The compensation panel for 7-Eleven’s underpaid workers just imploded and Allan Fels has gone ballistic

Professor Allan Fels, the former Australian Competition and Consumer Commission chairman, has accused 7-Eleven franchisees of retaliation, intimidation and threats against underpaid workers after the parent company sacked the compensation panel he chairs.

The independent panel, chaired by Fels, alongside economist professor David Cousins, a former ACCC commissioner, was set up in September last year following revelations of the widespread exploitation of workers at 7-Eleven stores. It’s believed up to 20,000 workers were underpaid over the past decade.

7-Eleven issued a statement on Wednesday saying the Fels panel had “agreed to transition the claims process for past under-payment of wages by franchisees to an independent unit within 7-Eleven” and it will close on Friday.

New CEO Angus McKay said the decision “reflects the company’s commitment to integrity, credibility and fairness”.

But Fels took to both Twitter and Facebook for the first time on Wednesday evening to dispute the 7-Eleven claim, accusing the company of attempting to emasculate his independent panel’s work and discredit it, hoping to reduce the cost of compensation claims.

He accused McKay of breaking commitments to accept the panel’s decisions without question, and attempting to change the terms of reference.

Last August, a joint investigation by Four Corners and Fairfax Media alleged up to 60% of 7-Eleven franchisee staff were underpaid, earning between $10 and $12 an hour, less than half of the award wage of $24.69.

7-Eleven chairman Russ Withers and CEO Warren Wilmot resigned in the wake of the scandal. Withers, the billionaire owner of the business, remains chairman of the group’s holding company.

New chairman Michael Smith said it was “incumbent upon 7-Eleven to take responsibility for this process. Ethical corporate standards cannot and should not be outsourced”.

Several weeks ago, the Fels Wage Fairness Panel said it had received 2,800 claims, including some from people overseas who had left Australia permanently.

In the first six months, the panel handed out $10 million, at an average payout of $33,284.

On Wednesday Fels said on Twitter that his panel was “starting to make progress despite difficulties generated by 7-Eleven and by franchisees”, adding that 400 claims, worth $14 million, had been processed with around 2000 outstanding.

While 7-Eleven has set aside $25 million in compensation, Fels told the ABC’s 7.30 tonight that the ultimate compensation figure may be as high as $100 million.

Fels told 7.30 that 7-Eleven was “trying to work up a story there is fraud going on”, but failed to provide any evidence to back the claim.

“It’s just a story they want to generate in order to discredit the panel a bit and give themselves an excuse for managing the process and getting the claims down,” he said.

He said the company plans to set a high standard of proof for any further claims, which would be impossible because franchisees had destroyed data and “7-Eleven itself abetted that whole process”.

Fels labelled the internal panel “bogus” sending a signal to franchises responsible for underpayments that everything would be okay, saying “a huge number [of workers] were intimidated from coming forward by fear of franchisee retaliation”.

“There is, to this day, going on retaliation, intimidation, threats from the franchisees against the employees,” he said.

The new panel will provide recommendations on compensation to workers, which will then be reviewed by the company before they are paid.

7-Eleven says this will result in a faster process.

Fells issued his own statement, via Twitter, taking 7-Eleven to task over its statement.

The full 7-Eleven statement is here.

The company says it will collaborate with the Fair Work Ombudsman (FWO) to ensure the integrity of the process.

Last month the FWO released the findings of its inquiry into 7-Eleven.

The report said in part:

The Fair Work Ombudsman had significant engagement with the 7-Eleven head office between 2009 and 2014 and expected to see improvements in compliance.

We did not.

The FWO said a number of employees reported having approached 7-Eleven with concerns before the inquiry, but felt head office was disinterested in their grievances and was aware of high non-compliance throughout its network.

A key part of the FWO’s conclusion is:

The full extent of information that 7-Eleven received about problems within its network is unknown.

What is clear is that since our auditing in 2009, 7-Eleven had information that some stores within its network had engaged in deliberate attempts to underpay workers, including relying on inaccurate records and/or inputting false information about working hours into the head office payroll system.

Despite these signs, 7-Eleven did not appear to have made major changes to either its payroll system or store review process to target the risk of false record-keeping.

Our Inquiry suggests that the payroll section of the store review process did not sufficiently interrogate store practices, or records, to uncover signs of non-compliance where a franchisee sought to hide it.

7-Eleven had a reasonable basis on which to inquire and to act.

Head office controlled the settings of the system in which the franchisee employers operated.

Moreover, it had the resources and tools to inquire into and attempt to direct the behaviour of franchisees – but did not do so in any significant way until exposed to public scrutiny.

Recent changes to the 7-Eleven model and planned changes to the payroll system are welcome, however it is the view of the Inquiry that 7-Eleven could have acted earlier and done more.

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