Caltex establishes $20 Million fund to assist vulnerable workers

Caltex has announced that it will establish a $20 million assistance fund for workers who have not been paid their full entitlements by Caltex franchisees.

The fund will allow both current and former franchise employees to come forward and claim back-payment for underpayments where franchisees are exited from the Caltex network. Caltex will establish a criteria for the assessment of claims which will allow franchise employees to claim for the period from 2015 to date. A back payment will be paid by Caltex to the employee once the claim has been substantiated.

The establishment of the $20 million franchisee assistance fund is the latest in a suite of measures announced by Caltex after Fairfax Media reported allegations of systemic worker exploitation right across its network.

Caltex is in the process of undertaking an audit of its entire franchise network, with 19 franchisees so far either being terminated by Caltex or leaving before their audit was completed. The workplace audits, initiated by Caltex, have reportedly revealed a non-compliance rate of 80%. However, Caltex has cautioned that this figure could be misleading as the audits have been focused on sites where it has identified possible concerns.

Other measures include the establishment of an independently-managed, confidential, employee assistance hotline in November 2016 and the continued offer of counselling to workers that have been affected.

Caltex has always taken a hardline approach to workplace non-compliance with the Company quick to confirm that it does not tolerate any unlawful activity – including deliberate underpayment of workers – anywhere in its network. Unlike 7-Eleven, the hardline stance taken by Caltex has largely protected its reputation and its brand. But it has not stopped the Fair Work Ombudsman from undertaking its own investigations.

The $20 million assistance fund announced by Caltex provides some indication of the costs associated with workplace non-compliance within franchise networks. A similar assistance fund was established by 7-Eleven. To date, 7-Eleven has received 2341 claims and made back payment in excess of $90 million.

The Protecting Vulnerable Workers Bill:                   

Caltex has always maintained that it has no liability to pay franchisee employee entitlements under the current legislation. But this is all about to change. The Government’s Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 contains a suite of measures specifically designed to deter unlawful workplace practices and protect vulnerable workers.

The Protecting Vulnerable Workers Bill has been referred to the Senate Education and Employment Legislation Committee for inquiry and report by 9 May 2017. It seems that some franchise businesses continue to cling to hope that the Protecting Vulnerable Workers Bill will be watered down, or perhaps even abolished altogether. But the submissions received by the Senate Committee indicate that this is very unlikely. Indeed, we do not expect there to be any significant amendments to the nature or effect of the legislation as it is currently drafted.

Unsurprisingly, specific provisions which propose to make franchisors liable for breaches of the Fair Work Act committed by franchisees within their franchise networks have those in the franchise sector worried. Once passed, the legislation will significantly increase the risks and potential liability of franchisors. Those who choose to act now to take proactive positive steps to identify and address workplace non-compliance will be broadly exempt.

In particular, the submissions in relation to the Protecting Vulnerable Workers Bill all but acknowledges that franchisors have been largely ineffective in preventing and responding to workplace non-compliance within their respective networks. Once passed, the legislation will effectively provide the Fair Work Ombudsman with the mandate it requires to undertake a deep review of the franchise sector. Indeed, a widespread compliance audit campaign specifically targeting the franchise sector is almost inevitable.

HR Assured, in conjunction with its parent company FCB Group, has extensive experience in working with franchisors to develop strategies to mitigate their risk in anticipation of the new legislation. To confidentially discuss the proposed changes and the ways in which FCB Group can assist you, please do not hesitate to contact Rod Marshall on +61 2 9922 5188 or via email: rwm@fcbgroup.com.au.

For more information on the recommendations and what this means for you, clients should contact the HR Assured team. If you’d like more information about the benefits of becoming an HR Assured client contact us today for an informal chat.