would be a sufficient deterrent to employers to avoid predatory practices. Wage theft could be considered a form of institutional corruption that warrants the high degrees of legal punishment due to its prevalence in numerous businesses (Cavanough & Blain 2019).

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Actions to take There are several actions to take when it comes looking for reparations and reporting unethical practices of the employer. First, as an employee I could approach my colleagues talk to them about what I am going to do, what their rights are and if they were willing to join me, after this I would reach out to a union and from there, I would go with the union to FWO for litigation as Ullat Thodi and his colleagues did in 2008 (Berg & Farbenblum 2018, p.1049). This however is not private since court proceedings are public, a safer option would be reaching out to WRP due to the several guarantees it provide such as the DIBP would not cancel employee visas ‘for breaches of visa work conditions if the employee made a claim or was assisting the WRP or the FWO and have committed any further breaches further breaches’ (Berg & Farbenblum 2018, p.1062). WRP also provides assurance that it would not disclose the claimants’ visa status and would provide the claimants name for rectification payments only. Finally, there is also the 7Eleven whistleblower policy which gives the employee a choice to disclose their identity if the employee chooses otherwise their identity won’t be revealed (7-Eleven 2020, p.10). In addition, since the 7-Eleven is not the authorities, so people would be more inclined to report to them.

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Conclusion 7-Eleven was the first company in a long list of Australian corporations that has been found to implement wage theft as a function of increasing profit margins. Since the identification and prosecution of the stores, more companies have come forward for underpaying its employees in fear of drastic legislative consequences. While the companies accept the establishment of repayment schemes, the punitive approach is not suitable for addressing the issue because it does not address the underlying main factor, which is greed. The Australian government should discourage any form of non-compliance with labour laws by increasing protection for claimants, legislative reforms, and sanctions. Definitive action is the sole solution that can spark fear in the hearts of Australian employers. Maintaining wage compliance should be embedded in every level of corporate and national governance to prevent such issues from reoccurring.

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Reference list 

7-Eleven Australia, 2020, ‘Benefits of a 7-Eleven franchisee’, 7-Eleven Australia Pty Ltd., https://www.7eleven.com.au/franchising/franchise-benefits.html

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7-Eleven Australia, 2018, ‘Operation and effectiveness of the Franchising Code of Conduct’, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, https://www.aph.gov.au/DocumentStore.ashx?id=ec694274-2ad54dd0-9a22-f2b1ff32eacc&subId=565725

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Australian Competition & Consumer Commission, 2020, ‘Fines and Penalties’, Australian Competition & Consumer Commission, https://www.accc.gov.au/business/business-rights-protections/fines-penalties

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Berg, L, Farbenblum, B, 2018, ‘Remedies for migrant worker exploitation in Australia: Lessons from the 7-eleven wage repayment program’, Melbourne University Law Review, University of Melbourne, vol. 41, no. 3, pp. 1035–1084. https://search.informit.org/doi/10.3316/ielapa.750472940936323

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Berg, L, Farbenblum, B, 2020, ‘International Students and Wage Theft in Australia’, Sydney, Australia, Migrant Worker Justice Initiative, https://rmit.primo.exlibrisgroup.com/discovery/fulldisplay? docid=cdi_unsw_repository_oai_unsworks_library_unsw_edu_au_1959_4_unsworks_71 710&context=PC&vid=61RMIT_INST:RMITU&lang=en&search_scope=EverythingNO Tresearch&adaptor=Primo%20Central&tab=AllNOTresearch&query=any,contains,wage %20theft%20in%20Australia&offset=0 Berg, L, Farbenblum, B, 2017, ‘Wage Theft in Australia: Findings of the National Temporary Migrant Work Survey’, doi:10.4225/53/5ab19f1e85d8c. Clibborn, S & Wright, C 2018, ‘Employer theft of temporary migrant workers’ wages in Australia: Why has the state failed to act?’ The Economic and Labor Relations Review, vol. 29, no. 2, pp. 207–227. https://doi.org/10.1177/1035304618765906

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Clibborn, S, 2019, ‘It takes a village: Civil society regulation of employment standards for temporary migrant workers in Australian horticulture’, The University of New South Wales Law Journal. University of New South Wales, vol. 42, no. 1, pp. 242–268. https://search.informit.org/doi/10.3316/informit.276351301546951.

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Clibborn, S, 2018, ‘Multiple Frames of Reference: Why International Student Workers in Australia Tolerate Underpayment’, Economic and Industrial Democracy 1

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Cavanough, E & Blain, L 2019, Ending wage theft: Eradicating underpayment in the Australian workplace, McKell Institute, Victoria, https://mckellinstitute.org.au/wpcontent/uploads/McKell-Ending-Wage-Theft.pdf

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Fair Work Ombudsman, 2018, ‘More than $192000 in penalties for former 7-Eleven operators who underpaid vulnerable workers,’ Fair Work Ombudsman, viewed 08 August 2021 < https://www.fairwork.gov.au/about-us/news-and-media-releases/2018-mediareleases/april-2018/20180410-vipper-and-viplus-mr>

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Ferguson, A, 2018, ‘Revealed: How 7-Eleven is ripping off its workers,’ SMH Australia, viewed 08 August 2021 https://www.smh.com.au/interactive/2015/7-eleven-revealed/

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Forsyth, A, 2017, ‘The Victorian Inquiry into Labour Hire and Insecure Work: Addressing Worker Exploitation in Complex Business Structures’, E-Journal of International and Comparative Labour Studies, Volume 6, No. 3, September - October 2017, ADAPT University Press

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MENA Report, 2017,“Australia : Foreign students, backpackers face 'endemic wage theft in Australia”, Albawaba (London) Ltd, Retrieved from http://ezproxy.lib.rmit.edu.au/login?url=https://www-proquestcom.ezproxy.lib.rmit.edu.au/trade-journals/australia-foreign-students-backpackersface/docview/1967022899/se-2?accountid=13552

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Stewart, A, Stanford, J & Hardy, T 2018, The wage crisis in Australia, University of Adelaide Press, Adelaide, https://minervaaccess.unimelb.edu.au/bitstream/handle/11343/234364/2018-Hardy_StewartBookChapter4-OA.pdf?sequence=3

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Terry-Armstrong, N, 2016, ‘7-Eleven: A case study of a flawed franchise model’, Busidate, Warringal Publications, vol. 24, no. 2, pp. 8–11. https://search.informit.org/doi/10.3316/ielapa.104454881099066.

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United Nations, 1948, ‘Universal Declaration of Human Rights’, United Nations, viewed 09 August 2021, https://www.un.org/en/about-us/universal-declaration-of-human-rights

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