The ruling means locally owned franchisees in Seattle remain on the same fast track as large employers toward reaching $15-an-hour pay for their workers with two to three years.
A federal judge has rejected a request from franchises to temporarily prevent part of Seattle’s minimum-wage law from taking effect next month.
The ruling by U.S. District Judge Richard A. Jones, filed late Tuesday, means locally owned franchisees in Seattle are still on the same fast track as large employers toward reaching $15-an-hour pay for their workers within two to three years.
Jones wrote that the franchise owners and their industry association hadn’t shown the city intended to discriminate against them.
Likewise, he wrote, “there is simply no credible evidence in the record that indicates franchisees will close up shop or reduce operations, or that new franchisees will not open up in Seattle.”
Most Read Business Stories
- Retail survivors: How four family-owned Washington shops have made it in the Amazon era
- The latest pricing glitch spooked Vanguard shareholders | Your Funds
- I shared my phone number. I learned I shouldn’t have.
- Zombie debt: how collectors trick consumers into reviving dead debts
- Apartment owners race to add luxury amenities
Several local franchisees and the International Franchise Association sought a preliminary injunction to suspend the portion of the law that grouped franchisees with big businesses of more than 500 workers, which must pay employees $15 an hour by 2017. Large employers that offer health-care benefits have an additional year.
Smaller employers — those with 500 or fewer employees — have up until 2021, depending on whether their employees get tips and medical benefits.
In a statement after the ruling, Seattle Mayor Ed Murray said, “This is a great day for Seattle’s fast-food franchise workers.”
The International Franchise Association, meanwhile, vowed Wednesday to keep fighting.
“Yesterday’s decision is clearly a disappointment but it is not the end of this fight,” Steve Caldeira, association president and CEO said in a statement. “The ordinance is clearly discriminatory and would harm hard-working small business owners who happen to be franchisees. Those who have set out to destroy the long-accepted, time-tested and proven franchise business model must be stopped.“
The case has drawn national attention as cities across the country adopt higher minimum-wage laws.
The franchises argued they are similar to other small businesses, so it would be unfair to subject them to a faster-paced wage hike.
Jones acknowledged that the owner of a Subway outlet with only 10 employees will be considered a large employer because of his relationship with the Subway franchiser and other Subway franchisees.
But he pointed out that “franchisees and independent small businesses have different business structures,” with franchisees enjoying benefits such as well-known brands, established recipes and procedures, and technology such as online reservation systems.
That provides “a rational basis” for the law’s classification of franchises with large businesses, wrote Jones, adding that his role is not to question the reasoning behind it.
Paul Clement, the franchise association’s attorney and a former U.S. solicitor general, argued in a hearing last week that Seattle’s 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.
Clement also contended the city intentionally discriminated against franchisees to protect purely local businesses.
The ruling by Jones says the franchisees “have not presented evidence of an actual, rather than potential, impact on interstate commerce.”
As for discriminatory intent, Jones wrote that while some “isolated statements” against the franchise model were made by City Councilmembers Mike O’Brien and Kshama Sawant, and by Nick Hanauer, a member of the mayor’s advisory committee on the wage measure, “these statements are insufficient to show that the law was enacted for a discriminatory purpose.”
Jones also wrote that the franchisees hadn’t shown they would suffer irreparable harm if he didn’t grant their request to stop the law from taking effect, and called “unconvincing” the argument that their rights of commercial free speech were being curtailed.
Assistant City Attorney Greg Narver, defending the minimum-wage law before the judge at last week’s hearing, had said the only goal of the law was to raise the pay of Seattle’s lowest-paid workers.
He said the city had classified franchisees with big businesses because it determined they had access to economic resources — including brand-name recognition and national advertising — that would allow them to meet the faster pay-raise schedule.
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 minimum wage.