Caltex Australia announces $20 million fund to compensate underpaid employees

A Caltex sign is seen at a petrol station in Melbourne April 22, 2010. Caltex Australia Ltd, the country's largest refiner, said on Thursday its short-term refiner margin outlook remains challenging, however it was optimistic about its medium to long-term — A Caltex sign is seen at a petrol station in Melbourne April 22, 2010. Reuters/Mick Tsikas

Caltex Australia announces a $20 million fund to compensate underpaid employees, but clarifies it has no liability to pay franchisee employee entitlement. In its announcement, the company says it establishes the fund because it wants to do the right thing by franchisee employees.

“The fund has been established because Caltex wants to do the right thing by franchisee employees,” the company said in its announcement. Sydney Morning Herald understands that Caltex seeks to pay for the fund with the money it collects from the franchisees responsible for the underpayment, which were terminated from the system.

Caltex assures that the fund will "be administered with fair criteria for assessment of claims" which will be paid "once claims have been substantiated.” It remains unclear what the company’s assessment criteria is going to be.

When a franchisee is "exited" from the Caltex network, workers who believe they have been unpaid are invited to come forward. A three-month window will be given so they can make a claim back dated to 2015. The company was auditing its store networks and has decided to terminate at least 19 franchisees for underpayment or other non-compliances.

Last year, a Fairfax investigation has found that large franchisee networks were engaging in wage fraud. Some individual workers were reportedly physically threatened and prevented from speaking out. In relation to this, the company vowed to stamp out the alleged wage fraud and vowed to terminate all store owners involved in the practice.

However, the move faced resistance from a number of store owners scared by the prospect of losing their stores. Some expressed anger towards Caltex and claimed it should be responsible for a franchisee system that encouraged wage fraud. At least seventy Caltex store owners, workers and their family members marched through the Sydney's business district in March to condemn the management and accuse Caltex of running an unprofitable franchise model.

Caltex denied that underpayment was connected to the profitability of its franchise model. It said it will do an independent review to examine the sustainability of its franchise model and also pledged to root out wage fraud. Australian Financial Review notes that the company also promises to provide jobs to employees affected when a franchisee exits and Caltex takes over operation of a site.

7-Eleven announced a similar fund after underpayments were unveiled across its franchisee network. The company reportedly spent over $90 million to employees from the fund so far. Google faces underpayment allegations too. See details through the clip below.