A new report slams Caltex for widespread breaches of workplace laws.

The Fair Work Ombudsman’s report (PDF) says 76 per cent of the Caltex businesses it audited were non-compliant with workplace laws.

Fair Work investigators probed 25 Caltex franchise fuel stations in Brisbane, Sydney, Melbourne and Adelaide.

Just six of these sites were found to be compliant with workplace laws – a non-compliance rate of 76 per cent.

Fair Work Ombudsman Natalie James says there was a large range of breaches.

“From underpayments to not giving pay slips, deductions for till imbalances and, most seriously, pretty deficient record keeping,” she told reporters this week.

“When records are not reliable it becomes very hard to work out the real extent of the underpayment, and so the amounts that we've uncovered I would suggest are the tip of the iceberg.

“FWO’s report shows Caltex Australia has been presiding over a non-compliant and unsustainable operating model.

“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,” Ms James said.

The Fair Work Ombudsman has already commenced proceedings against the former operator of the Caltex Five Dock service station in Sydney, Aulion Pty Ltd, and has also initiated proceedings against Abdul Wahid and Sons Pty Ltd, the former franchisee of a number of Caltex outlets in Sydney.

In both cases, the ombudsman alleges that 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.

Inspectors also recovered a total of $9,329.85 in back-pay for 26 workers who were underpaid during a one-month assessment period.

Ms James said the agency believes the figure would be higher if underpayments could have been accurately calculated, but with so many deficiencies in the outlets’ records it is impossible to be sure of the true extent of the rip-offs. 

“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 said.

The investigation also found that a contributing factor to the high rates of non-compliance was that 17 of the 23 franchise operators were from non-English speaking backgrounds with minimal knowledge or experience of Commonwealth workplace laws.

Ms James said these factors, when paired with low-skill work in competitive markets, escalated the risk profile for the network.

“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.

“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.”

Ms James said throughout the investigation, the FWO had offered Caltex the opportunity to enter into a compliance partnership with the FWO but Caltex had failed to commit to the proposal or discuss it in any detail.

Now that Caltex has announced it intends to convert all its franchised service stations to company-operated stores by mid-2020, Ms James has 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.