The Federal Circuit Court, in proceeding commenced by the Fair Work Ombudsman, has handed down a record penalty of more than $400,000 against the operators of a 7-Eleven store which, according to the Ombudsman, ‘systematically exploited its workers’. Court proceeding were commenced after an investigation by the FWO which found 12 7-Eleven employees in Brisbane had been underpaid over $82,000.
Whilst some of that sum was paid-back to employees, the FWO found that the franchisee, Brisbane businessman Sheng-Chieh Lo, had requested his staff to secretly pay back thousands of dollars to him and his wife.
Justifying the record fine, Federal Circuit Court judge Michael Jarrett said Mr Lo’s behaviour revealed “a contemptuous disregard of Australian workplace laws”.
Judge Jarrett also emphasised the record fine’s deterrent effect, arguing that “compliance activities by the Fair Work Ombudsman suggest a particularly high need for general deterrence in the retail industry and, specifically, in relation to 7−Eleven franchises, given the number of complaints received against 7−Eleven franchisees since 2010.”
Fair Work Ombudsman Natalie James, commenting on the case, argued that the FWO “will continue to be persistent with our compliance activities, even when confronted by employers who deliberately seek to mislead us with false records and where vulnerable employees are involved, even if they themselves are too afraid to talk to us.”
Last week’s judgement marks another significant development in the Fair Work Ombudsman’s investigation into the 7-Eleven franchise network. Indeed, many of the individual cases that the FWO has been investigating as part of the 7-Eleven probe are only now coming down for judgements. Significantly, many of these cases have lifted the corporate veil and imposed fines directly onto directors of companies operating 7-Eleven franchises who violate workplace laws. In this case, Mr Lo was penalised $68,058 and his company, Mai Pty Ltd, a further $340,290.
Commenting on the broader investigation into 7-Eleven franchises, Ms James says 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.’
Overall, the record penalty, coming mere months after another record fine against a 7-Eleven franchisee, will likely contribute the deterrent effect that FWO rightly recognises is essential if such systematic violations are to be avoided in the future.