Seeking to temporarily halt part of Seattle’s minimum-wage law, local franchisees told a federal judge it singles them out.
Seeking to temporarily halt part of Seattle’s minimum-wage law from taking effect next month, the International Franchise Association told a federal judge Tuesday that the law discriminates against local franchisees.
The trade group and five local franchisees seek a preliminary injunction to suspend the portion of the law that includes franchisees with the big businesses that are on a faster track toward paying workers $15 an hour.
The law, which takes effect April 1, requires businesses with more than 500 workers to pay employees $15 an hour by 2017. Large employers that offer health-care benefits have an additional year.
Seattle’s minimum-wage law
Large employers (501+ employees): Starting April 1, must pay their minimum-wage workers $11/hour. Will reach $15 by 2017. Large businesses that provide health-care benefits will have until 2018 to reach $15.
Small employers (500 or fewer employees): Must pay “minimum compensation.” Starting April 1, two ways of reaching minimum compensation: 1) pay a flat hourly rate of $11 or 2) pay a reduced rate of $10 an hour with the $1 difference made up in tips or payments to a qualifying medical-benefits plan. If the tips or medical-benefits payments do not make up the difference, the employer must do so each pay period. Small employers paying a flat hourly rate will reach $15 by 2019. Those who choose the second option will pay $15 by 2021.
For more information: www.seattle.gov/civilrights/minimumwage.htm
Source: city of Seattle
Small employers — those with 500 or fewer employees — have longer: up until 2021, depending on whether their employees get tips and medical benefits.
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Franchisees who are part of large national brands are classified as large employers under Seattle’s minimum-wage law.
The case has drawn national attention as cities across the country adopt higher minimum-wage laws.
Paul Clement, the franchise association’s attorney, told U.S. District Court Judge Richard A. Jones the law violates the Commerce Clause of the U.S. Constitution by treating small franchisees differently than other local small businesses, purely because those franchisees are affiliated with interstate franchises.
Franchisees are typically locally owned operations, with the owner paying a national company like McDonald’s or Subway specified amounts for everything from food supplies to advertising.
In 2017, Clement said, there could be as much as a $4-per-hour difference in what local franchisees have to pay their workers versus what another small business would be required to pay.
Jones questioned whether there would be discriminatory effects, such as franchisees having to cut jobs or finding it more difficult to compete.
“I’m not sure there’s proof to support me buying into that approach,” he said. “It’s a guess on your part of the impact.”
Clement responded that the franchisees didn’t have to show that differential treatment would result in lost jobs; just that the impact of the law is different for them.
“As of April 1, you’re going to have an unlevel playing field,” he said. “That, in the marketplace, is irreparable harm.”
The franchisees’ attorney also contended the city intentionally discriminated against franchisees in an effort to protect purely local businesses.
Clement cited an email from Nick Hanauer, a Seattle venture capitalist who served on the city’s minimum-wage-advisory committee, to council President Tim Burgess, calling franchises such as Subway and McDonald’s “not very good for our local economy … economically extractive, civically corrosive and culturally dilutive.”
That attitude is fine for an individual, said Clement, “but when a city embraces it as a policy, that runs square into the Commerce Clause. That’s 100 percent forbidden by the Commerce Clause. It’s not a permissible government objective.”
Seattle Assistant City Attorney Greg Narver, defending the minimum-wage law, said an email from an advisory committee member was not enough to show discriminatory intent by the City Council or mayor.
The city had classified franchisees with big businesses, Narver said, not because of protectionism but because it determined that franchisees had access to economic resources — including brand-name recognition and national advertising — that would allow them to meet the faster pay-raise schedule.
“The stated goal of the ordinance is to raise the minimum wage for Seattle’s low-wages workers. That’s it,” he said.
Narver also said there was no proof local franchisees would be irreparably harmed during the time period that a preliminary injunction would likely cover. As of April 1, for instance, there’s no more than a $1 difference between what small and large employers have to pay.
What the plaintiffs want to do, he said, is “take that $1 difference from workers without showing that that $1 disparity is going to cause (franchisees) irreparable harm” during the period of the injunction.
Jones said he hopes to rule on the preliminary injunction by next Tuesday.
In Seattle, there are 600 franchisees — including fast-food restaurants, hotels and business and personal services — that operate 1,700 franchise locations and employ 19,000 workers, according to the International Franchise Association. The association did not know how many of the 19,000 make the minimum wage.
Ron Oh, whose family owns a Holiday Inn Express in North Seattle and is one of the five franchisees that are suing the city, attended the hearing.
“They’re taking my business and pigeonholing us into ‘They’re this giant corporation. Let’s scapegoat them,’” he said after the hearing. “Honestly, I’m afraid.”
Earlier in the day, about a dozen demonstrators held signs outside the courthouse in support of upholding all of the minimum-wage law.
Jason Harvey, who works for minimum wage at the Burger King in Ballard, said getting even the small bump in pay slated to start in April will make a difference.
“I’m looking forward to $11 an hour to get off food stamps,” he said.