Following extensive media coverage and an investigation by the Fair Work Ombudsman, the Federal Circuit Court has handed down the first penalty against a 7-Eleven franchisee. The franchisee was fined nearly $180,000 and its sole director and shareholder was fined $35,700.

Implications for employers

This case demonstrates that the Fair Work Ombudsman actively pursues contraventions of the minimum entitlement in the modern awards system, particularly where those contraventions attract the media and public’s attention. Employers should ensure that they have adequate systems in place that meet the record keeping requirements in the Fair Work Act 2009 (Act) and Fair Work Regulations 2009 (Regulations),and they pay employees the correct rate of pay and take into account penalty and overtime rates, and other allowances.

Background

On 29 August 2015, ABC’s Four Corners and Fairfax media alleged that 7-Eleven franchises had engaged in systemic underpayment of employees. The Fair Work Ombudsman had been investigating underpayment issues at the Blacktown 7-Eleven store since June 2014. The Ombudsman’s investigation found that between 26 March 2012 and 28 March 2014, two employees were paid around 40% of the amount they were entitled to under the Vehicle, Manufacturing, Repair and Retail Award 2010 (Modern Award).

This case concerned the prosecution of the Blacktown 7-Eleven store’s owner, Amritsaria Four Pty Ltd (Amritsaria) and its sole director Harmandeep Sarkaria. Amritsaria and Mr Sarkaria admitted the following contraventions:

  • underpayment of the casual, Saturday, Sunday, public holiday and overtime rates of pay under the Modern Award;
  • failing to keep records as required by the Act and the Regulations; and
  • Mr Sarkaria was involved in each of the contraventions above as the sole director of Amritsaria.

Decision

Judge Smith found that the underpayment of the two employees was not accidental. It was part of a deliberate effort to retain as much profit for Mr Sarkaria as possible. The underpayments were deliberately concealed by a failure to keep proper employee records and falsification of those records.

In determining an appropriate penalty, Judge Smith took into account:

  • the deliberateness of Mr Sarkaria’s conduct, including the falsification of records;
  • the lack of genuine contrition by Mr Sarkaria, because Mr Sarkaria was not frank and honest during the Ombudsman’s investigation, despite admitting the contraventions at an early stage of the prosecution; and
  • the importance of general deterrence in the context of non-compliance issues at other 7-Eleven franchisees.

Based on the above, Judge Smith determined that each of Amritsaria and Mr Sarkaria should pay 75% of the maximum penalty available for each offence.

Fair Work Ombudsman v Amritsaria Four Pty Ltd [2016] FCCA 968