IFA Press Release: IFA Seeks Injunction to Halt Seattle’s Discrimination Against Small Franchisees

WASHINGTON, D.C., Aug. 6, 2014 – The International Franchise Association, the world’s largest organization representing franchise owners, has asked the U.S. District Court for the Western District of Washington to issue a preliminary injunction preventing the city of Seattle from discriminating against small franchise businesses as part of the city’s new minimum wage law.

IFA and five Seattle franchisees sued Seattle on June 11 seeking to block portions of the city’s recently enacted law to increase the city’s minimum wage to $15 per-hour. The plaintiffs asked the court to immediately enjoin the city from treating franchisees as large, national companies rather than the small, locally-owned businesses that they are.

Seattle’s ordinance requires large businesses, defined as those with more than 500 employees, to raise the minimum wage they pay their employees to $15 an hour over three years starting in April, 2015. Smaller businesses get seven years to phase in the wage increase. But at the request of the Service Employees International Union (SEIU), the law treats a single hotel, print center, restaurant or in-home health care provider as if it employs more than 500 people due to its affiliation with a national chain, even if it only employs five people, thereby creating an uneven playing field.

The city’s ordinance willfully categorizes small, independently-owned franchise owners as big, out-of-state businesses, a violation of the Commerce Clause of the U.S. Constitution. The lawsuit argues that the Seattle ordinance defies years of legal precedent clearly defining a franchisee as an independent local business owner who operates separately from its franchisors that provide brand and marketing materials, based on the payment of an initial franchise fee and ongoing royalty payments to use the brand’s trademark.

The plaintiffs’ motion for a preliminary injunction argues that the ordinance’s arbitrary definition of small businesses violates the Commerce Clause and Equal Protection Clause of the U.S. Constitution, as well as Washington State’s Constitution. The motion also contends that an injunction would be in the public interest and that franchisees will suffer “irreparable harm” unless a limited preliminary injunction is granted.

A copy of the motion can be found here.

“The only conceivable logic for the Seattle city council to pass such a deliberate and unfair ordinance would be to score political points by helping the SEIU increase its membership and enrich its steadily-dwindling coffers. The ordinance is clearly discriminatory and severely hurts hard-working small business owners who are franchisees,” said IFA President & CEO Steve Caldeira, CFE. “This shortcut cannot be accomplished through a city ordinance and our lawsuit – and now our motion for preliminary injunction – will provide franchise small business owners their rightful opportunity to present this case in court. Under the guise of raising the minimum wage for workers, the SEIU has blatantly attempted to destroy the long-accepted, time-tested and proven franchise business model.”

The IFA is seeking an injunction against the part of the Seattle minimum wage law that unfairly classifies small franchise businesses as large businesses. Under the proposed preliminary injunction, small franchise business owners would pay the same minimum wage as other small businesses while the litigation is ongoing.

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About the International Franchise Association
The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.

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