Home World Business Caltex announces $20m compensation fund but admits no liability for underpaid workers

Caltex announces $20m compensation fund but admits no liability for underpaid workers

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Oil giant Caltex will establish a $20 million assistance fund for workers who were underpaid at its franchised service stations.

The company made the sharemarket announcement this morning, following months of attacks from its franchisees who say Caltex’s franchise model is unprofitable, and claims by workers that underpayment was entrenched among some store networks. 

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Caltex wage fraud: the system is broken

First it was 7-Eleven. Now, petrol station chain Caltex is under the spotlight for rampant wage fraud throughout its franchise network, as Fairfax’s Adele Ferguson explains.

Caltex reiterated that there is no correlation between site profitability and underpayment of workers. In its announcement, Caltex said liability for underpayment still remained with franchisees, but it still wanted to do the right thing by workers.

“While Caltex has no liability to pay franchisee employee entitlements, the fund has been established because Caltex wants to do the right thing by franchisee employees,” the company said.

​The company will seek to pay for the fund using money collected from the franchisees responsible for the underpayment, who are forced to leave the system. 

Caltex did not spell out the assessment criteria but said the fund will “be administered with fair criteria for assessment of claims” which will be paid “once claims have been substantiated”.

Once a franchisee is “exited” from the Caltex network, workers will be invited to come forward if they believe they may have been underpaid. They will have a three-month window to make a claim back dated to 2015.

Caltex is auditing its entire store network, and has so far terminated 19 franchisees for underpayment or other non-compliances.

Caltex says it is trying to "do the right thing" by underpaid workers Caltex says it is trying to “do the right thing” by underpaid workers Photo: Sasha Woolley

A Fairfax investigation last year found large franchisee networks were engaging in wage fraud. In some cases individual workers were being physically threatened, or having their families intimidated by armed men, to stop them from speaking out.

Following the allegations, Caltex pledged to stamp out wage fraud, and promised to terminate any store owner found to have engaged in the practice.

Caltex CEO Julian Segal. Caltex CEO Julian Segal. Photo: Pat Scala

But it has faced resistance from a block of store owners scared by the prospect of losing their stores and angry at Caltex which, they believe, should be held accountable for a franchisee system that they claim encourages wage fraud.

In March, 70 Caltex store owners, workers and their family members marched through the Sydney’s business district chanting and brandishing placards denouncing management and accusing the company of running a franchise model that is unprofitable.

The fund has been established because Caltex wants to do the right thing by franchisee employees

Caltex, ASX announcement

Caltex has repeatedly rejected the idea underpayment is linked to the profitability of its franchise model. In November, it announced an independent review looking at the sustainability of its franchise model, while also promising to root out wage fraud.

In February, Mr Segal revealed the outcome of its review, using an opinion piece in Fairfax newspapers to say the Caltex model “allows franchisees to draw a wage, make a profit and pay employees in accordance with lawful wage rates”.

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