Franchise association says ordinance discriminates against small businesses
By Gene Johnson
Associated Press
SEATTLE (AP) — A federal lawsuit filed Wednesday challenges Seattle’s adoption of what would be the nation’s highest minimum wage as unfair to small franchises.
The Seattle City Council voted unanimously this month to gradually raise the minimum wage to $15 an hour. The plan gives businesses with more than 500 employees nationally at least three years to phase in the increase — four if they provide health insurance. Smaller employers get seven years.
In a lawsuit filed in U.S. District Court in Seattle, the International Franchise Association, a Washington, D.C.-based business group, said the ordinance “unfairly and irrationally discriminates against interstate commerce generally, and small businesses that operate under the franchise business model specifically.”
For example, an independently owned Holiday Inn Express in Seattle with 28 workers is considered a “large” business under the law, because Holiday Inn franchises nationally have more than 500 workers, the lawsuit argues. Meanwhile, other Seattle companies with up to 500 workers are considered “small” and given extra time to adopt the wage.
“The ordinance will impose significantly higher labor costs on small franchisees than on their non-franchised competitors,” it said. “It is foreseeable that some small franchisees in Seattle will not survive this prolonged period of unfair competition.”
But Seattle Mayor Ed Murray rejected any assertion of unfairness, saying that the franchises have advantages unavailable to other local businesses. For example, fast food franchises have menus, a supply chain, training and advertising provided by national corporate entities, he noted.
If the $15-an-hour wage floor challenges franchise owners, they should take that up with those national corporations, he said.
“I don’t doubt at all that they are working under some pretty tight conditions, but I think it’s a conversation to have with some of the people who have decided to spend oodles of money on lawyers,” Murray said in a statement emailed by his office.
The complaint, signed by former U.S. Solicitor General Paul Clement, alleges a slew of legal shortcomings with the minimum wage measure, from incompatibility with federal trademark law to violations of the state and federal constitutions.
Among the arguments:
— By increasing the costs for franchises associated with out-of-state companies, the law discourages those companies from doing business in Seattle, thus violating the commerce clause of the U.S. Constitution, which reserves for Congress the regulation of interstate commerce.
— By treating independently owned franchises differently from local companies of similar size, the law violates the rights of the franchises to equal treatment under the law.
— By imposing higher costs on franchises, the law makes it difficult for the out-of-state companies that own the franchise trademarks to maintain the quality of those trademarks, in violation of federal law.
The plaintiffs include Seattle franchise owners of AlphaGraphics, a printing company; BrightStar Care, a home-care company; Comfort Inn; and Holiday Inn Express.
David Ziff, a former civil litigator who teaches at the University of Washington Law School, said he considered many of the claims frivolous. In a first-blush analysis posted online, he argued that the minimum wage law treats franchises with out-of-state corporations the same as franchises based in the state, so there is little worry about commerce-clause problems.
Furthermore, he said, equal protection claims most often concern laws that discriminate on the basis of race, gender or some other “protected class.” Franchise businesses don’t fit into that category, so as long as Seattle can come up with pretty much any reason at all for treating franchises the way the law does, that claim should be dismissed.
Seattle’s decision to raise the minimum wage was kick-started by last fall’s election of Socialist City Councilwoman Kshama Sawant, who had called for a raise to $15 an hour to improve the plight of low-income workers. Supporters have celebrated their victory this month by calling for a national movement to close income and opportunity gaps between rich and poor.
San Francisco has the nation’s highest hourly minimum wage at $10.74. Voters there will decide in November whether to raise the city’s minimum wage to $15 an hour in 2018.
The minimum wage in Washington state is $9.32 an hour.
Earlier this year, Minnesota raised the state’s guaranteed wage by more than $3, to $9.50, by 2016. California, Connecticut and Maryland also have passed laws increasing their respective wages to $10 or more in coming years.
