Federal Court imposes record fine on 7-Eleven franchisee for underpayment of employees

The Federal Court yesterday handed down the largest fine yet applied for the underpayment of employees, ordering that a 7-Eleven franchisee pay a total of $214,000 for underpaying two workers.

Judge Justin Smith justified the record fine by stating that the franchisee had ‘deliberately flouted his legal obligations’ and engaged in ‘a sustained and deliberate process of deception’ aimed at maximising financial return. The judge concluded that ‘this was part of the respondents’ business model. In my view, this approaches the worst type of each contravention.’ Judge Smith also justified the record fine on the basis that the franchisee was not ‘truly sorry for his conduct.’

The litigation was commenced by the Fair Work Ombudsman as part of its investigation into the systemic underpayment of employees at 7-Eleven.

Whilst this fine represents a significant win for the Ombudsman, there remains the difficulty of ensuring employers are aware of the case. Indeed, in light of the systemic underpayment of workers uncovered by the Ombudsman at 7-Eleven, ensuring cases like this are widely disseminated will be essential if effective deterrence is to be fostered.

Fair Work Ombudsman Natalie James reflected the hope of the case’s deterrent effect when she argued that ‘anyone tempted to implement a business model that revolves around deliberate exploitation of workers should think again.’

Overall, it will likely take more than one record fine to change the culture of impunity that the Ombudsman identified among many 7-Eleven franchises.

The Ombudsman’s full press release is available here.

An ABC News article on the case is available here.