One of the roles of an international franchise lawyer, is to educate his/her clients on specific wage and labor laws that apply in the country where they want to do business. Never has this been more important than now, as we are in the wake of the massive 7-Eleven wages fraud scandal where owners of 7-Eleven franchises worldwide have been accused of violating local minimum wages laws. Wage fraud is not limited to 7-Eleven.

The U.S. Department of Labor, has found that within the last year “more than $38 million in back wages were owed to nearly 47,000 restaurant workers worldwide – almost exclusively due to minimum wage and overtime violations.” As a result of the fallout of 7-Eleven case, as well as systemic minimum wage compliance abuse, government agencies are stepping in to either pass tougher laws or to obtain agreements with franchisors to ensure that franchisees will be educated and supervised to make sure that they comply with local labor and wage laws.

As recently as this month, the U.S. Labor Department Wage and Hour Division, entered into an agreement with “SUBWAY“, the world’s largest franchisor, in what is being called a creative partnership. The purpose of the partnership is to make clear that, to the extent that tougher laws are not passed, a franchisor has an obligation to self-police franchisees to make certain that they are in compliance with all applicable local labor standards. Such a collaboration seeks to mitigate the potential financial fallout that could result from the National Labor Relations Board issuance of a new and vague joint employer standard.

The new joint employment standard seeks to hold a franchisor such as 7-Eleven, MacDonalds or Subway responsible at the highest corporate level for any wage violations on the part of the franchisee. Opponents of the new joint employment agreement argue that compliance at the corporate level, would add an unnecessary layer of bureaucracy, to a company who may be forced to hire armies of attorneys to research and advise on every possible labor law, and ultimately increase franchise costs to such an extent as to threaten the franchise model as a viable business option.

The next step is for Congress to step in and write a law that balances the needs of the franchise corporation with the need to protect the paychecks of vulnerable, lower-wage employees.

At the Law Offices of Mario L. Herman, we advise our clients on their legal responsibilities to comply with local wage and labor laws, as well making them aware of that this high-profile issue has the full attention of the US government.