7-11’S Not Alone: The Trend of Australian Franchises Underpaying Staff

In recent memory, two separate 7-11 franchises were found guilty of poor payroll management (actually, let’s call a spade a spade and say deceptive payroll practices), wage underpayment and incorrect classification. They were fined in the Federal Circuit Court after it was discovered that the owner of the two stores in Brisbane, had of his own accord, not paid his staff according to the right award classification, and thus breached the Fair Work Act.

This was quite a high profile case, with the store owner receiving a personal $28,000 fine, and his company receiving a $140,000 fine. After all, he had been guilty of incorrectly classifying retail level one employees whose tasks were actually of a more intensive nature, with the store owner himself referring to them as managers. This inaccurate classification led to extreme underpayments. Additionally, he was complicit in the company’s inability to maintain accurate records and keep payslips.

The Case of Pizza Hut

Unfortunately, the 7-11 stores are not alone in their blatant refusal to pay staff according to their work and classification. There has been a trend in recent years of other major franchises doing much the same thing. Take Australia’s Pizza Hut stores, for example. 24 Pizza Hut stores have been found to engage in non-compliance, especially when it comes to underpayment and inaccurate classification of delivery drivers. 7 franchises misclassified their delivery drivers as independent contractors instead of employees, which then led to these workers being swindled out of sick leave, annual leave and superannuation. The provisions of the Fair Work Act only apply to employees, not independent contractors.

Additionally, workers were owed a grand total of $12,086 in underpayments — thanks to inaccurate minimum hourly rates and a lack of compensation for allowances. Sometime drivers would even be forced to cover fuel costs while being paid just $5.70 per delivery! Some of the underpayments were also due to the wrong award being applied when paying employees. This especially affected vulnerable young employees who were below the age of 24.

Domino’s Delicious Worker Exploitation

Another large franchise under fire for worker exploitation is Domino’s. One franchise, in order to keep its labour costs below 27% of sales, would often go into the payroll system to reduce the number of hours worked by staff, and thus decrease their pay as well. In fact, a six month long investigation uncovered the ugly truth behind Domino’s pizzas: deliberate underpayment of penalties and wages, and illegal sale of sponsorship of migrants.

A large part of it is due to Domino’s business model. The franchisees are expected to increase sales, not profits, and the head office takes a percentage of royalty from every sale. This means that anytime labor or rent costs increase, it’s the franchisees that have to absorb those expenses.

Domino’s case has been compared and contrasted with 7-11’s. It points to an underlying theme of franchisees being seemingly unable to make ends meet without underpaying their staff, thanks to draconian rules being set at the franchiser level. Domino’s case can even be considered worse than 7-11’s, given that it enjoys a reputation as a more profitable business than the latter.  All of these cases highlight the need to create laws that hold franchisers more accountable.