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7-Eleven chairman labels alleged cashback scheme “revolting”

7-Eleven Australia chairman Michael Smith has labelled the alleged cashback scheme among franchisees a “revolting practice” as allegations of underpayments still continue at the convenience chain.

The Senate inquiry held last week revealed almost $2.8 million had already been paid to 117 employees involved in the wage scandal. The Fels Panel, headed by Professor Ian Fels and set up by 7-Eleven to investigate claims of wage fraud, has so far reached out to more than 20,000 past and present franchisees and employees for compensation. Of the 20,000, it is understood around 2000 have lodged an interest in making a claim.

“Cash back and intimidation is a revolting practice and we’re embarrassed by it and we will stop,” Smith said.

“It will not succeed because we are working with Professor Fels and the FWO and equipping ourselves to uncover it and take action against it, as demonstrated by the termination of two franchisees in New South Wales a couple of weeks ago.”

At the inquiry,  Professor Fels labelled underpayments throughout the network as “widespread”. He said around 60 per cent of stores have had a claim made against them but believed this percentage to likely be higher, with many reluctant to come forward.

“There’s no question that people are not coming forward to the extent we believe they should,” he said.

The inquiry also heard one claimant had suffered physically abused.

“We believe there is a strong, powerful, quite widespread campaign of deception, fear-mongering, intimidation and even some physical and actual physical actions of intimidation by franchisees,” Fels said.

7-Eleven announced at the inquiry it will start to roll out a new mandatory payroll system for all its staff over the next few months, with interim CEO Bob Baily describing the technology as “almost big brother-ish”.

Wage fraud was first uncovered last year following a joint investigation by Fairfax Media and the ABC’S Four Corners. The investigation has since led to the resignation of former CEO Warren Wilmot, chairman Russ Withers and general manager of operations Natalie Dalbo.

Smith, who was previously deputy chair, was appointed chairman following Wilmot’s and Withers’ resignations while Bob Baily was appointed interim CEO. 7-Eleven is currently recruiting for a new CEO.

Last week, 7-Eleven announced it had appointed a specialist investigator to examine underpayment claims and also established a whistleblower hotline. It followed the move by the franchise last month to terminate two franchise agreements and take over the stores, after the franchisee was found to have been underpaying staff during independent investigations.

Speaking to C&I Week, Smith said: “Any time you terminate a franchise is a real disappointment. It means that someone who has been with us has lost a business. They wanted to be in business with us and our view is that we wanted to be in business with them so when it comes to an end it’s a pretty significant event. But the other point of that is, when there is a breach of an agreement, if we don’t take strong action then we’re not demonstrating our commitment to all of the franchisees and the moral commitment that we have to our community.”

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