WHEN the City Council votes Monday, as expected, to enact a historic $15 minimum wage, expect McDonald’s Chief Executive Don Thompson to be raised at least once as the rapacious face of income inequality.
He is an easy political target. Thompson made $9.5 million last year, allowing him to earn more in one day than the average McDonald’s worker made in 1.4 years.
To level such inequality, the Seattle minimum-wage proposal, as it now stands, defines nearly all franchises as big businesses, giving them only three to four years to raise all workers wages to $15 an hour. Small businesses (defined as fewer than 500 employees) get up to seven years, cushioning financial blow and offering them a temporary advantage over competitors.
The targeting of Thompson by $15 activists is jarring because he, undoubtedly, couldn’t give a rip about Seattle’s radical wage experiment. He certainly isn’t going to pay.
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Who will pay? The 1,700-some independent franchisees operating in the City of Seattle. In addition to fast-food franchises, these are businesses offering in-home care to elders and people with disabilities, pet groomers, barbers and the like.
And contrary to the rhetoric from the $15 wage movement, these businesses are not arms of corporations. Franchiseshave their own tax ID numbers and payroll — they are independent business units separate from the franchiser. Typical agreements offer franchises a brand, a business model, some marketing and bulk buying power. In exchange, franchises pay about 4 to 7 percent of their gross profits back to the franchiser.
If the proposal passes as is, Seattle’s definition of a franchise would put it at odds with state and federal law. It effectively discriminates against a business model — franchises — by giving non-franchises a slower phase-in.
“What’s happening in Seattle is unprecedented,” said Gary Duvall, a Seattle business attorney who represents franchises. He said franchises would “absolutely” sue Seattle if the definition of franchises remains as proposed, and the lawsuit, based on precedent elsewhere, is “very likely” to be successful.
The politics of this decision is clear. Seattle is the first city to move swiftly toward a $15 minimum wage, but not the last. National labor activists will export the model created here. Treating franchises as what they are — small businesses — would eliminate the opportunity to burn Thompson in rhetorical effigy elsewhere.
City Council members, and the mayor, should stop allowing themselves to be so willingly manipulated by activists, should head-off an inevitable lawsuit and should adopt some rationality. The council should strike the definition of franchises.
Editorial board members are editorial page editor Kate Riley, Frank A. Blethen, Ryan Blethen, Sharon Pian Chan, Lance Dickie, Jonathan Martin, Erik Smith, Thanh Tan, William K. Blethen (emeritus) and Robert C. Blethen (emeritus).