IFA seeks injunction to halt Seattle discrimination against small business franchise owners

WASHINGTON, D.C., March 10, 2015 – 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 local franchise business owners as part of the city’s new minimum wage law. Oral arguments on the preliminary injunction will take place at 9 a.m. PST on Tuesday, March 10 before Judge Richard A. Jones at the U.S. District Courthouse, 700 Stewart St., in Seattle.

IFA and five Seattle franchisees sued Seattle in June 2014 seeking to block portions of the city’s recently enacted law to increase the city’s minimum wage to $15 an hour. The plaintiffs asked the court to enjoin the city from treating small franchisees as large, national companies rather than the small, locally-owned businesses that they actually 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. The ordinance is scheduled to take effect April 1, 2015.

Smaller businesses have seven years to phase in the $15 wage increase. However, the Seattle law treats a single hotel, print center, restaurant or in-home health care provider as though it employs more than 500 people if it is a franchise. This is the heart of the uneven playing field created by the ordinance.   

“Our lawsuit has nothing to do with the minimum wage increase to $15 and everything to do with creating a level-playing field for franchisees so they can  continue to operate  as the independent, locally-owned businesses that they actually are,” said IFA President & CEO Steve Caldeira, CFE. “We are not looking for special treatment for our hard-working franchisees with under 500 employees, but equal treatment with the non-franchised businesses that also have under 500 employees. It is very unfortunate that the Service Employees International Union exerted so much influence over the City and use the minimum wage ordinance as a vehicle to break the franchise model to unionize workers at independently-owned and operated small businesses. We are simply attempting to stop that injustice and level the playing field for these job-creating, local Seattle business owners.”    

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

The plaintiffs’ motion for a preliminary injunction, which was filed in August of last year, asserts that the ordinance’s arbitrary definition of small businesses violates not just the Commerce Clause but also the 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, given their accelerated adoption of the minimum wage increase. 

A copy of the motion can be found here

Under the proposed preliminary injunction, small franchise business owners would pay the same minimum wage just like any other small businesses while the litigation is ongoing.