Caltex to switch from franchising model following investigation by Fair Work Commission

Elizabeth Barry 5 March 2018 NEWS


Out of 25 Caltex franchises, 76% were non-compliant.

An investigation by the Fair Work Commission has revealed systemic non-compliance among franchised Caltex retail stores, with the Commission finding underpayments of $9,329 for 26 employees across the 25 franchises investigated. This follows on from the petrol giant's decision last week to exit its franchising model and move 433 remaining franchised stores into Caltex corporate ownership by mid-2020.

According to the Australian Financial Review, the Fair Work Commission's report found 76% of audited Caltex stores were exploiting workers and 60% of employees were visa holders. Caltex confirmed to the Australian Financial Review it had completed 293 audits – over half its franchise networks – for the period October 2016 to mid-2017 and the results were in line with the Commission's findings.

The Fair Work Commission visited 25 stores as part of its investigation and found 100% of franchise stores in Sydney were non-compliant, 71% in Adelaide, 67% in Melbourne and 60% in Brisbane.

The Commission found a lack of records which suggested "serious and systemic non-compliance" as well as evidence of wage underpayment, non-payment of overtime and penalties and in some cases, deliberate falsification of payroll records.

While Caltex said the decision to switch from its franchising model was motivated by a strategic review rather than the Commission's investigation, it has been dealing with its franchise non-compliance issues for some time. In 2016, Fairfax Media revealed wage fraud which saw employees being paid as little as $13 in cash, much lower than the part-time adult rate for service station employees which started at $19.56 per hour at the time. Caltex audited its entire store network, terminating 19 franchises as of May 2017 and establishing a $20 million assistance fund for underpaid workers.

Transferring business models will come at a cost of $120 million to Caltex, but the shift may be an unavoidable one.

"FWO's report shows Caltex Australia has been presiding over a non-compliant and unsustainable operating model," said Fair Work Ombudsman Natalie James.

"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."

A franchise model can be a popular one for larger companies and allow small business owners to buy into the success of large marketing budgets and brands. However, it's important to undertake research before buying into a franchise to ensure your business won't be damaged by the reputation of other franchisors. The onus of responsibility is also on you to comply with all relevant laws regarding employment and worker payment.

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