A record penalty of more than $400,000 has been imposed against the operator of a 7-Eleven store in Brisbane.
The penalty is the largest ever court imposed penalty achieved by the Fair Work Ombudsman.
The fine follows an investigation and litigation by the Fair Work Ombudsman which found 12 7-Eleven employees of a store on Boundary Road, West End had been short-changed more than $82,000.
While some of the money was paid back, the store owner, Sheng-Chieh Lo, requested his staff to secretly pay back thousands of dollars to him and his wife.
Federal Circuit Court judge, Michael Jarrett, found the 7-Eleven franchisee had shown “contemptuous disregard” for Australian workplace laws and had sought to deceive the Fair Work Ombudsman.
Handing down his decision on Monday, Judge Jarrett imposed record penalties totalling $408,348 – eclipsing by $65,000 the Fair Work Ombudsman’s previous highest penalties of $343,860 to a Perth-based business in 2013.
Mr Lo was penalised $68,058 and his company, Mai Pty Ltd, a further $340,290. It was found that Mr Lo underpaid 12 employees, including a number of international students, a total of $82,661 between September 2013 and September 2014. More than $35,000 of the underpayment remains outstanding.
Judge Jarrett has issued an order that Mai Pty Ltd fully rectify the underpayment.
Mr Lo’s store was one of 20 7-Eleven outlets targeted by Fair Work inspectors for random night time visits as part of a tri-state operation in September 2014.
Staff flat rates as low as $13 an hour
Judge Jarrett found Mr Lo and his company had “systematically exploited” employees by implementing “a business model that relied upon a deliberate disregard of the employees’ workplace entitlements”.
Mr Lo paid employees flat rates as low as $13 an hour and had tried to conceal the underpayments by creating false records and making entries into the 7-Eleven head office payroll system.
Judge Jarrett described it as “a sophisticated system of data manipulation and false record keeping” and the extent of the deception only came to light because of the persistence of Fair Work inspectors.
After initially providing inspectors with false records to try to cover up the underpayments, Mr Lo showed inspectors selective bank records as evidence that his employees had been back paid.
However, when he provided the records to inspectors, Mr Lo knew that he had already arranged for the employees to pay thousands of dollars back to him and his wife.
After inspectors learnt of the conduct, Mr Lo again tried to deceive inspectors by denying he had required employees to back pay wages, saying it “would be wrong” to do so. He later admitted what he had done.
Judge Jarrett said the “facts reveal a contemptuous disregard of Australian workplace laws”.
“Mr Lo’s contempt is demonstrated by his persistent attempts to deceive the Fair Work inspectors investigating the relevant complaints and his insistence, undertaken in a secretive way, that any amounts he paid to the relevant employees to make good (Mai Pty Ltd’s) defaults should be immediately paid back to him,” he said.
Most of the employees received just over half what they were entitled to, with individual underpayments ranging from $1673 to $21,966.
In addition to the penalties and back pay order, Judge Jarrett imposed an injunction restraining Mr Lo and his company from underpaying workers and from seeking or accepting any back-payment of wages from current or future employees.
Mr Lo’s company was also ordered to display an in store notice informing employees of entitlements and to undertake an audit of its compliance with workplace laws and report the results to the Fair Work Ombudsman.
Ombudsman in talks with 7-Eleven
Since July 2009, the Fair Work Ombudsman has placed eight matters involving 7-Eleven franchisees before the courts – four of them still to be finalised.
In May, a 7-Eleven operator in Blacktown, New South Wales was fined more than $214,200, the largest penalty against a 7-Eleven operator at the time, for deliberately short-changing two migrant employees and falsifying records.
The record penalty also follows the public release of the Fair Work Ombudsman’s findings from a national inquiry into 7-Eleven in April.
Fair Work Ombudsman, Natalie James, said her office is currently in discussions with 7-Eleven about a “robust and transparent arrangement that will satisfy the agency that head office is taking the necessary steps to build a franchise operating model that ensures workers employed in its network are correctly paid into the future”.
7-Eleven approves 21 claims under new in-house program
7-Eleven announced on Tuesday it had approved 21 claims, totalling $686,000, in the first round of payments under the company’s new in-house Wage Repayment Program.
7-Eleven said the total number of wage repayment claims submitted now stands at 4008, with 305 new claims lodged since 7-Eleven’s decision to takeover the repayment process. Over the same period, three claims have been withdrawn.
7-Eleven CEO Angus McKay said the company was focused on paying “legitimate claims as quickly as possible”.
“7-Eleven is happy to be judged on our actions, and will continue to publicly report our progress as we move forward,” Mr McKay said.