Compensation paid out to underpaid 7-Eleven workers has tipped over $110 million, fuelling criticism of failures in Australia’s employment law system to keep wage theft in check.
Labor spokesman for employment, Brendan O’Connor. Photo: SMH
The 7-Eleven wage repayment scheme has so far reached $110,701,468 – an average of $39,089 for each of the 2832 claims by workers who were underpaid under the franchise system.
But the voluntary compensation payout eclipses penalties that could otherwise be achieved under existing laws and has raised questions about whether the Federal Government’s proposed new law to protect vulnerable workers will go far enough in holding similar conduct to account.
Professor Allan Fels. Photo: Alex Ellinghausen
Former consumer watchdog, Professor Allan Fels said fines imposed under existing laws would be “miniscule” in comparison to the $110 million compensation payout.
While 7-Eleven’s head office was not held responsible for the conduct of its franchisees that had underpaid workers, it volunteered to repay workers what they were owed in back pay.
“The far stronger deterrent effect for others is if they know they have to make up the underpayments in full – in this case $110 million plus, compared to if they just have to pay a fine,” said Professor Fels.
“The Fair Work Act system just imposes fines and very limited compensation on the individuals whose cases are considered. But the court system works quite badly for systematic underpayment of thousands of people.”
Employment Minister Michaelia Cash. Photo: Andrew Meares
The Federal Government’s proposed Fair Work Amendment (Protecting Vulnerable Workers Bill) 2017, if passed, will increase maximum civil penalties and hold companies responsible where they knew or ought reasonably to have known of the contraventions of their franchisees.
Professor Fels said the proposed law which Employment Minister Michaelia Cash says is “priority legislation” was welcomed as a “big step forward”. It is expected to go to the Senate as early as next week.
“But no law – that law or the Fair Work law – permits recovery of mass underpayments,” he said.
Federal Labor spokesman for Employment and Workplace Relations Brendan O’Connor said the legislation would not go far enough to redress the underpayment of vulnerable workers.
He said the Turnbull government had been dragged “kicking and screaming to do something to address worker exploitation”.
“And what they have done is manifestly inadequate,” Mr O’Connor said. “The bill currently before the parliament has been too long in coming and doesn’t go far enough to prevent and punish worker exploitation.”
“Labor will move amendments to the bill to make it easier to prosecute franchisors and companies for exploitation by labor hire [companies] and along the supply chain, and will continue to lead the way to stamp out underpayment and exploitation of all workers in Australia.”
Senator Cash said the former Labor Government slashed funding to the Fair Work Ombudsman and produced no policy to protect vulnerable workers after six years in government.
“The Coalition took a comprehensive policy to strengthen worker exploitation laws to the last election,” Senator Cash said “Labor’s belated announcement of a worker exploitation policy at the end of the 2016 election campaign failed to deal with the key instance of exploitation. It exempted small business from higher penalties – meaning most 7-Eleven franchises would not be affected.”
Senator Cash said rampant exploitation seen in businesses such as 7-Eleven was “deplorable”.
“The Turnbull Government is providing the necessary resourcing and policies to ensure that is not repeated.
“The Coalition does not tolerate the exploitation of workers of any kind, whether it be workers being ripped off by dodgy employers or honest union members being dudded by crooked union bosses.
“We have implemented a number of strong, targeted measures to ensure that workers – particularly vulnerable workers – are offered strong protections against exploitation and underpayment.”
A spokesman for 7-Eleven said it had delivered on its promise to reform its business after underpayments in its franchised network were uncovered.
“While some doubted our resolve at the time, we said judge us on our actions – $110 million in repaid wages through our voluntary Wage Repayment Program clearly demonstrates our commitment to remediating the past and reforming our business,” the spokesman said.
“We will continue these efforts, and our ongoing collaboration with the Fair Work Ombudsman and others, to ensure our franchised store network operates at the highest standard we and the community expect. We’ll also continue to report transparently on our progress as we seek to be the exemplar of a solution to a problem that is regrettably broader than our network.”
Giri Sivaraman, employment law principal at Maurice Blackburn Lawyers, said underpayment scandals were not limited to any one type of industry or employer and would keep happening until the system was changed.
“The system is broken and needs to be replaced,” he said.
“We need to start again to provide better worker protection otherwise these scandals will keep happening in other businesses and areas.”
To change the system, Mr Sivaraman said workers needed to be better educated about their employment law rights and whistleblowers needed to be protected.
“There needs to be a much better system for recovering underpayment. The court system is too complicated, lengthy and difficult for ordinary workers to pursue.
“You’ll never be able to stamp out wage theft unless the principal is automatically liable for the underpayments of franchisees or contractors.”