Franchise Operations

Franchisees Running “a Modern Plantation System”?

7-11 has announced a widespread internal review of workers at its 5,600+ franchises, following a federal investigation into what prosecutors described as “a modern plantation system.”

Undocumented workers from Pakistan were given stolen identities, including Social Security numbers. The identities were taken from people who were deceased and in at least one case two workers shared a single Social Security number. Workers were paid for only a small part of the 100 hours they worked each week, and were housed in substandard housing — the source of the “plantation” characterization.

Complaints from workers and tax discrepancies brought the scam to the attention of the federal investigators. This is the largest immigration scandal the department has ever uncovered, according to the New York Times.

In this case, it is clear that criminal wrongdoing was involved. At least 50 illegal immigrants were recruited by the miscreants and mistreated through wage theft. Prosecutors acknowledge that the employees “were not innocent victims in this scheme, but they were abused.” Prosecutors also believe that this may be a widespread pattern — thus the 7-11 internal review.

The people who committed the crimes that started it all are simply criminals if these allegations are correct, so their experience doesn’t apply to franchisees as a whole. For the rest of the 7-11 franchisees, however, there may be consequences they didn’t foresee.

7-11 doesn’t have safeguards in place, according to reports on the crime. This means that the burden of making sure that all hires are legal falls on the franchisees. If you invest in a franchise business, you can expect support and guidance from the franchisor, but you also have legal responsibility.

As a new franchisee, you might not be aware of all the ins and outs of hiring regulations. Your franchisor might give you a heads-up — or might not. Your lawyer might brief you on it — if you ask.

Some 7-11 franchisees — or other franchisees — might employ undocumented workers unknowingly. A college student with a student visa might not be allowed to work at an after school job, for example, but a franchisee might not realize that. Seeing evidence that the student is in the country legally, you or anyone might assume that it’s legal for you to hire him or her.

Many new business owners, franchise or otherwise, could be deceived by false documents. You might have a worker fill out a W-9 and neglect to ask to see the Social Security card. You might even hire people and have them start work, planning to deal with the paperwork later.

7-11 had all the employee data sent in to the corporate office, but there was nothing built into the database that would alert the franchisor that there was a problem. Without any automatic red-flagging, many problems could just slip right into the database. The existence of the database might have made the franchisors and franchisees alike feel safe, but with no human oversight and no automatic alerts, capturing the data really didn’t protect anyone.

Many careless franchisees might find themselves in hot water as a result of the wrongdoing of a few criminals.

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