Saturday, November 11, 2017

7-Eleven Labor Scandal (2015)

7-Eleven was involved in the largest labor scandal
in Australian history in 2015.

    7-Eleven is one of Australia's largest convenience and gas stops and has twice been named Australia's "franchiser of the year". Trouble came to 7-Eleven in 2015 however when an ABC documentary series called Four Corners revealed their use of exploitative and illegal work practices to reduce it's labor costs. Young and foreign workers at 7- Eleven were being grossly underpaid, most of the time more than 50% below minimum wage. The young and foreign workers were being targeted, but this problem was throughout the company in Australia as almost all workers were facing this  problem. This ethical controversy at 7-Eleven was exploited and led to the resignations of their chairman Russ Withers and their CEO Warren Wilmot. It has been argued that the wage fraud ad labor exploitation was a way to keep stores costs down and increased profits for both franchisees and especially for the parent company. Workers were being payed for every other hour of work and foreign workers were threatened to be reported if they spoke out. Even after being under investigation for 12 months, The Fair Work Ombudsman launched a fresh investigation in 2016 when new evidence emerged of franchisees still exploiting and garnishing employees wagers. The underpayment of workers and a new sinister cash back plan was noted in the 2016 investigation which had seen employees being paid in full but then having to give half back to the franchisee. In the Australian business model set for 7-Eleven by their executives, the head offices was receiving and enormous 57% of gross profits. This was leaving stores to cover almost a quarter of a million dollars in staffing costs on just 43% of their revenue. This is a very low percentage to try to manage the huge cost of labor being put on franchisees. With this percentage left to pay employees, franchisees were paying nearly half of what they actually earned. An employee working a 40 hour shift would be paid around $12 an hour, when at the time the award rate in Australia was around $23.90. Franchisees were able to doctor this by fixing the time sheets to show only half of what the employees actually worked. The misconduct continued in the form of blackmail as international students that were working for the company were often threatened to be reported to the immigration department if they spoke out about their wages. This threat was also made to employees to make them work longer hours while being paid half of what they earned. At the time, the Australian student Visa would only allow students to work 20 hours per week, however with this blackmail tactic, students were working 40-60 hour weeks and being paid as if they worked the allowed 20 hours. Fairfax media in Australia noted that unnamed franchisees of the company came out after the allegations stating that it is impossible for a company that runs 24/7 to be profitable without ripping off their employees. 
Australia is home to more than 620 7-Eleven
 stores from the east to the west cost.
  The stakeholders in this controversy are the many employees that were being cut short of money while working hard everyday for 7-Eleven. This also effects future franchisee owners of the company as this problem would deter people from wanting to work at 7-Eleven or even be a customer of the store. 7-Eleven is also an enormous company that has a parent company named 7-Eleven Malaysia Holdings Berhad. This company is traded as equity in Malaysia. The stakeholders of this firm were greatly effected by this event as public image went down as well as the stock price. All of the families who lost out on half of their wages were struggling to make ends meat and pay bills when they should have been receiving twice as much pay for their work. It was very hard for the company to rebound from this huge scandal. After the wage settlements and money paybacks, may of the workers left the company to find new employment. This left many jobs open withing the major player in their respective industry. The opening saw themselves very hard to fill however, in light of the scandal and the overwhelming fact that they were back under investigation just one year after this whole scandal really blew up.  
  Individualism is all about maximizing the profits of the business owners without breaking the law. In the case of 7-Eleven, they absolutely maximized profits by paying their workers half of their money, however this was only made true by breaking the law in multiple cases. Besides blackmailing their foreign and diverse workers, they were practicing institutionalized fraud and labor exploitation on their hard working employees. Even though this was maximizing their profits and making franchisee's and higher owners very happy; the lower level, blue collar, front line workers for the company were being financially abused which was of course against the law. 
  The Case Manual states that "Business actions should aim to maximize the happiness in the long run for all conscious beings that are affected by the business action" (Salazar 17). In this case of 7-Eleven, they went against Utilitarianism thoughts and were maximizing the happiness of only upper management and owners. There is no way that the workers that were receiving half of the money the worked for were happy. By just making upper
The labor scandal at 7-Eleven cost the company tens of millions
 of dollars and lost the trust of most of their employees. 
management and franchisee owners happy, they were risking getting caught and penalized and ultimately losing their job. It is clear that the money was way more important to them then maximizing happiness in the long run for all conscious beings affected by the business action. 
  "Always act in ways that respect and honor individuals and their choices. Don't lie, cheat, or manipulate or harm others to get your way. Rather, use informed and rational consent from all parties." (Salazar 17). This is the thinking of a Kantian and it is clear this wasn't thought of at all when the decision was made to pay half their wages and blackmail foreign employees. Owners did not respect their employees at all when they didn't pay them for what the were worth. They were lying on time sheets to make it seem like only 20 hours were worked and they also manipulated their employees into fear with risk of reporting them. This was all very against Kantian thinking. They were stealing hard worked money from employees for themselves. 
Many of Australia's 7-Eleven stores were reviewed and
 near 50% had findings of labor laws broken. 
Virtue Theory 

   "Act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits." (Salazar 17). This is the description of the Virtue Theory and it is clear once again that this way of thought was not considered or executed by owners and management. Their character traits were very bad as they stole and manipulated employees. In no way was any good character or virtue made in the decision to do this to maximize profits. The vicious traits that made them choose to hurt families and workers with less money was a risk that they decided should be done in order to continue to maximize profits for their business. 


Ferguson, Adele. 7-Eleven's wage fraud sparks $170 billion blow back. The Sydney Morning Herald, The Sydney Morning Herald, 26 Aug. 2016,

Rhodes, Carl . 7-Eleven, Volkswagen cases show why we should push back on 'corporate ethics'. 25 Nov. 2017, Accessed 27 Nov. 2017.

Salazar, Heather. The Business Ethics Case Manual. n.d

Syfret, Wendy. Everything We Know So Far About 7-Eleven Australia's Wage Fraud Scandal. Vice, 1 Sept. 2015,

Yahoo! Finance. 5250.KL Profile | 7-ELEVEN MALAYSIA HOLDINGS BERH Stock.
, Yahoo!, 27 Nov. 2017,

7-Eleven Corporate. About Us.,

1 comment:

  1. Your blog post was very thorough and well researched! I had no idea so many 7-Eleven franchisees had abused and underpaid so many of their employees. It's evident the company and franchisees have the inability to learn from each others' mistakes as the same issues keep being repeated. I thought your graphics were intentional and helpful to your content, especially the graph you included to illustrate your findings. Overall you did a great job!