A Brisbane businessman will have to pay more than $400,000 after a court found he had been grossly underpaying workers at his West End 7-Eleven convenience store.
Sheng-Chieh Lo, who owns a store at the centre of a wider investigation into systemic exploitation of workers by 7-Eleven, has been penalised $68,058 personally, and his company, Mai Pty Ltd, fined $340,290.
In handing down the decision, Judge Michael Jarrett said Mr Lo showed a “contemptuous disregard” for Australian workplace laws, finding he sought to deliberately deceive the Fair Work Ombudsman.
Mr Lo’s Brisbane store was one of twenty 7-Eleven outlets targeted by Fair Work inspectors for surprise night-time visits, as part of a tri-state operation in 2014.
The probe found that 12 employees were underpaid a total of $82,661 between 2013 and 2014. Mr Lo had been paying flat rates as low as $13 an hour – a little more than half of what workers were entitled to – and tried to conceal underpayments by creating false records and entries into the 7-Eleven head office payroll system.
The Judge found that Lo and his company had “systematically exploited” employees by implementing “a business model that relied upon a deliberate disregard of the employees’ workplace entitlements”.
His Honour called the enterprise “a sophisticated system of data manipulation and false record keeping”, noting that the deception was only discovered as a result of the persistence of Fair Work inspectors. He found that Mr Lo’s contempt was further demonstrated by his persistent attempts to deceive inspectors.
Mr Lo initially provided inspectors with false records trying to cover-up the underpayments, but when his deceit was discovered, he showed inspectors selective bank statements as ‘proof’ that his employees had been back-paid. At the same time, he secretly arranged for employees to pay this money back to him.
When inspectors questioned Lo about his requests for repayment, he initially denied making such requests, but later admitted telling employees to repay the money.
The Judge found there had “been no suitable credible expression of regret”.
“Mr Lo continues to justify his actions without accepting responsibility for them,” he said.
The Judge found it appropriate to impose heavy fines upon Lo to deter others from similarly exploiting employees.
“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,” he said.
In addition to the fines and back-pay order, His Honour issued an injunction restraining Lo and his company from underpaying workers, and from seeking or accepting back-payment of wages from current or future employees.
An empire built on fraud and exploitation
A 7-Eleven insider told the ABC’s Four Corners program that the exploitation of workers is a key component of the company’s business plan, and that many stores would go bust if workers were paid correctly.
A subsequent review of more than 225 stores suggested that more than two-thirds had payroll issues.
Workers claim that head office is aware of the situation, and that the exploitation is made possible because many employees are foreign students on Visas with employment restrictions, and therefore unlikely to complain.
But the 7-Eleven Chairman claims head office is unaware of the exploitative activities of individual franchisees, and cannot be expected to know all of the goings-on of every individual store.
Earlier this year, the company vowed to make the interests of staff a priority, after facing criticism for axing an independent review of worker claims, and opting instead for an in-house review.
Fair Work Ombudsman, Natalie James, says her office is engaged in discussions with 7-Eleven headquarters with a view to implementing a robust and transparent arrangement to ensure all workers are paid correctly.