The Fair Work Ombudsman’s latest Compliance Activity Report shows a workplace non-compliance rate of 76 per cent in the Caltex service-station network.
The FWO began investigations into the network in late 2016 after receiving intelligence indicating an upsurge in compliance issues at Caltex outlets. Fair Work inspectors visited 25 sites operated by 23 Caltex franchisees in Brisbane, Sydney, Melbourne and Adelaide. Just six of these sites were found to be compliant with workplace laws.
“FWO’s report shows Caltex Australia has been presiding over a non-compliant and unsustainable operating model,” Fair Work Ombudsman Natalie James said.
“In light of this alarmingly high level of non-compliance across its retail fuel outlets, I am not surprised by Caltex’s announcement to the ASX last week that it will transition franchise sites to company operations.”
Across the non-compliant sites, inspectors found evidence of underpayment of wages and non-payment of overtime and penalty rates, as well as record-keeping and pay-slip breaches.
Inspectors also had concerns about the accuracy of the time and wage records provided by non-compliant franchisees, with legal action being taken against two franchisees for allegedly providing falsified records.
During the activity, the regulator issued nine infringement notices, 11 compliance notices and 16 formal cautions to non-compliant franchisees. Inspectors also recovered a total of $9,329.85 in back pay for 26 workers who were underpaid during a one-month assessment period.
Ms James says the agency believes the figure would be higher if underpayments could have been calculated accurately, but with so many deficiencies in the outlets’ records, being certain of the true extent of the wage rip-offs is impossible.
“There’s no question that if these findings indicate the norm in this network, and if these underpayments are replicated throughout the business month after month, we are quickly looking at millions of dollars of underpayments over the course of a few years,” she said.
The investigation also found that a contributing factor to the high rates of non-compliance was that 17 of the 23 franchise operators were from non-English-speaking backgrounds with minimal knowledge or experience of Commonwealth workplace laws.
Ms James says these factors, when paired with low-skill work in competitive markets, have escalated the risk profile for the network.
“Caltex should have recognised this in its business model by ensuring franchisors properly understood their obligations and conducted monitoring to assure itself that obligations were being met.”
According to Ms James, the FWO throughout the investigation had offered Caltex the opportunity to enter into a compliance partnership with the FWO, but Caltex had failed to commit to the proposal or discuss it in any detail.
Now that Caltex has announced it intends to convert all its franchised service stations to company-operated stores by mid-2020, the FWO has called on Caltex to engage seriously in the offer of a compliance partnership so that the regulator and the Australian community can be confident Caltex is operating openly and honestly.
“The Australian public expects nothing less from such large and reputable companies, and recent changes to the law mean that in some circumstances franchisors or holding companies can now be held liable for breaches or underpayments by their franchisees,” Ms James said.
Caltex responds
A spokesperson for Caltex says the total of 25 sites investigated by the FWO is not a representation of the network of about 1,900 Caltex-owned or affiliated sites across Australia.
“Caltex is concerned about the comments made by the FWO, as our view is that the regulator and industry – and others – need to work constructively if we wish to eradicate wage underpayment,” the spokesperson said. “Caltex has a strong record of good engagement with other regulators and believes constructive engagement between industry and our regulators is important.”
Caltex says that in mid-2016 it established an audit process, an independently run whistle-blower hotline and an assistance fund for franchisee employees affected by the conduct of certain franchisees.
The audit program is working, according to the company, which cites a decline in wage underpayment and the transition of more than 875 former franchisee employees to now work directly for Caltex.
“Since mid-2016, we have audited 292 sites and this will continue for the remainder of our network,” the spokesperson said. “The FWO’s investigations are different and cannot be compared with our own audit program, which has completed 292 audits of franchisee-operated sites to date – about half the network.”
Caltex says its employee-assistance fund has proven to be an “efficient and fair system” making a contribution to employees who have been underpaid by employers.
Administered by a third party, the fund began operation at the end of May 2017 and will continue to operate in conjunction with the ongoing underpayment audits.
Currently 163 sites are eligible for assistance from the fund, which Caltex says has so far received a total of 269 claims in relation to 84 sites. As at February 23, 2018 155 of these claims were approved, 21 were rejected and 81 were in progress.
“Caltex has put considerable resources and effort into our audit program, to systematically examine our franchise network for mistreatment of vulnerable workers, and to stamp out wage underpayment,” the company said.
“Since instances of wage underpayment in our franchise network first emerged in 2016, Caltex has been very clear – unlawful behaviour would not be tolerated and we will act decisively to remove the practice from our franchise network. This work continues.”
