Legal Challenge Against Part of Seattle Minimum Wage Law Moves Forward

The legal challenge against the discriminatory provisions of Seattle’s new minimum wage law is taking an important step forward. The International Franchise Association and Seattle franchisees last June filed a lawsuit in U.S. District Court to challenge the provisions of the new law that discriminated against small franchise businesses. Then in August, the IFA requested a preliminary injunction to stop the discriminatory provisions of the minimum wage law from taking effect.

U.S. District Court Judge Richard A. Jones has now set oral arguments on that request for a preliminary injunction for 9 a.m. PST on Tuesday, March 10.  This will be the first time that arguments will be made on the legal challenge to the new law in person.  The hearing will be before Judge Jones at the U.S. District Courthouse in downtown Seattle.

Paul D. Clement, a partner at the law firm Bancroft PLLC and a former U.S. Solicitor General, is expected to represent the IFA and the Seattle franchisees at the March hearing.  IFA and five Seattle franchisees sued Seattle in June seeking to stop 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 April 1, 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.

Judge Jones is likely to decide on the preliminary injunction before the law takes effect on April 1. Regardless of the ruling on the injunction, the lawsuit against the franchisee provisions of the new law will continue.  

The injunction – and the lawsuit – seek to stop only the provisions of the new law that discriminate against franchise businesses. If the injunction is granted, the new minimum wage law still takes effect. Small franchise businesses, however, would adopt the $15 minimum wage on the same 7-year timetable as other small businesses, instead of the 3-year schedule currently required in the ordinance.     

To learn more about the preliminary injunction, read IFA’s motion for the injunction here, and the IFA’s further briefs on the injunction here and here.