An audit of Caltex petrol stations by the petrol giant has revealed almost 80 per cent were underpaying their staff.
Caltex is auditing its entire franchise network and started with stores where it had suspicions wage fraud occurred.
Caltex wage fraud: the system is broken
First it was 7-Eleven. Now, petrol station chain Caltex is under the spotlight for rampant wage fraud throughout its franchise network, as Fairfax’s Adele Ferguson explains.
It has now completed audits of 32 petrol station sites – targeting stores with a high likelihood of wage issues first – and found all but seven had issues.
As a result 19 franchisees, who together controlled 43 sites, have now left the Caltex network after being terminated, leaving before their audit was completed or failing to cooperate with an audit.
Caltex chief executive Julian Segal warned the strike rate could be misleading because so far audits have been focused on sites where Caltex had identified possible concerns.
“Across the remainder of the network, the proportion of exits is expected to be lower than to date,” he said.
A further 57 site audits are well-advanced and another 76 are under way, according to the company. The remaining sites in the 637-store franchise network will be audited during 2017 and 2018.
On Monday Caltex told the sharemarket it would establish a $20 million assistance fund for workers who were underpaid at its franchised service stations, while making clear it felt liability still remained with franchisees.
Caltex says it is trying to ‘do the right thing’ by underpaid workers Photo: Sasha Woolley
“While Caltex has no liability to pay franchisee employee entitlements, the fund has been established because Caltex wants to do the right thing by franchisee employees,” the company said in an ASX statement.
The company will seek to pay for the fund using money collected from the franchisees responsible for the underpayment and who are forced to leave the system.
Caltex CEO Julian Segal says a $20 million assistance fund for workers will be ‘beyond reproach’. Photo: Pat Scala
Yesterday, Mr Segal would not say whether the fund would be independent while he still sorts out the administrative details. He expects to have more detail by the end of the month.
“One thing is certain, the integrity of the fund will be beyond reproach,” he said.
One thing is certain, the integrity of the fund will be beyond reproach
Caltex Chief Executive, Julian Segal
He said the company arrived at the $20 million figure based on an estimate of potential underpayment using data from its audit program.
A Fairfax investigation last year found large franchisee networks were engaging in wage fraud. In some cases individual workers were being physically threatened, or having their families intimidated by armed men, to stop them from speaking out.
Following the allegations, Caltex pledged to stamp out wage fraud, and promised to terminate any store owner found to have engaged in the practice.
But it has faced resistance from a block of store owners scared by the prospect of losing their stores and angry at Caltex which, they believe, should be held accountable for a franchisee system that they claim encourages wage fraud.
In March, 70 Caltex store owners, workers and their family members held a protest led by Sanjeev Sharma. He was later issued with 13 breach notices by Caltex and terminated last month for underpaying a staff member.
Mr Sharma, who previously denied the wage-fraud allegations, yesterday admitted to underpaying his own family members because he was struggling to make a profit.
“At my Granville store, I did, there’s no point denying that. There was no other option,” he told Fairfax Media.
“I have not paid my parents and my wife and my wife’s parents…my whole family including myself.”
He now plans to lodge a claim under the Caltex fund for his whole family.
Mr Segal said applications, such as Mr Sharma’s involving family members, will not be considered.
Caltex has repeatedly rejected the idea underpayment is linked to the profitability of its franchise model.
In November, it announced an independent review looking at the sustainability of its franchise model, while also promising to root out wage fraud.
In February, Mr Segal revealed the outcome of its review, using an opinion piece in Fairfax newspapers to say the Caltex model “allows franchisees to draw a wage, make a profit and pay employees in accordance with lawful wage rates”.
Tean Kerr, from firm Lander & Rogers, represents 40 franchisees who claim the Caltex franchise model is unfair and are fighting the audits.
He said the fund was an attempt by Caltex to manage its liability.
“This is nothing more than a public relations exercise engineered to distance Caltex from liability for systemic issues in a franchise model that it profited from,” he said.
He said investigating allegations of underpayment should be left to the authorities.
“Shouldn’t the FWO be investigating wage issues not Caltex?” he said.