Two, four, six, eight… time for us to legislate?

More laws are not the answer to stopping law breakers, suggests Simon Lord.

In the 1960s, the great Tom Lehrer wrote a song about the Second Vatican Council which sought to modernise the Roman Catholic Church through the use of vernacular languages instead of Latin, and the embracing of modern musical forms. Taking the idea to extremes, the satirist wrote The Vatican Rag, which included, to a ragtime piano accompaniment, the wonderful lines:

Get in line in that processional, Step into that small confessional, There the guy who’s got religion’ll Tell you if your sin’s original. If it is, try playin’ it safer, Drink the wine and chew the wafer. Two, four, six, eight, Time to transubstantiate!

The combination of syncopated rhythm, clever rhyming and an understanding of Catholic practices make it one of the cleverest songs of its time. Sadly, Tom Lehrer himself has stopped writing, observing that the awarding of the Nobel Peace Prize to Henry Kissinger made political satire obsolete.

The lack of such sharp wit is a shame. New Zealand’s best satirist, John Clarke, moved to Australia years ago, but perhaps they have greater need of him than we do. If Tom Lehrer had been writing about that bureaucracy-beleaguered country today, he would surely have had a chorus of politicos warbling: “Two, four, six, eight, time for us to legislate.’ For that is, once again, the reaction to the latest problem to hit franchising there – the 7-Eleven employment scandal.

In essence, this involves allegations that illegal employment practices are rife among 7-Eleven franchisees in Australia, including the falsification of payroll records, withholding of passports and drivers’ licences, and allegations of ‘cash-back’ schemes involving mainly immigrant franchisees and workers. What makes it worse are suggestions that the 7-Eleven business model almost required franchisees to underpay vulnerable staff in order to turn a profit.

7-Eleven’s CEO and senior managers have already resigned, the company has appointed a former head of the Australian Competition & Consumer Commission to lead an investigation, and proposed changing its business model. Legal proceedings have already commenced against some franchisees and more may follow. But the employment laws are apparently not enough: now a private member’s bill has been introduced that would make franchisors accountable for the wages and conditions of their franchisees’ employees. One franchise expert has said it would be the ‘kiss of death’ for small franchises if it came into law.

There’re a number of reasons why the proposed legislation would be so disastrous.

1. Making franchisors accountable for their franchisees’ employment practices wouldn’t just blur the boundaries between the responsibilities of franchisors and franchisees – it would tear them down completely. This is already happening to a small extent in some areas of employment and competition law, but the Australian proposal goes much further.
2. Increasing compliance costs and risks for franchisors would inevitably need to be passed on, making it less possible than ever for small business owners to compete with big business.
3. It would transfer the responsibility for individual franchisees to act within the law to a third party who isn’t actually in a position to ensure that they do so. Franchisees are independent business owners who use the brand and systems of the franchisor to manage their businesses. The system might tell them what to do, but it can’t control how they do it on a daily basis, as every franchisor knows only too well. The more you make franchisors legally responsible for their franchisees’ actions, the more likely it becomes that businesses won’t bother franchising – cutting off small businesses from a valuable source of capital and denying ownership opportunities to individuals.

The truth is that, no matter how much legislation is in place, some people will always break the law. More than a failure of franchising, this case is a failure of the integration of immigrant communities into a society that outlaws exploitation and corruption. Employers are obliged to obey employment law but some choose not to. They prey especially upon immigrants, often from their own communities, and get away with it because of the ignorance, fear and isolation of their victims. And that, I bet, is much more prevalent among independent businesses than among franchises.

Australia already has some of the world’s most stringent franchise-specific legislation. New Zealand has none, yet the two countries have similar rates of franchise disputes. In fact, many of my colleagues in Australia say the legislation has only served to make franchise buyers less cautious about doing proper due diligence, because ‘if it’s regulated, it must be safe.’ Well, employment is regulated, too, but some people still break the law.

Tom Lehrer poked gentle fun at the Second Vatican Council, which sought to communicate and enlighten. What would he do to legislation which serves to obfuscate rather than illuminate, puts responsibility for law enforcement on companies rather than officers of the State, and replaces the need for caution with meaningless reassurance? I’d love to know.