It’s starting to feel as if we can’t go a week without hearing about another business committing some form of wage fraud. Caltex franchisees are the latest in a string of investigations. What is going on?

The latest wage scandal comes to us courtesy of Caltex, which just recently became the target of yet another Fair Work Ombudsman (FWO) investigation.

According to a Fairfax Media investigation, Caltex warned its service station owners that they were about to be raided by the FWO amid accusations of wage fraud and intimidation.

The report revealed that some franchisee employees, many of whom are students from Pakistan or India, have been paid as little as $12 an hour. Other allegations include employees sleeping on mats in back rooms to reduce commute times, and intimidating workers and even their families.

The FWO says it gave Caltex the warning about its raids to “promote compliance across the Caltex network,” and to encourage the company to let franchises know they should expect a visit. However, some current employees state that Caltex franchisees used the advance notice to instruct employees to lie to FWO inspectors about their working conditions and remuneration.

“My manager asked me ‘Don’t tell anyone my real pay rate’,” one current franchise employee tells The Sydney Morning Herald. He says he was threatened with deportation if he speaks out. 

In a statement about the allegations, a company spokesman confirmed that it communicated the FWO’s intentions, but it was only complying with the body’s request to communicate with each site operator about the investigation.

This is not the first time the company has come under scrutiny. An internal Caltex head office document leaked to media in 2004 recommended instilling fear, uncertainty and doubt in franchisees; the aim was to secure the best possible deal for its petrol link-up to Woolworths.  

Over the past 12 months, the company has conducted its own internal investigations into workplace fraud, which resulted in the termination of five franchisees who were found to be deliberately underpaying staff or breaching their franchise agreement. The company is currently investigating an additional 11 franchisees who control 22 sites. This also comes as Caltex is fighting a battle with workers at a site in Lytton, who are on indefinite strike after the company tried to cut wages by 15 percent.

As you can tell, the pressure is on for Caltex to explain its behaviour. How is it that such a history of misconduct can continue? Like most things, behaviour is modelled from the top, but Director of the Franchise Advisory Centre Jason Gehrke tells SmartCompany that a franchise network is only as strong as its weakest link.

“A highly compliant franchisee can still be at risk of their reputation and credibility being affected if another franchisee is doing the wrong thing,” Gehrke says. He goes on to suggest that for anyone looking for franchising opportunities should dig into the company’s history to see if there are past misdemeanours. If yes, are they a one-off occurrence? Or symptomatic of something more foul at play?

Ultimately, franchise owners need to comply with all relevant entitlements for their business – and contact the FWO if they are unsure what these are. “At the end of the day, the payment of the employee entitlements rests with the franchisee,” Gehrke says. “Just because they’re the watchdog, doesn’t mean they will not help businesses be compliant.”

Editor’s note: After publication, it was announced that the wage dispute between National Union of Workers and Caltex has since ended and employees are back at work.