Even 7-Eleven’s biometric payroll system couldn’t stop a determined franchisee from swiping her employees’ pay.

Melbourne 7-Eleven operator, Jing Qi Xia, had implemented a cash-back scam so she could skim $6,670 of her employees’ wages for work they did between November 2015 and October 2016.

All three of the underpaid employees were Chinese student visa holders under the age of 24.

Wage fraud scandal ignored

Following the 7-Eleven wage fraud scandal in 2015, the company introduced new processes in an attempt to tackle the underpayment of its employees, including the introduction of a biometric management system after August 2016.

To circumvent this, the operator’s former manager, Ai Ling ‘Irene’ Lin – who was also on a student visa and being underpaid – told the employees that they would be paid through the new payroll system, but would have to return any amounts they were paid in excess of $15 per hour in cash in a safe drop box, or directly into her bank account. This was then paid back to the operator.

A “particularly egregious” contravention of the Fair Work Act

In the Federal Circuit Court hearing, it was found that the employees accepted the cash-back arrangement, as the operator had upped their wages from $11 per hour to $15 per hour. This was significantly less than the casual award rates they were entitled to.

Judge Norah Hartnett said that this cash-back scheme depended on the agreement of vulnerable employees who the operator exploited.

She said the scheme was “particularly egregious, as it involved a deception of 7-Eleven head office and circumvented attempts by head office to stamp out the underpayment of employees by 7-Eleven franchisees”.

Small businesses must also pay big fines

The Fair Work Ombudsman (FWO) submitted that the Jing Qi Xia’s cooperation in the investigation was “limited” and that she showed a “lack of contrition” for “the effect of the wilful exploitation of vulnerable employees over an extended period of time” which required a “strong need for both specific and general deterrence”.

The FWO proposed that she pay a penalty between $154,225 and $180,792.

The operator complained that this was excessive in relation to the amounts she had underpaid her employees which she said were “not overly large”.

Judge Hartnett noted that the underpayments were “sizeable for award dependent employees” and “given the time in which they occurred … may have had a greater impact on the employees, being international students, than they may have on the average worker”. One of the employees needed financial support from his family in China to survive in Australia.

She said the fact that the employees were “vulnerable to exploitation in the workplace” was an “aggravating factor in the consideration of penalty” and that “[s]mall businesses have the same obligation as larger employers to meet minimum employment standards”.

The operator’s company, Xia Jing Qi Pty Ltd, was ordered to pay a $154,225 penalty.

Complicit manager must pay too

Former manager Ai Ling ‘Irene’ Lin said “it was not in her nature to question her superiors”, but admitted in the hearing that she had intentionally participated in the fraudulent cash-back scheme.

However, Judge Hartnett said that “following directions from her employer and being on a visa herself, are not excuses for providing false information to a Fair Work Inspector or for being involved in contraventions of the FW Act”.

Even though she was underpaid herself and was placed in a “terrible and illegal position” which went to “her very poor financial circumstances” it did not “ameliorate her responsibility for perpetuating underpayments, including by involvement in cash back schemes”.

The manager was ordered to pay a $9,590 penalty.

Second helping of fines for the operator

In a follow-on hearing, Xia Jing Qi Pty Ltd was then ordered to pay a further $145,800 penalty for underpaying an employee at an Ajisen Ramen franchise in Melbourne. Jing Qi Xia herself was ordered to pay an individual penalty of $26,049.

The underpayment involved another Chinese employee, who was on a working holiday visa.

Between May and October 2016, it was found that she had been underpaid by $9,616, after being paid $11.50 per hour until her final week of work, when she was paid just $179 for 45 hours worked, which equated to $3.98 per hour.

Underpaying employers need a deterrent

Judge Hartnett said that Jing Qi Xia’s conduct was “deliberate and grave” and that “a penalty should be imposed at a level that is likely to act as a deterrent in preventing similar contraventions by like-minded individuals or organisations”.

“Like-minded organisations particularly relevant to these proceedings include employers in the restaurant industry and employers of workers on working holiday visas,” she said.