United Petroleum has been accused of forcing its franchisees into positions where meeting their legal obligations is not viable.
Just days after a Four Corners investigation revealed widespread underpayments at 7-eleven franchises, United Petroleum franchisees have told the ABC that staff at some sites are being underpaid.
The franchisees also alleged that the company is aware of the underpayments.
United responded to the allegations by claiming it would “never be involved in a business ripping off workers”.
“United Petroleum was shocked by 7-Eleven's conduct, and [we] certainly do not operate in that way,” said David Szymczak, United’s COO, after the allegations against 7-eleven were publicised.
One franchisee, who operates a 24-hour service station, admitted to paying employees just $15 per hour, and claimed he had put staff on the books for working 20 hours despite having completed 40-50 hours of work.
He also told the ABC that he believed some United employees were being paid just $10 to $12 per hour, and added that he had informed a senior manager but received no response.
In an email recently obtained by the ABC, a United franchisee expresses concern about his inability to meet his obligations as an employer.
The email was sent in 2013 to two senior managers at United Petroleum.
“I really want to be able to afford & start paying award rates but the financial compulsions are something I do not have control over,” the email read.
“I believe everyone else in the network must be in same position.”
According to the ABC, the franchisee said his repeated pleas to discuss the issue were ignored.
“We are unsure who you are referring to in your email,” Szymczak told the ABC on behalf of United. “It is thus not possible at this time to investigate the existence of such an email, its context, or our response.”
Last week the ABC revealed three former franchisees are involved in legal action against United Petroleum over claims they were unfairly kicked out of the businesses following disputes with the company.
Court documents revealed that one franchisee was alleging United forced franchisees to purchase its stock above market prices.
Another claimed that meeting the award wage was part of the reason his business was unprofitable.
“It's a business model that makes money for [United],” said one of the former franchisees. “It's not workable.”
HC spoke to Andrew Jewell, senior associate at McDonald Murholme, about where United could stand legally.
Forging payroll records
“Employers have an obligation pursuant to the Fair Work Act to keep employee records, and are liable for penalties should they fail to do so,” Jewell explained. “There may also be consequences to the State government for failure to payroll tax and consequential underpayment of employees.”
“More broadly it is a salient warning to the Abbott government that watering down the Fair Work Act is not a good thing.”
Jewell added that allowing employers to unfairly sack workers who complain about their company’s misconduct “employer reduces the capacity to enforce what Australia believes are minimum income standards and freedom of speech to identify bad employers”.
Franchisees’ obligations as employers
“Franchisees are national system employers and have the same obligations under the Fair Work Act as any other employer,” Jewell told HC.
He said that franchisees are responsible for their employees, and cannot hide behind or blame head office – the franchisor – after breaching any employment laws.
“The Franchisee will be answerable in any litigation, and required to pay any damages or penalty that is awarded,” said Jewell.
“Why should an honourable employer have no protection under the Fair Work Act against other employers who are cheating by not paying award rates to employees?”
How responsible is the Head Office?
“The responsibility of head office, or the franchisor, is dependent on the Franchise Agreement, but generally Head Office will not be directly liable for any employment breaches by its franchisees,” Jewell explained.
“Should Head Office be found by a Court to be 'involved in' an employment law breach, it may be liable for damages or a penalty.”