More on Wage Fraud

Franchising is an honest and well-regulated business model that has served the public for decades. Franchisees continue to be the leading employers of young adults in, Australia, the United States, and around the world. Recent wage-fraud scandals have been brought to light and CEO’s from 7-Eleven, Pizza Hut, and Caltex have been quick to point out that no system is perfect and once wage payment violations were brought to their attention the companies immediately took steps to attempt to rectify the problem. 7-Eleven has gone as far as to re-write their franchise agreement and institute profit sharing amongst franchisees. Other’s including Caltex CEO Julian Segal has pledged to cooperate with and work hand-in-hand with regulators to uncover and stamp out wage fraud wherever it occurs within their network. But given the scope and depth of wage fraud around the world, regulators are becoming increasingly concerned that franchise companies are not doing enough to stop wage fraud in the first place.

In wealthier western countries like Australia and the United States, where strict minimum wage laws force franchisees to pay their entry-level employees a fixed dollar figure, hiring immigrants and underpaying them is an easy way for franchisee owners who are often immigrants themselves, to add revenue to their bottom line. Since little or no minimum wage laws are on the books in their own country, many do not feel the need to enforce those wage laws of their host country. Many are not even aware that minimum wage laws exist and that they apply equally to immigrant workers as they do to legal citizens who to work at low-wage jobs. Many legal citizens work at a franchise for the summer between semesters in college, or as a very first job to gain experience in the workplace, as well as earn a little extra money. Those jobs are frequently taken from them and given to immigrants that agree to very low, cash only wages, or those that agree to kick back a percentage of their wages in cash to the franchisee.

It is inevitable that the wage fraud problem that has surfaced in Australia is many times worse in the United States. Given the open border policy in recent years, thousands of immigrants have come to the United States from around the world, especially those that have crossed the border from Mexico. How many jobs in the fast food, restaurant, hospitality, and cleaning and landscaping franchise industries are currently being held by undocumented immigrants that are willing to live in untenable conditions and work for mere subsistence wages? How many main stream franchise companies are in violation of minimum wage laws by hiring immigrants “under the table”?

I’d be willing to bet that the Australian wage fraud scandals are just the tip of the iceberg and that federal legislation will eventually be required to prevent franchise minimum wage payment abuses going forward.