Question of The Day: Is The City Discriminating Against Restaurant Franchises?

Should fast food franchises like Subway and McDonalds, owned by individuals, be considered big business? Or are they really just a network of small businesses that should be treated as such by city law?

That’s the question at the center of an injunction filed against the City of Seattle by the International Franchise Association (IFA) concerning the city’s new $15 minimum wage law. The injunction, argued in federal court Tuesday, claims that the law discriminates against franchises by classifying them as big business rather than small-scale interstate commerce.

In response, Assistant City Attorney Greg Narver argued that the IFA did not have conclusive proof that the city intended to discriminate against franchise owners.

Currently, franchisees must adopt the $15 minimum wage within three years — the same time frame as large employers with over 500 employees. Other small businesses in Seattle have seven years to reach the minimum wage.

Lawyer Paul Clement sued the city on behalf of the IFA back in June. In August he filed for the preliminary injunction to allow franchisees more time to prepare for the hike in labor costs.

Clement, who has argued 74 Supreme Court cases, criticized the wording of the law, calling it “facially discriminatory.” Because the city uses the words “franchise network,” he argued, rather than “interstate commerce,” the law is unconstitutional.

Clement wasted no time diving into city emails acquired by the IFA through public records requests. One of those emails was from local billionaire and venture capitalist Nick Hanauer, who served on the Income Inequality Advisory Committee, which advised Mayor Ed Murray on raising the minimum wage. The email, sent to city councilmember Tim Burgess back in May of 2014, explained Hanauer’s thinking around treating small franchise businesses as large employers. A city dominated by independent, locally owned, unique sandwich and hamburger restaurants will be more economically, civically and culturally rich than one dominated by extractive national chains,” he wrote.

Several times during Tuesday’s court appearance, Clement reminded the judge that Burgess had thanked Hanauer for taking leadership on the issue.

That email, along with tweets by city council member Kshama Sawant and statements made by Seattle mayor Ed Murray, Clement argued, are proof that the minimum wage law itself is discriminatory toward national chains.

“Discrimination is so overwhelming on businesses with interstate commerce — we prefer to have local business, they are better for neighborhoods. That is a view someone can have, but it isn’t a view that the commerce clause allows a local government to have,” Clement said.

Narver argued that the statements and Hanauer’s email are not enough to prove that the city was trying to discriminate against franchises. Statements by the mayor and council members, he said, were policy judgments, not discrimination.

“How do we define who is big and who is small?” Narver asked. “It isn’t the role of the court to second guess policy judgments of the council.”

He also pointed out that council members’ statements and views are their own, not those of the city itself. The public, he said, is free to disagree or agree with them.

“Welcome to Seattle. We have lots of citizen commissions and you can’t cherry-pick one statement of one person on a commission and attribute that to the whole city,” he said. “Until the council signs onto a point of view, it is irrelevant.”

Judge Richard A. Jones said he would have his decision on the injunction by next Tuesday.