Caltex on Monday described aspects of the report as misleading and called on the regulator to work with industry. “These 25 sites that were investigated by the FWO is not a representation of the network of approximately 1900 Caltex owned or affiliated sites across Australia,” a Caltex spokeswoman told Fairfax Media. “Caltex is concerned about the comments made by the FWO, as our view is that the regulator and industry – and others – need to work constructively if we wish to eradicate wage underpayment." Caltex said its own audit program was working and wage underpayment was declining. "Since instances of wage underpayment in our franchise network first emerged in 2016, Caltex has been very clear - unlawful behaviour would not be tolerated and we will act decisively to remove the practice from our franchise network," it said.

It noted that of the 19 outlets found to be non-compliant by the FWO, only two were facing further action. However, a FWO spokeswoman said the findings of its investigation were indicative of widespread issues across the Caltex network. "There is no reason to think that the profile of the workforce in the outlets we looked at across a number of states, including a high proportion of visa workers and a high proportion of franchisees from a culturally and linguistically diverse background, would not be indicative of the network as a whole. Combined with the 24/7 nature of the business, this represents a high risk profile," she said. “We have submitted a number of options to Caltex over the past 18 months regarding an appropriately tailored arrangement that would address the causes of the non-compliance in the Caltex network but Caltex is yet to respond with any meaningful commitment." Caltex last week said it would bring all its petrol stations under company control by 2020 but denied the move was in any way connected to widespread wage fraud in its franchise network unearthed by a Fairfax Media investigation in 2016.

The FWO has been investigating complaints about the 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. Inspectors found evidence of underpayment of wages, non-payment of overtime and penalty rates as well as record keeping and pay slip breaches at most of the sites it visited. FWO’s report shows Caltex Australia has been presiding over a non-compliant and unsustainable operating model. Inspectors also reported concerns about the accuracy of the time and wage records provided by non-compliant franchisees. Legal action is being taken against two franchisees for allegedly providing falsified records.

In both cases, the Fair Work Ombudsman alleges 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. Loading Replay Replay video Play video Play video Inspectors recovered a total of $9329.85 in back pay for 26 workers who were underpaid during a one-month assessment period. But with so many deficiencies in the outlets’ records it was impossible to be sure of the true extent of the wage rip-offs, the ombudsman said. The investigation found that 17 of the 23 franchise operators were from non-English speaking backgrounds, with minimal knowledge or experience of federal workplace laws. This had made low-skilled employees more vulnerable to exploitation in a competitive market.

“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,” Ms James said. Fair Work Ombudsman Natalie James said it is clear Caltex's checks were inadequate and failed to properly consider the dynamics at play in its business. Credit:Andrew Meares “While Caltex claims it had a practice of carrying out annual reviews and audit processes to ensure compliance with the law, it is clear these checks were inadequate and failed to properly consider the dynamics at play in its business.” “There’s no question that if these findings indicate the norm in this network, and if these underpayments are replicated throughout the business month after month, we are quickly looking at millions of dollars of underpayments over the course of a few years,” Ms James said. “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.

“Sixty per cent of the 194 employees the Fair Work Ombudsman obtained records for were visa holders and nearly 26 per cent under the age of 24." Ms James has repeatedly 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. “The Australian public expects nothing less from such large and reputable companies, and recent changes to the law mean that in some circumstances franchisors or holding companies can now be held liable for breaches or underpayments by their franchisees,” Ms James said.