Judge rejects bid by franchises to block new Seattle minimum wage

Reuters News
Posted: Mar 18, 2015 1:24 PM

By Daniel Wiessner

(Reuters) - A U.S. judge has denied a business group's bid to block part of a law that will raise Seattle's minimum hourly wage to $15, rejecting claims that it favors independent businesses over franchises.

U.S. District Judge Richard Jones in Seattle on Tuesday said the International Franchise Association had failed to back up its claims that the wage law is discriminatory because it requires franchises like McDonald's and Burger King to phase in the new wage more quickly.

The law, which takes effect April 1, requires businesses in Seattle with more than 500 employees nationwide to raise their minimum wage to $15 by 2018; smaller companies have until 2021.

The franchise association's 2014 lawsuit challenges the law's treatment of franchises as subsidiaries of parent companies, rather than completely separate businesses.

"There is simply no credible evidence...that indicates franchisees will close up shop or reduce operations, or that new franchisees will not open up in Seattle," Jones wrote.

The decision did not dismiss the association's lawsuit, but means the law will take effect as planned.

Steve Caldeira, the franchise association's president and chief executive, said in a statement that the group was disappointed but would push forward with the challenge. The group's members include McDonald's Corp and other large franchisers.

“The ordinance is clearly discriminatory and would harm hard-working small business owners who happen to be franchisees," he said.

Seattle Mayor Ed Murray, a Democrat who championed the wage hike, said it was franchise workers, particularly in the fast-food industry, who have been driving the nationwide movement for higher wages.

"Rather than investing in lawyers to prevent workers from earning higher wages, it is time for these large businesses to begin investing in a higher minimum wage for their employees," Murray said in a statement.

The franchise association is represented in the case by former U.S. Solicitor General Paul Clement, who has brought a number of high-profile cases to the Supreme Court in recent years, including a failed challenge to the Affordable Care Act.

Seattle is just one of the large U.S. cities to recently pass laws that will raise the minimum wage above $10 an hour. The franchise association's lawsuit could have an impact in cities like Chicago and San Francisco.

The case is International Franchise Association Inc v. City of Seattle, U.S. District Court for the Western District of Washington, No. 2:14-cv-0848.

(Reporting by Daniel Wiessner in Albany, N.Y.; Editing by Alexia Garamfalvi and Leslie Adler)