The Fair Work Ombudsman’s latest Compliance Activity Report shows a workplace non-compliance rate of 76 per cent in the Caltex service network.
“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,” Fair Work Ombudsman Natalie James said, adding that Caltex Australia has been presiding over a “non-compliant and unsustainable operating model.”
The FWO commenced investigations in late 2016 after receiving intelligence indicating an upsurge in compliance issues at Caltex outlets, including non-payment and underpayment of wages; cash payments made “off the books”; false records; and threats of termination or visa cancellation for any workers who complained. Of the 25 retail fuel outlet sites operated by 23 Caltex franchisees in Brisbane, Sydney, Melbourne and Adelaide, Fair Work inspectors found just six of these sites to be compliant with workplace laws, resulting in a 76 per cent non-compliance rate.
Across the non-compliant sites, inspectors found evidence of underpayment of wages, non-payment of overtime and penalty rates as well as record keeping and pay slip breaches. They 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.
The Fair Work Ombudsman commenced proceedings against the former operator of the Caltex Five Dock service station in Sydney, Aulion Pty Ltd, and has also initiated proceedings against Abdul Wahid and Sons Pty Ltd, the former franchisee of a number of Caltex outlets in Sydney.
In both cases, the Fair Work Ombudsman alleges that the absence of accurate time and wage records prevented inspectors from completing audits and determining whether employees had received their lawful entitlements.
During the activity, the regulator issued nine infringement notices, 11 compliance notices and 16 formal cautions to non-compliant franchisees. They also recovered a total of $9,329.85 in back-pay for 26 workers who were underpaid during a one-month assessment period.
James said the agency believes the figure would be higher if underpayments could have been accurately calculated, but with so many deficiencies in the outlets’ records it is impossible to be sure of the true extent of the wage rip-offs, which may amount to millions of dollars.
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. “A large number of employees at the audited sites are young and migrant workers, cohorts that we know to be particularly vulnerable to workplace exploitation and reluctant to complain about mistreatment,” James said.
“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,” she noted. “It is clear these checks were inadequate and failed to properly consider the dynamics at play in its business.”
James stated that the FWO offered Caltex the opportunity to enter into a compliance partnership with the FWO but it failed to commit to the proposal or discuss it in any detail.
With Caltex’s recent announcement that it intends to convert all its franchised service stations to company-operated stores by mid-2020, she 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.
In response a Caltex spokesperson said that they are committed to stamping out wage underpayment anywhere in their network and have taken the actions they are permitted by the relevant Codes and under their agreements with franchisees. In mid 2016 Caltex established an audit process, an independently run whistle-blower hotline, and an assistance fund for franchisee employees who have been affected by the conduct of certain of their franchisees.
Caltex said that their audit program is working and that they are are committed to continue it. Wage underpayment is declining, underpaid workers from exited sites have access to theirr employee assistance fund and over 875 people now work directly for Caltex.
In their stateement Caltex added, “…since mid 2016, we have audited 292 sites and this will continue for the remainder of our network. 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 Employee Assistance Fund has proven to be an efficient and fair system to make a contribution to employees who have been underpaid by employers. Administered by a third party, the Fund will continue to operate in conjunction with the ongoing underpayment audits. The Fund commenced operation at the end of May 2017. Currently 163 sites are eligible and the Fund has so far received a total of 269 claims in relation to 84 of those sites. The average employee payment is around $25,800 and as at 23 February 2018 of the 269 claims received 155 are approved and 81 in progress.Only 21 have been rejected.”
