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Bird's-Eye View after Appeal on Seattle's Minimum Wage Case


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A protest advocating for raising the minimum wage in Seattle.

The International Franchise Association will appeal a federal judge’s ruling last week in the Seattle minimum wage case, in which the court denied a petition to block a portion of the ordinance the IFA and five franchisee plaintiffs deem discriminatory.

Starting April 1, large businesses in Seattle—defined as those with more than 500 employees—will be required to raise the minimum wage to $15 an hour over three years. Smaller businesses will have seven years to phase in the increase, but the new law classifies Seattle’s 600 franchisees as large employers because they’re part of a franchise network.

“In reality, these are small, locally owned businesses that should be given the extra time to plan for the wage increase, just like all other small businesses in Seattle,” said IFA CEO Steve Caldeira in a statement.

The IFA’s lawsuit, filed last June, claims the “discrimination violates the Commerce Clause of the U.S. Constitution, because 96 percent of the franchises operating in Seattle are affiliated with an interstate commerce network.”

In his ruling, Judge Richard Jones acknowledged franchisees are businesses legally separate from their franchisor, but stated they benefit from resources that an independent business does not have.

 “Despite this legal separateness, however, franchisees are not free to do as they please,” he wrote. “Franchisees accede to the franchisor’s restrictions because being part of a larger network provides significant benefits.”

In addition, he wrote, “franchisors also have the ability to use their greater financial resources to support the franchise by aiding franchisees during times of business stress.”

Shannon McCarthy is a partner at Seattle law firm Miller Nash Graham & Dunn, who attended the hearings because they’re in her “backyard” and the case is drawing intense interest across the country. She and her firm are not involved in the case.

She said she wasn’t surprised by the judge’s ruling, given the dialogue during oral arguments, but she thinks he got it wrong. “The judge just did not seem persuaded by the plaintiffs’ arguments that the statements made by various council members showed discriminatory intent,” she told this blogger.

“I just really disagree with the judge’s view, and the city’s position, which is, ‘Listen, the franchisees have all these resources in order to weather this higher, quicker implementation.’ Franchisees don’t get money from their franchisors. It’s a contract that they’ve entered into that allows them the right to use a trademark for a fee, but none of those fees flow back to the franchisees. 

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
 twitter.com/mlarson1011.
 

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