Franchisers in Seattle are faced with phasing in the city’s $15-an-hour minimum wage more quickly than they had hoped now that the U.S. 9th Circuit Court of Appeals has rejected their bid to be classified as small businesses, a decision the franchisers call discriminatory.
In 2014, Seattle passed a minimum wage law that requires employers to phase in the new $15 minimum wage over the next few years. Employers with 500 or fewer employees have more time to implement the change than employers with more than 500 workers.
The International Franchise Association (IFA) filed suit, claiming the Seattle law is intended to discriminate against franchised businesses. IFA and five Seattle franchisees sued the city in June 2014, asking the court to stop the city from treating franchisees as large national companies instead of small locally owned businesses.
In March, a U.S. district court ruled against the franchisees, leading the IFA to appeal to the 9th Circuit. After the September 25 9th Circuit ruling, the IFA issued a statement calling the decision “blatantly discriminatory.” The association’s executive vice president of government relations and public policy, Robert Cresanti, issued the statement, saying the decision “affirmatively harms Seattle hard-working franchise small business owners.”
Unlike the 9th Circuit, the11th Circuit has struck down restrictions on franchises as unconstitutional under the Commerce Clause, according to Cresanti’s statement. “The absence of controlling [U.S.] Supreme Court precedent, and the conflict among the decisions of the federal circuit courts, suggests that Supreme Court review of the 9th Circuit’s decision may be appropriate,” he said, adding that the IFA was reviewing the opinion to evaluate the next steps in the appeal.
The IFA’s lawsuit argued that Seattle’s law goes against years of legal precedent that defines a franchisee as an independent local business owner that operates separately from its franchisor, which provides brand and marketing materials.