The NSW Supreme Court ruled in 7-Eleven’s favour that its actions of terminating a franchisee were a justified response to underpayments. 7-Eleven had terminated an agreement with a franchisee after it came to light that they were seeking ‘cash-back payments’ from their employees.
Two employees of the terminated franchisee were allegedly underpaid by the cash-back payments, which saw the employees paid the correct award wages but then also required them to return part of those wages back to the franchisee.
The court was shown evidence regarding the two employees allegedly underpaid, allowing the court to rule that the franchisee had engaged in fraudulent behaviour, and as a result caused damage to 7-Eleven’s reputation.
The franchisee agreement allowed the franchisor to terminate the agreement on the grounds of fraudulent behaviour in connection with the business.
Under the cash-back scheme, employees were found to have been underpaid effectively below the minimum wage.
The franchisee denied the claims and argued that they had been unlawfully terminated, however the court found his evidence inadequate and ruled that the agreement had been lawfully terminated.