Should we expect more from lead firms?

The 7-Eleven case has not only highlighted serious problems of worker exploitation in this country, it has underlined the need for lead firms to do more to ensure workplace relations compliance in their franchise network or supply chain, according to Melbourne Law School lecturer Dr Tess Hardy.

The scandal which has engulfed 7-Eleven in the last month is a watershed moment for workplace relations regulation in this country.

“I would be very surprised if there was not some level of reform, and greater resourcing of the regulator, following this incident,” Dr Hardy says.

She says there is an increasing appetite for amending key legislation, including the Fair Work Act, pointing to the current Senate inquiry into temporary migrant workers and the continuing public conversation about the need for more effective enforcement of workplace entitlements.

The expert in employment law and regulatory enforcement says that the issues identified in the 7-Eleven case are extreme, but not exceptional.

“In the last few years, there have been various workplace issues identified in a whole range of branded chains, like Grill’d, Bakers Delight and La Porchetta, amongst others,” Dr Hardy says.

“While the media spotlight is currently on 7-Eleven, it is not an isolated case. Any prospective reform needs to address these broader issues and not just the particular problems affecting 7-Eleven.”

Dr Hardy was invited to appear before the Senate inquiry and has provided both verbal evidence and a written submission about some of the issues that have been identified.

Based on her research, she used the opportunity to identify important limitations of the current statutory regime, and to put forward possible solutions to curb worker exploitation in franchise networks and other problematic sectors, such as the horticulture industry.

“Besides beefing up the penalties available under the Fair Work Act, and introducing a licensing regime for labour hire firms, we also need to consider to what extent lead companies should be held ethically and legally responsible for workplace contraventions taking place in their supply chain or franchise network,” Dr Hardy says.

“While voluntary measures, such as ethical sourcing policies, codes of conduct and independent panels, are commendable, my research suggests that these ‘softer’ initiatives will only be effective and sustained where they are supported by ‘harder’ measures, such as a credible threat of legal liability or reputational damage.”

With the Senate inquiry ongoing, Dr Hardy says a report is not expected for some time, but hopes some of her propositions will help guide any reform that comes from it.

For now, 7-Eleven is doing what it can to protect its brand and its franchisees’ employees. This includes increased monitoring and auditing implemented since being outed in late August.

“Other franchises have been far more proactive in ensuring that their franchisees are complying with workplace laws before these issues have hit the headlines,” Dr Hardy says.

“Lead companies are in a commanding position; they often determine key aspects of the relevant business model, which can have flow-on effects for employers in the supply chain or franchise network. Where serious contraventions are found, lead firms may also have the ability to terminate supply contracts or franchise agreements.

“These types of commercial sanctions are often far more powerful than the legal penalties that are presently available to the regulators.

“We need to ensure that any future reform – including extending liability to lead firms – does not promote counterproductive behaviour where lead firms seek to distance themselves further from the problems. Rather, we want to encourage more lead firms to embrace positive, preventative initiatives.

“This may be one of the most effective ways to ensure that vulnerable workers are properly protected in the longer term.”