Franchises sue Seattle over $15 per-hour min wage equal treatment

IFA logo2 thb Franchises sue Seattle over $15 per hour min wage equal treatmentInternational Franchise Association

Federal Complaint Alleges Discrimination Against Franchisees 

SEATTLE – The International Franchise Association (IFA), a Washington, D.C.-based trade group, and five franchisees today filed a lawsuit in U.S. District Court in Seattle on June 11, 2014, seeking to block Seattle’s recently enacted law to increase the city’s minimum wage to $15 per-hour. The complaint alleges the new law illegally discriminates against franchisees and improperly treats them not as the small, locally-owned businesses they are, but as large, national companies.

Seattle Mayor Ed Murray last week signed the law, which requires large businesses, defined as those with more than 500 employees, to raise the minimum wage they pay their employees to $15-an-hour over three years beginning on April 1, 2015.  Smaller businesses have an extra four years, or a total of seven years, to phase in the wage increase.

IFA’s lawsuit asserts that the Seattle statute unfairly requires Seattle’s 600 franchisees, who own 1,700 franchise locations and employ 19,000 workers, to meet the three year deadline for large businesses simply because they operate as part of a franchise network. The lawsuit argues that the Seattle ordinance defies years of legal precedent clearly defining a franchisee as an independent local business owner who operates separately from the corporation that provides brand and marketing materials.

“Hundreds of small, locally-owned businesses and thousands of their employees are unfairly threatened by Seattle’s new law. We are not seeking special treatment for franchisees, we are just seeking equal treatment. The city’s minimum wage statute arbitrarily and illegally discriminates against franchisees and significantly increases their labor costs in ways that will harm their businesses, employees, consumers and Seattle’s economy,” said Steve Caldeira, IFA president & CEO. “We hope the court will block the ordinance to save jobs and prevent Seattle from unfairly singling out one type of business – a franchise – for punitive treatment.”

“Seattle’s new minimum wage law unconstitutionally discriminates against franchisees by categorizing them as big businesses even when they are small and independently owned. A single hotel or restaurant can be treated as if it employs more than 500 people even when it actually employs only 15 people,” said Paul D. Clement, a partner at the law firm Bancroft PLLC and a former U.S. Solicitor General. “We’re asking the federal court to stop this unfair attack on small business owners who happen to be franchisees.”

The complaint names as defendants the City of Seattle and the Director of the Department of Finance and Administrative Services. It seeks an injunction to stop the law from going into effect as scheduled on April 1, 2015. The plaintiffs are IFA; Charles Stempler, owner and operator of two AlphaGraphics stores in Seattle and three elsewhere in Washington State; Katherine and Mark Lyons, owners and operators of BrightStar Care of North Seattle; Michael Park, General Manager and owner of a Comfort Inn in Seattle and president of the Korean American Hotel Owners Association (KAHOA); and Ronald Oh, General Manager and an owner of a Holiday Inn Express in Seattle.

The lawsuit alleges that the ordinance violates the Equal Protection Clause of the U.S. Constitution by arbitrarily discriminating against small businesses simply because they are franchises. For example, a non-franchise company with 450 workers is categorized as a small employer and gets extra time to comply with the law. But a franchisee with just five employees is considered a large employer – and gets less time to raise its wage floor – if its franchise network employs more than 500 workers nationwide.

The lawsuit also contends that the ordinance violates the Commerce Clause of the U.S. Constitution because it imposes regulations based partly on business occurring in other states. For instance, if a Seattle franchisee has only a few workers in Seattle, but its franchisor’s network has more than 500 workers out of state, it is classed as a large employer and gets tougher treatment. Under the new law, a Seattle-based business that happens to be associated with a national franchise can be forced to pay a higher minimum wage than a non-franchise business of similar size.

The complaint also argues that discrimination between franchise and non-franchise businesses is prohibited under the Washington State Constitution and that the Seattle ordinance imposes health care changes that violate the federal labor statute called the Employee Retirement Income Security Act or ERISA.

Go to SeattleFranchiseFairness.com to learn more about the issue and the coalition of Seattle small business owners working together to oppose the franchisee provisions in the city’s minimum wage law. The site, which will be updated regularly, includes video, a petition and an outreach tool for supporters to contact the City Council. Read the full complaint here. Case number: 14-848   

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Posted by at 05:00 | Posted in Economy, Employment, Government Regulation, Labor, Uncategorized | 6 Comments |Email This Post Email This Post |Print This Post Print This Post
  • GObill sizemore

    Washington employers should place a measure on the statewide ballot and ask the people to declare that minimum wage laws must be voted on statewide and not city by city or county by county. There are other ways to approach this that might make such a measure more appealing or more attractive to voters, but I will not muddy the waters further here.

    • .

      IN retrospect, too bad so sad in retrospect for common-sense Oregonians, had you been elected Governor our state might have become weeded PERSnatching organized crime-steers out defecating upon cost effective private sector common sensibilities. That accords well for Bob Tiernan, too.

  • Bob Clark

    I understand the attractiveness of the minimum wage for those who believe in pixie dust (or something for nothing…After all, we don’t have many sweat shops or labor monopsonys like company owned towns these days), but minimum wage law restricts the freedom of people to contract for their own labor services. I should have the inalienable right to negotiate a lower fee for my labor if I so choose.
    Many of us have other sources of income besides our labor, and being able to make a few bucks on the fly even if not at prescribed minimum wage still makes us happy. The alternative in most cases is to just sit idle and pinch our pennies.
    It’s the labor unions pushing this spike in minimum wage and mostly because they prefer hikes in their own pay scales, even if it means fewer job opportunities.

  • Jack Lord God

    What’s the point really? Three years? Seven years? Seattle has told these businesses quite plainly that they don’t want them.

    There is a name for this kind of thing.

    It’s French

    That name, is Detroit.

    Let Seattle do the same. BId them good luck, best wishes and move on. The best way to fight this sort of thing is not to participate.

    When politicians decide they know how to run your business better than you and pull this crap you have three choices:

    Automate. Move. Ship jobs overseas.

    Any of the three is the most patriotic act a business can do for this country. There is no more effective counter to the politician who says you must pay more than to change your practices so as to pay nothing at all. By doing so you invalidate both the politician, and the remedy he prescribes.

    • MrBill97702

      Starnesville from Atlas Shrugged come to mind as well. Let’s hope people come to their senses up there before things get to that point.

  • Pingback: Crusade Begins Against Seattle Minimum-Wage Law's Treatment of Franchise … | Business for Sale()

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