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The wage underpayment saga continues

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By David Bates

Not too long ago, I wrote that the wage underpayment scandal engulfing 7-11 franchisees was just the tip of the iceberg.

Well ladies and gentlemen, the rest of that iceberg is about to smash head-on into hundreds of unsuspecting Australian employers.

Caltex is now the latest brand to be tarnished by seemingly widespread wage underpayments by some of its franchisees. The Company is currently auditing its service stations and, to date, 19 franchise agreements (covering a total of 43 separate locations) have been terminated because the franchisee was found to be in breach of applicable employment laws.

The problem is so bad, Caltex has now set up a $20,000,000 fund to cover the back-payments likely to be owed to current and former employees.

You might be thinking ‘wow, that’s a lot of money!’. But it’s all relative. Have a guess at the total value of the underpayment claims processed so far by 7-11 Australia since it set up its own ‘Wage Repayment Program’.

$30,000,000? No. Higher.

$50,000,000? Nope. You’re not even close.

A staggering $90,000,000+ in claims has been processed so far, and there are still plenty more to go. You can monitor their progress for yourself here.

But things are set to get a while lot worse, because Caltex and 7-11 aren’t alone, and there are also thousands of other franchisees out there who think they’re doing the right thing but who will shortly learn (to their dismay) that they’re not.

Perhaps they think their employees are covered by the Retail Award when they are, in fact, covered by the Vehicle Manufacturing, Repair, Services and Retail Award … and have been since 2010 (think: massive underpayments and potentially crippling back-payments).

Or perhaps they’ve been relying on workplace relations advice provided by their franchisor, which has been sketchy at best or hopelessly misguided at worst (such as the advisers who recommend magically ‘turning’ everyone into an independent contractor by applying for an ABN).

Or maybe they’ve just paid ‘the going rate’ and innocently assumed Australia’s employment laws are similar to those in other Western economies (read: imminent HR tragedy).

We’ve been saying for years the only reason the Fair Work laws haven’t crippled small businesses is because most employers either don’t understand them or feel they have no choice other than to ignore them.

Makes you wonder where it’s all headed, doesn’t it?

Published: Wednesday, May 03, 2017


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