Franchise group files to block $15 minimum-wage phase-in

The International Franchise Association is seeking an immediate federal injunction against Seattle’s $15 minimum-wage law.

Seattle Times staff reporter

The International Franchise Association has asked a federal judge to immediately block portions of Seattle’s $15 minimum-wage law, which treats local franchises as large businesses.

In a motion for a preliminary injunction filed Wednesday in the U.S. District Court of Western Washington, the group says franchisees will be irreparably harmed and face a competitive disadvantage because the law treats them as large employers solely because they are associated with a national corporation.

“Who in their right mind wants to become a franchisee in Seattle now? They are immediately placed at a competitive disadvantage to local small businesses,” said Matt Haller, a spokesman for the International Franchise Association, based in Washington, D.C.

He said the association isn’t asking the court to invalidate the whole law, just the parts that require a three-year phase-in to $15 an hour for large businesses while giving small businesses up to seven years to meet the higher minimum.

Five Seattle franchisees and the association filed suit in June to prevent parts of the $15 minimum-wage law from going into effect in April 2015. Despite the delayed start date, Haller said franchisees must start planning now for increased labor costs. That’s why the group is seeking an immediate injunction, he said.

Mayor Ed Murray and City Attorney Pete Holmes declined to comment because of the pending litigation.

The motion filed Wednesday argues that while the minimum wage is a policy decision for the city, the city “took a wrong turn” when it singled out small franchise businesses for “uniquely unfavorable treatment and to favor local businesses. That discriminatory decision crossed the constitutional line.”

The legal brief notes that Seattle is the first city in the country to adopt a $15 minimum wage. It argues that the city is also the first to treat small employers differently from large employers and small franchises differently from all other small businesses.

In what may be an indication of the national importance of the case, the lead author of the brief is Paul Clement, a former solicitor general under President George W. Bush who has argued more than 50 cases before the Supreme Court.

And the city has retained the nationally known litigation firm Susman Godfrey as co-counsel to defend the minimum-wage ordinance.

The lawsuit argues that Seattle’s new ordinance violates the Interstate Commerce Clause of the Constitution, as well as the Equal Protection Clause of the Fourteenth Amendment.

The brief also provides a behind-the-scenes glimpse of the workings of Mayor Ed Murray’s Income Inequality Advisory Committee, which over several months this spring hammered out the compromise agreement that was largely adopted by the City Council on June 2.

The brief includes a declaration from Seattle nightclub owner Dave Meinert, who said that the co-chair of the committee, SEIU (Service Employees International Union) 775 President David Rolf, told him several times that the “purpose behind treating small franchise businesses as large employers under the minimum wage law was ‘to break the franchise model’ and enable labor unions to organize the franchise employees.”

The suit also quotes an email from committee member Nick Hanauer, a wealthy proponent of the $15 minimum wage, saying, “The truth is that franchises like Subway and McDonald’s really are not very good for our local economy. They are economically extractive, civically corrosive and culturally dilutive.”

These statements, Haller said, show that the minimum-wage effort in Seattle intentionally discriminated against local franchisees as part of a broader movement by SEIU to undermine large corporate franchisers.

He said a ruling by the National Labor Relations Board last week, that McDonald’s and its franchisees are jointly responsible for working conditions, is part of the union’s national campaign to break the franchise business model.

Rolf was out of the country Wednesday and couldn’t be reached for comment, but a spokesman for the union noted that Seattle’s $15 minimum-wage law is about pay, not about getting new members.

“In the city ordinance, there’s no unionization of people who will make $15 an hour,” said Jackson Holtz, SEIU spokesman.

The lawsuit also contains declarations by several local franchise owners who say they have taken all the financial risks to build their businesses and receive little in the way of training, branding or corporate support. They say they’ll have to pay higher wages for the first four years after the minimum-wage law goes into effect while local businesses of similar size will pay less.

Charles Stempler, who owns two AlphaGraphics franchises in Seattle, said he invested his own money to finance the purchase of the business and pays marketing and franchise fees to the parent company. While he received four weeks of training from the company, he said, “I paid all the costs of my training — room, board, tuition and travel costs.”

Sage Wilson, spokesman for Working Washington, which lobbies for fast-food workers, said the declarations show so little benefit, “It’s hard to understand why anyone would become a franchisee under the model they describe. They pay a lot of money and get nothing in return.”

Lynn Thompson: lthompson@seattletimes.com or 206-464-8305. On Twitter @lthompsontimes