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Group of Seattle franchise businesses sue to stop $15 minimum wage

Franchise association says Seattle's new law discriminates against small-franchise owners.

Five Puget Sound business owners and a trade group based in Washington, D.C., filed suit in federal court Wednesday to stop Seattle from enacting a $15-an-hour minimum wage, which would be the highest in the nation when it takes effect.  

The suit, filed by the International Franchise Assn. and five local franchisees, argues that the new minimum wage discriminates against the owners of franchised businesses because it treats them like national corporations instead of the small businesses that they really are.

The ordinance, which was passed unanimously by the Seattle City Council on June 2 and signed into law by Mayor Ed Murray a day later, violates the U.S. and Washington state  Constitutions, the suit says, along with federal statutes and state law, and could put some small franchisees out of business.

The law is scheduled to go into effect in April and will phase in the increased wages over three to seven years depending on the size of the business. Businesses with more than 500 employees will be required to pay higher wages sooner than those with fewer workers.

Under the new law, “a non-franchise business that has 500 employees is treated as a ‘small’ employer whereas a small franchisee with only five  employees is treated as a ‘large’ employer if, as is usually the case, the franchisee is part of a network that employs more than 500 workers,” the suit says.

“As a result, until as late as 2025, the Ordinance will impose significantly higher labor costs on small franchisees than on their non-franchised competitors,” the document continues. “During that period, small franchisees are placed at an unfair competitive disadvantage.”

Murray defended the law, pointing out that it started when fast-food workers walked off the job. He said that restaurant franchise owners have corporate support for advertising, food supplies and menu development.

“They are not the same as a new restaurant that opens up in the city. So I think they're different,” he said in a statement.

Seattle businesses must currently pay their workers at least the Washington state minimum wage; at $9.32 an hour, it currently is the highest in the country. Some other states are in the process of raising their minimums above Washington’s, but none have taken effect. 

“I dont't think the strain is on a fairly slow phase in on the minimum wage, but on a business model that really does, in many cases, harm some of those franchise owners," Murray said. "I don't doubt at all that they are working under some pretty tight conditions, but I think it's a conversation to have with some of the people who have decided to spend oodles of money on lawyers.”

The franchise group’s president, Steve Caldeira, said in a written statement that his organization and the other plaintiffs “are not seeking special treatment for franchisees, we are just seeking equal treatment.”

Filled with lofty language, the ordinance quotes economist Thomas Piketty on the stratospheric rise in income for the top 1% and 0.1% of U.S. earners. It also quotes President Obama, who called the battle against income inequality “the defining issue of our time.”

The franchise association, however, doesn’t see it that way.

“The city’s minimum wage statute arbitrarily and illegally discriminates against franchisees and significantly increases their labor costs in ways that will harm their businesses, employees, consumers and Seattle’s economy,” Caldeira said.

The organization filed the suit the day after San Francisco officials announced that a $15-an-hour minimum wage will be on the November ballot in their city and Los Angeles lawmakers asked city staff to draft an ordinance that would raise the pay of thousands of hotel workers to at least $15.37 an hour there.


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