Another wage problem for Australian franchising?
posted on 27th November 2016
The Caltex chain in Australia has been accused of systemic worker exploitation throughout its franchise network. An investigation by the team of journalists behind the 7-Eleven expose last year has, according to Fairfax Media, 'unveiled a brutal franchise structure which some operators claim leaves little option but to defraud workers.' The Australian Fair Work Ombudsman confirmed it has been contacted by a worker in relation to this group but couldn't comment further due to the 'wider compliance activity relating to Caltex franchisee outlets.'
Caltex Australia CEO Julian Segal has said, 'Depriving employees of their entitlements is illegal and immoral' and has promised the company will review the franchise model, including the franchise agreement, the financial returns as well as the ongoing governance and compliance arrangements.
When the 7-Eleven scandal broke in August 2015, one franchisee wrote an email warning: 'It is inevitable that this will get out. It is only a matter of when, not if. What damage will this cause to the Caltex brand?'
The company took action, including auditing some franchisees for suspicions of wage fraud. It then made contact with the Fair Work Ombudsman and separately investigated eight franchisees and terminated five of them, equivalent to 13 sites. It is reportedly investigating 50 more sites. However, the terminations have themselves been criticised as termination due to a breach of the franchise agreement means the value of the business returns to Caltex.
There is no connection between the Australian-owned Caltex operation and the Caltex brand in New Zealand, which is operated by Z Energy Ltd under licence from Chevron International. The largest individual shareholder in Z Energy is the New Zealand Supernnuation Fund.
Caltex SEO speaks out on illegal and immoral actions
An internal Caltex document presented to franchisees in August on workplace obligations outlines "common mistakes".
The list includes not paying an employee for trial/training shifts, not recording and rostering the hours worked by the franchisee and not having these records available and not checking if visa requirements are up to date.
One of the more egregious "common mistakes" was "not paying wages … on a regular basis/on time and not having required records of wage payments (especially when cash wages are paid)".
In a statement Caltex described the "common mistakes" as examples "provided by way of illustration and do not reflect Caltex's behaviour".
It says the company had always made it clear to franchisees that they are required to operate their businesses in full compliance with all laws, including the Fair Work Act.
But it will not commit to a compensation scheme where it finds exploited workers who have been systematically ripped off, similar to the scheme set up by 7-Eleven, which has so far paid A$50 million in back pay to workers.
Instead, it points the finger at franchisees, saying "franchisees are responsible for ensuring their employees are correctly paid. Caltex is providing practical support to those employees such as helping them secure ongoing employment if possible as well as assisting them to pursue a claim against their former employer".
But it isn't as simple as that. If a franchisee is terminated and loses the value of the goodwill, it is hard to chase them down to repay workers as some of them will have nothing left except a big bank loan to repay for a business loan they took and no income to repay workers.
In addition, many workers are too afraid to come forward for fear of retribution.
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