Inquiry Of 7Eleven Australia Pty Ltd

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Inquiry Of 7Eleven Australia Pty Ltd

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Question:
Discuss about the Inquiry of 7-Eleven Australia Pty Ltd.

Answer:
Introduction:

Inquiry was commenced by Fair Work Ombudsman (FWO) in June 2014 in lieu of allegations related to underpayment of wages and maintaining false employment records against the leading retailer of Australia named as 7-Eleven Australia Pty Ltd (7-Eleven). This inquiry conducted by FWO investigated almost three allegations by conducting inspections of sites and analysis of record keepings. This inquiry conduct investigations on other matters also which were requested by the employees of 7-Eleven. Results of these investigations are shocking as it shows non-compliance of various provisions of Fair Work Act 2009 (FW Act) and Fair Work Regulations 2009 (FW Regulations), and it also shows that company made false entries in their records (FWO, 2016).
This report states various frauds committed by 7-Eleven stores and investigation conducted by FWO against the company. It also states the result of these investigations and consequences faced by company. Subsequently, paper is concluded with brief conclusion.
About the company & history of non- compliance:
In Australia, 7-Eleven was considered as largest retailer of petrol and convenience on the basis of its market share and number of franchisee awards. Stores of 7-Eleven were operated under the license of US-based business 7-Eleven Inc., which was responsible to develop franchisees of 7-Eleven in Australia. 7-Eleven Inc. was actually incorporated in 1927, and it was determined as largest operator of franchisee and licensor of convince stores (7-Eleven, 2017).
First store of 7-Eleven in Australia was initiated in 1977 in Melbourne. In 1978, more stores were opened by the company which includes first franchise store, first fuel site, and also first 24-hour site. All these stores were considered as key elements of the operating model of 7-Eleven. On 31st December 2015 almost 626 7-Eleven stores were operated in Australia throughout the Australia. It must be noted that, almost 70% of these stores sell fuel and traditional merchandise.
Allegations on 7-Eleven stores were not new and FWO receives various reports related to these allegations from 2008 onwards from the employees of the stores. These employees continuously alleged the underpayment of wages from the stores of 7-Eleven. Concern of FWO was increasing because these underpayments of wages were directly linked with the inaccurate records of the stores. As employers of stores show less working hours of employees for the purpose of showing that employees higher rates of pay, but in actual situations were completely different (7-Eleven, 2017).
Underpayment of wages & Workplace Ombudsman’s audit:
Allegation were received by Workplace ombudsman in 2008 from an unregistered organization which represents the workers of fast food and retail sector, that stores of 7-Eleven were involved in the practice of double hours scam. Double hour scam means stores of 7-Eleven made records and pays only half amount to their workers actually worked. In other words, workers of 7-Eleven receive only half amount as compared to amount which should have been paid by employers under award rates. During the period of 2008-2009, number of stores established in Melbourne and Sydney are audited by FWO. The result of the audit conducted by FWO in Melbourne shows fraud of $112000 wages, and these wages were recovered for 88 employees in five stores. FWO instructed 6th Store to credit almost 1000 hours of annual leave back in the records of 12 permanent staff members. In the store of Sydney, FWO conduct audit and it shows fraud of $50000 which were recovered for 80 workers at 15 stores.
The main issue identified by FWO in the audits was the underpayment of wages and underpayment of penalty rates related to weekends and nightshifts. However, sufficient evidences were not present which shows that double hour scheme was widespread, and FWO also noted that generally underpaid workers young international students at young age and stores of 7-Eleeven mainly exploit these students (FWO, 2009).

Education and Audit campaign by FWO:
During the period of September 2009 and February 2010, education and audit campaign was conducted by FWO in 56 stores of 7-Eleven situated in Melbourne and Geelong. This campaign was the result of allegations received by FWO that young employees engaged in this sector were being exploited and also because of the request received from 7-Eleven for providing advice and guidance for the purpose of establishing compliance system in franchisees.
FWO address all the audited business and provide information related to the education and compliance elements, and it also provides self-audit checklist. Almost 56 audits were conducted by the FWO and it was found that almost 70% of the business compliant with the FW Act and 30% business contravened the FW Act. Stores which contravened FW Act were involved in almost 24 types of contravention, and these contraventions were:

Almost 7 issues related to underpayment of wages were found.
10 issues related to non-payment of weekend penalty rates were found.
3 issues related to non-payment of public holiday penalty rates were found.
1 issue related to non-payment of overtime rates were found.
3 issues were found related to incomplete details in pay slips (ABC, 2015).

In total fraud of $32378 was found and this amount was recovered for almost 62 workers of 7-Eleven stores.
Legal proceedings were recommended by the FWO in January 2010 against the Boston Pty Ltd and also against the former operators of 7-Eleven stores that were Hao Chen and Xue Jing. Investigation was conducted by the inspectors of FWO after receiving the request from six employees who were international student and worked at Geelong and South Yarra stores of 7-Eleven. It must be noted that these stores were engaged in flat rate pay and fail to pay base hourly rates and penalty rates defined by the awards of applicable rate industry.
Investigation conducted by inspectors of FWO shows that stores only record half working hours of employees for the purpose of showing that they paid double to the employees. This can be understood through example, if employee in the store working for 40 hours per week at $12 per hour then it would be recorded as 20 hours at $24 per hour.
Later, this fraud was referred by Media as the ‘half pay scam’, and in April 2011 penalties were awarded by Magistrate Court of Victoria in following manner:

Boston Pty Ltd- $120000
Hao chen- $20000
Xue Jing- $10000 (FWO, 2011).

Issue related to pay-roll tax:
Another whistle was blow for the convince stores of 7-Eleven, and investigation was conduct against the franchisees by the state governments of Victoria and NSW because of the alleged failure of stores to pay their payroll tax due to state. This was the issue which was alleged against the company after the half pay scam. Separate investigation was conducted by state government which was revealed under the freedom of information, and this information was requested under the transparency laws of NSW and lodged by Labor MLC Daniel Mookhey to the Office of State Revenue (Ducknley, 2016).
Documents revealed in the investigation shows that state revenue department of Victoria initiated an investigation against the in headquarter of 7-Eleven established in Melbourne and also in the franchisees of 7-Eleven established in Victoria related to the concerns about payroll tax compliance.
Management of 7-Eleven stated in relation to these claims made by NSW Labor, that claims made by NSW for non-payment of payroll tax were disgraceful and untrue. These claims were highlighted in the weekend after documents related to Freedom of Information was requested by the NSW Labor’s Daniel Mookhey, in which he found that 7-Eleven was not registered under the payroll tax in the state. He further stated that documents revealed those convenience stores of 7-Eleven and its franchisees failed to pay payroll tax of last three financial years in NSW.
These claims were rejected by the 7-Eleven and further stated that company paid almost $9 million as the payroll tax in NSW and Victoria in last three financial years. Management also stated that company fulfills all its tax obligations whenever it become due and company does avoid its payroll tax obligations (SMH, 2016).
Office of State Revenue in NSW stated that 7-Eleven is registered for their payroll tax in the state and it has met all its obligations towards relevant tax commitments. This statement of OSR was given after the OSR released its response related to the Freedom of Information which suggests that 7-Eleven is not registered for payroll tax in NSW. Later OSR clarified that it was an error on their part and OSR corrected this error publicly. OSR further stated that 7-Eleven paid almost $9 million tax in last three financial years in NSW and Victoria.
However, last year in October 7-Eleven actively requested the SRO in Victoria to provide their advice whether any state tax implications are due on their part during their wage repayment program. It must be noted that on this matter 7-Eleven working with the SRO of Victoria who also represents the other states for the period of 12 months. These discussions are well advanced. Therefore, this company was proactive, transparent and compliance al its obligations related to state tax (7-Eleven, 2016).
Conclusion:
As stated above, various investigations are conducted by FWO and state government against the 7-Eleven stores. Fair Work Ombudsman conducts its investigation in June 2014 in lieu of allegations related to underpayment of wages and maintaining false employment records against the leading retailer of Australia named as 7-Eleven Australia Pty Ltd (7-Eleven). In this, company and its former representatives was heavily penalized by the Court.
Later NSW state government conducts investigation against the franchisees because of the alleged failure of stores to pay their payroll tax due to state. In this government admits its error and announced publicly that company fulfill all its tax obligations in last three financial years.

References:
7-Eleven, (2017). Welcome To 7-Eleven Australia. Viewed at: https://franchise.7eleven.com.au/why-7-eleven.html. Accessed on 21st September 2017.
FWO, (2016). Identifying and addressing the drivers of non-compliance in the 7-Eleven network. Viewed at: https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=7&cad=rja&uact=8&ved=0ahUKEwiRv-C147XWAhUNTo8KHa1rCQcQFghRMAY&url=https%3A%2F%2Fwww.fairwork.gov.au%2FArticleDocuments%2F763%2F7-eleven-inquiry-report.pdf.aspx&usg=AFQjCNG4B0Ov9wMA6hexyckXAD0fwQvEBg. Accessed on 21st September 2017.
7-Eleven, “Reasons to become a franchisee”, 7 Eleven Pty Ltd. Viewed at: https://franchise.7eleven.com.au/why-7-eleven.html. Accessed on 21st September 2017.
Fair Work Ombudsman, (2009). Watchdog’s random audits recoup $112,000 for city convenience store workers. Viewed at: accessed at https://www.fairwork.gov.au/about-us/news-and-media-releases/2009-media-releases/july-2009/20090725. Accessed on 21st September 2017.
Fair Work Ombudsman, (2011). Convenience store operators fined $150 000 for underpaying international students. Viewed at: https://www.fairwork.gov.au/about-us/news-and-media-releases/2011-media-releases/april- 2011/20110427-bosen. Accessed on 21st September 2017.
ABC, (2015). How 7 Eleven is ripping off its workers. Viewed at: https://www.abc.net.au/news/2015-08- 29/7-eleven-half-pay-scam-exposed/6734174. Accessed on 21st September 2017.
Fair Work Ombudsman, (2009). City convenience stores back-pay workers $50,000 after watchdog investigation. Viewed at: https://www.fairwork.gov.au/about-us/news-and-media-releases/2009-media-releases/july- 2009/20090708. Accessed on 21st September 2017.
Dunckley, M. (2016). 7-Eleven head office paid payroll tax, says state revenue office. Viewed at: https://www.smh.com.au/business/retail/7eleven-head-office-paid-payroll-tax-says-state-revenue-office-20160929-grrayd.html. Accessed on 21st September 2017.
SMH, (2016). NSW, Victoria investigate 7-Eleven over payroll tax. Viewed at: https://www.smh.com.au/business/workplace-relations/nsw-victoria-investigate-7eleven-over-payroll-tax-20160922-grmn67.html. Accessed on 21st September 2017.
7-Eleven, (2016). NSW confirms 7-Eleven compliance with payroll tax obligations. Viewed at: https://www.7eleven.com.au/media-centre/article/nsw-confirms-7-eleven-complies-with-payroll-tax-obligations/article/nsw-confirms-7-eleven-complies-with-payroll-tax-obligations. Accessed on 21st September 2017.

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