Federal lawsuit challenges Seattle’s $15 minimum wage

A federal lawsuit filed Wednesday challenges Seattle’s adoption of what would be the nation’s highest minimum wage as unfair to small franchises.

The Seattle City Council voted unanimously this month to gradually raise the minimum wage to $15 an hour. The plan gives businesses with more than 500 employees nationally at least three years to phase in the increase — four if they provide health insurance. Smaller businesses get seven years.

In a lawsuit filed in U.S. District Court in Seattle, the International Franchise Association, a Washington, D.C.-based business group, said the ordinance “unfairly and irrationally discriminates against interstate commerce generally, and small businesses that operate under the franchise business model specifically.”

Matt Haller, Senior Vice President of Media Relations at the International Franchise Association, tells KIRO Radio’s Jason Rantz they want people to know they’re not against raising the minimum wage to $15 in Seattle.

“That’s not what this lawsuit is about. This lawsuit is really about the need for equal treatment of small business franchisees. These are franchisees who own their stores, not the whole chain, however under the ordinance that the mayor signed into law last week, franchisees are treated like they are part of the corporate chain.”

For example, an independently owned Holiday Inn Express in Seattle with 28 workers is considered a “large” business under the law because Holiday Inn franchises nationally have more than 500 workers, the lawsuit argues. Meanwhile, other Seattle companies with up to 500 workers are considered “small” and given extra time to adopt the wage.

“The ordinance will impose significantly higher labor costs on small franchisees than on their non-franchised competitors,” the lawsuit said. “It is foreseeable that some small franchisees in Seattle will not survive this prolonged period of unfair competition.”

But Seattle Mayor Ed Murray rejected any assertion of unfairness, saying that the franchises have advantages unavailable to other local businesses. For example, fast food franchises have menus, a supply chain, training and advertising provided by national corporate entities, he noted.

If the $15-an-hour wage floor challenges franchise owners, they should take that up with those national corporations, he said.

“I don’t doubt at all that they are working under some pretty tight conditions, but I think it’s a conversation to have with some of the people who have decided to spend oodles of money on lawyers,” Murray said in a statement emailed by his office.

The complaint, signed by former U.S. Solicitor General Paul Clement, alleges a slew of legal shortcomings with the minimum wage measure, from incompatibility with federal trademark law to violations of the state and federal constitutions.

Among the arguments:

–By increasing the costs for franchises associated with out-of-state companies, the law discourages those companies from doing business in Seattle, thus violating the commerce clause of the U.S. Constitution, which reserves for Congress the regulation of interstate commerce.

–By treating independently owned franchises differently from local companies of similar size, the law violates the rights of the franchises to equal treatment under the law.

–By imposing higher costs on franchises, the law makes it difficult for the out-of-state companies that own the franchise trademarks to maintain the quality of those trademarks, in violation of federal law.

The plaintiffs include Seattle franchise owners of AlphaGraphics, a printing company; BrightStar Care, a home-care company; Comfort Inn; and Holiday Inn Express.

Haller told Rantz these franchisees are useful contributors to the local community and are being put at a disadvantage under the current plan.

“They are small franchisees that are local, that are the sponsors of your little league teams, and your churches,” said Haller. “These are the folks who are being unfortunately put at a competitive disadvantage vis-a-vis similarly sized other small businesses who are not operating under a franchise model.”

The Associated Press contributed to this report.