Convenience store giant 7-Eleven has agreed to pay almost $100 million in a class action settlement to franchisees who say they were misled about the profitability of the stores.
The class action before the Federal Court alleged 7-Eleven enticed operators into franchise agreements even though stores could only turn a profit if they underpaid staff or worked … “for nothing” or below award rates.
The claim, lodged in 2018, alleged the company misled them about the accuracy of the labour costs in documents and records supplied to prospective franchisees and the average wages that a franchisee would have to pay.
The chain was forced to pay back more than $173 million to workers after a joint investigation by The Sydney Morning Herald and The Age, and Four Corners, found systemic wage theft and doctoring of payroll records.
“But it was clear that there was another $100 or $200 million to come and they didn’t want that,” he said.
The Fair Work Ombudsman also launched multiple investigations, suing 11 7-Eleven franchisees over pay issues, with a cumulative total of $1.8 million in penalties awarded against them, equivalent to about 1 per cent of the underpayments nationally.
Stewart Levitt, partner at law firm Levitt Robinson, which ran the class action, said franchisees were led to believe employee costs would represent about seven per cent of business costs, but were actually about 13 per cent.
“The gap represented the difference between being profitable and losing money for many franchisees,” Mr Levitt said.
“A franchisee who bought into the 7-Eleven franchise couldn’t meet all his commitments and also survive so they either didn’t pay proper wages, or pay their mortgage or didn’t feed their children.”
The franchisees also alleged 7-Eleven breached its contract with certain class action members by only letting franchisees buy stock from a particular supplier at a particular price.
On Wednesday, Federal Court judge David O’Callaghan signed off on the $98 million settlement that had been reached between the parties in August last year, with the money to be held in a trust.
In a statement, 7-Eleven said the settlement had been reached without admission of fault, and the sum was inclusive of all legal costs.
Chief executive Angus McKay said the company was pleased the matter had come to an “acceptable resolution”, adding 7-Eleven had also invested $50 million in systems to prevent wage theft and for training for franchisees “in relation to their responsibilities in this regard”.
“We are seeing the positive results of the significant efforts we have made together with our franchise network,” he said.
Extracted from The Sydney Morning Herald