IFA Files Lawsuit Against Seattle for Equal Treatment

 

 

SEATTLE, June 11, 2014 – The International Franchise Association (IFA), a Washington, D.C.-based trade group, and five franchisees today filed a lawsuit in U.S. District Court in Seattle seeking to block Seattle’s recently enacted law to increase to the city’s minimum wage to $15 per-hour. The complaint alleges the new law illegally discriminates against franchisees and improperly treats them not as the small, locally-owned businesses they are, but as large, national companies.

Seattle Mayor Ed Murray last week signed the law, which 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 beginning on April 1, 2015.  Smaller businesses have an extra four years, or a total of seven years, to phase in the wage increase.

IFA’s lawsuit asserts that the Seattle statute unfairly requires Seattle’s 600 franchisees, who own 1,700 franchise locations and employ 19,000 workers, to meet the three year deadline for large businesses simply because they operate as part of a franchise network. 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 the corporation that provides brand and marketing materials.

“Hundreds of small, locally-owned businesses and thousands of their employees are unfairly threatened by Seattle’s new law. We are not seeking special treatment for franchisees, we are just seeking equal treatment. The city’s minimum wage statute arbitrarily and illegally discriminates against franchisees and significantly increases their labor costs in ways that will harm their businesses, employees, consumers and Seattle’s economy,” said Steve Caldeira, IFA president & CEO. “We hope the court will block the ordinance to save jobs and prevent Seattle from unfairly singling out one type of business – a franchise – for punitive treatment.”

“Seattle’s new minimum wage law unconstitutionally discriminates against franchisees by categorizing them as big businesses even when they are small and independently owned. A single hotel or restaurant can be treated as if it employs more than 500 people even when it actually employs only 15 people,” said Paul D. Clement, a partner at the law firm Bancroft PLLC and a former U.S. Solicitor General. “We’re asking the federal court to stop this unfair attack on small business owners who happen to be franchisees.”

The complaint names as defendants the City of Seattle and the Director of the Department of Finance and Administrative Services. It seeks an injunction to stop the law from going into effect as scheduled on April 1, 2015. The plaintiffs are IFA; Charles Stempler, owner and operator of two AlphaGraphics stores in Seattle and three elsewhere in Washington State; Katherine and Mark Lyons, owners and operators of BrightStar Care of North Seattle; Michael Park, General Manager and owner of a Comfort Inn in Seattle and president of the Korean American Hotel Owners Association (KAHOA); and Ronald Oh, General Manager and an owner of a Holiday Inn Express in Seattle.

The lawsuit alleges that the ordinance violates the Equal Protection Clause of the U.S. Constitution by arbitrarily discriminating against small businesses simply because they are franchises. For example, a non-franchise company with 450 workers is categorized as a small employer and gets extra time to comply with the law. But a franchisee with just five employees is considered a large employer – and gets less time to raise its wage floor – if its franchise network employs more than 500 workers nationwide.

The lawsuit also contends that the ordinance violates the Commerce Clause of the U.S. Constitution because it imposes regulations based partly on business occurring in other states. For instance, if a Seattle franchisee has only a few workers in Seattle, but its franchisor’s network has more than 500 workers out of state, it is classed as a large employer and gets tougher treatment. Under the new law, a Seattle-based business that happens to be associated with a national franchise can be forced to pay a higher minimum wage than a non-franchise business of similar size.

The complaint also argues that discrimination between franchise and non-franchise businesses is prohibited under the Washington State Constitution and that the Seattle ordinance imposes health care changes that violate the federal labor statute called the Employee Retirement Income Security Act or ERISA.

Go to SeattleFranchiseFairness.com to learn more about the issue and the coalition of Seattle small business owners working together to oppose the franchisee provisions in the city’s minimum wage law. The site, which will be updated regularly, includes video, a petition and an outreach tool for supporters to contact the City Council. Read the full complaint here. Case number: 14-848  

ASSOCIATED PRESS: Lawsuit Challenges Seattle’s $15 Minimum Wage

FORBES: Crusade Begins Against Seattle Minimum-Wage Law’s Treatment Of Franchise Owners

KIRO- Seattle Minimum Wage Coverage

NATION’S RESTAURANT NEWS: San Francisco Proposes $15 Minimum Wage

LOS ANGELES TIMES: Group Of Seattle Franchise Businesses Sue To Stop $15 Minimum Wage

WALL STREET JOURNAL REAL TIME ECONOMICS BLOG: Trade Group Sues to Block Seattle’s Minimum-Wage Law

PUGET SOUND BUSINESS JOURNAL: Fast-Food Eatery Togo’s Will Expand To Seattle (Not Afraid Of $15 Wage)

REUTERS: Trade Group, Franchisees Sue To Block Seattle Minimum Wage Hike

Q13FOX: Franchise trade group files suit against Seattle’s $15 minimum wage law

KING5 NEWS: Franchise owners file federal lawsuit over $15 minimum wage

THE SEATTLE TIMES: Franchisees sue city over transition period under new wage law

KING5 NEWS: Seattle Mayor Ed Murray Responds To Franchise Lawsuit

KING5 NEWS: IFA Files Lawsuit Against Seattle Minimum Wage Law

NORTHWEST CABLE NEWS (Northwest News Today): Seattle Minimum Wage Coverage

SEATTLE WEEKLY NEWS: Challengers Line Up To Thwart Seattle Minimum-Wage Bill, Including Tim Eyman

ASSOCIATIONS NOW: Minimum Wage Law: Franchise Association Files Suit Against Seattle

MANUFACTURING BUSINESS TECHNOLOGY: Seattle’s Minimum Wage — The Next Chapter

SEATTLE WEEKLY NEWS: International Franchise Association Goes On the Offensive with Seattle Times Ad

CREATIVE COMMONS GROUND REPORT BLOG: Seattle Raises Minimum Wage To $15/Hr

ENTREPRENEUR: Franchisees Take Action Against Seattle’s Minimum Wage Law

FOX BUSINESS: Franchise group sues to block Seattle’s minimum wage

INDUSTRIAL DISTRIBUTION: Seattle’s Minimum Wage — The Next Chapter

FOX NEWS: Seattle Business Owners React To Minimum Wage Increase

WALL STREET JOURNAL LIVE: Labor’s War on Franchises

FOX NEWS: Businesses Launch Legal Challenge To Seattle’s $15 Minimum Wage

BLOOMBERG: When Minimum Wage Laws Count Small Franchisees As Big Business

THE SEATTLE TIMES: Employers worry over effects of $15 wage law

ASSOCIATED PRESS: Minimum Wage Issue Pits Franchisees Against Cities

FOX BUSINESS: IFA Says Optimism Driving Franchise Growth

WORK PLACE CHOICE: SEIU’s Illegal Plan To Unionize Small Businesses Imposes Heavy Costs

THE BLAZE: Big Labor Has Some New Tricks Up Its Sleeves

TOPEKA METRO NEWS: Minimum Wage Issue Pits Franchisees Against Cities

IFA Takes Legal Action to Preserve the Franchise Model

 

 

Last week, Seattle’s City Council passed an ordinance that raised the minimum wage to $15, the highest in the United States. Large employers, defined as businesses with 500 or more employees, have three years to implement the payroll change while small businesses have up to seven years. However, independently-owned franchised businesses are being unfairly categorized as large employers under the new ordinance. There are more than 600 franchisees in Seattle, who own 1,700 franchise locations and employ 19,000 workers.

IFA’s President & CEO Steve Caldeira spoke out against this discriminatory proposal and announced plans to file a lawsuit against the City of Seattle. He asserted that “hundreds of franchise small business owners are being punished simply because they chose to operate as franchisees” during his statement directly following the vote.

Click here to stay updated on how the Seattle Minimum Wage Plan is affecting the franchise industry. Below is a small sample of the national press coverage IFA has received on the issue, for a full list of media coverage please visit our website.

NATIONAL:

The Huffington Post: ABC News Panel Debates Raising Minimum Wage

Forbes: Minimum Wage Hike Feels Good Now, But Will Lead to Long-Term Pain

The New York Times: Seattle Approves $15 Minimum Wage, Setting a New Standard for Big Cities

The Wall Street Journal: Seattle’s Very Big — and Very Complex — Wage Jump

Associations Now: Franchise Association Promises Lawsuit Over Seattle Minimum Wage Law

Associated Press: Seattle hikes minimum wage; will others follow?

The Wall Street Journal: Seattle City Council Approves $15 Minimum Hourly Wage

Reuters: Seattle approves hike in minimum wage to $15 per hour

USA TodaySeattle raises minimum wage to $15 an hour

The Washington Post: Seattle to enact $15 minimum wage

NPRSeattle Ordinance Gradually Increases Minimum Wage To $15

Gawker: Seattle Is Soon to Have the Highest Minimum Wage in America

ABC News Radio: Seattle City Council Approves Legislation to Raise Minimum Wage to $15

Examiner: Seattle latest state to increase the minimum wage

Associated PressSeattle’s $15 Minimum Wage: Questions And Answers

PJMedia: Seattle Declares War On Small Business With $15 An Hour Minimum Wage

BBC News: Seattle Votes For $15 Minimum Wage

Associated Press: Seattle City Council OKs Minimum Wage Increase To $15 An Hour, Making It The Nation’s Highest

LOCAL:

Los Angeles Times: Seattle raises minimum wage to $15 an hour, highest in U.S.

The Seattle Times: Seattle City Council approves historic $15 minimum wage

KIRO 7: Seattle To Get $15 Minimum Wage — Nation’s Highest

City & State NY: Mayor De Blasio Backs Proposal To Raise Local Minimum Wage

MyNorthwest.com: Franchise Group To Sue Over Seattle’s $15 Minimum Wage

New York Daily News: Mayor de Blasio Says President Obama’s $10.10 Minimum Wage Is Not Enough

Seattle Post Intelligencer: Seattle Enacts $15 Minimum Wage, A Phased In Big Dream

Q13 Fox: Seattle City Council unanimously approves $15 minimum wage plan

Puget Sound Business Journal: Franchise Group Plans To Sue Over Seattle’s Minimum Wage Rules

Complex City Guide: Seattle To Officially Increase Minimum Wage To $15 Per Hour

Puget Sound Business Journal: Seattle Council Approves Minimum Wage Boost

ELECTRONIC COVERAGE

Fox BusinessSubway franchisee serves Seattle

Fox BusinessFighting Seattle’s new minimum wage

Fox & FriendsFranchise group is planning to sue over Seattle wage hike

Seattle Minimum Wage Coverage-KING

Seattle Minimum Wage Coverage-KCPQ

Seattle Minimum Wage Coverage-KOMO

Seattle Minimum Wage Coverage-KIRO

Minimum Wage Report-CNN

Minimum Wage Report-MSNBC

Kshama Sawant Interview-KCPQ

570 KVI with Steve Caldeira

OTHER NOTABLE ARTICLES:

Inter Press Service: Low-Wage Workers Butt Heads With 21st Century Capital

Morning Sentinel: Harold Meyerson: Studies Show Raising Wages Creates Jobs

 

Seeking Best Practices for Your Franchise Business?

website-fw-header-blue-190One for the benefits of belonging to IFA is access to industry experts who represent a variety of franchise brands and can address issues affecting your franchise business.

Franchising World magazine, along with its ongoing coverage of various categories such as management and operations, marketing, multi-unit franchising and international development, includes coverage of best practices.  Zero in on insightful advice on such topics as customer relations, enhancing growth, attracting military veterans, meeting challenges and more. Here are just a few articles to give you an idea of what you can review to help build your business:

  • How to Create a Trusting Relationship With Your Customers
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Visit the magazine’s website at franchisingworld.com today to find these and other informative articles.

Yes, Council Member Sawant – Franchises Are Small Businesses

 

 

Franchising is far more than just fast food. In trying to argue that Seattle franchises are not small businesses, Seattle Council Member Kshama Sawant points to a “Good Jobs Seattle” study that only examines ownership of McDonald’s, Burger King, and Wendy’s. But what Council member Sawant fails to realize is that the franchise industry is made up of 100 business lines as diverse as hotel, real estate, and tax preparation services, which offer entrepreneurs opportunities to start and grow their own business at all levels of investment.

Some franchise owners are small with only one or a few franchise units and – yes – certainly some are larger. However, to classify all of Seattle’s franchise businesses, which provide 19,000 jobs to the Seattle area, as large corporations would misrepresent the many single and multi-unit owners in the city that face the exact same challenges as Seattle’s other small businesses.

What’s more, by equating all franchises to large corporations, as Sawant argues, franchise businesses would be at a disadvantage to other small businesses in Seattle. Under Seattle Mayor Ed Murray’s proposal, businesses with fewer than 500 employees would have seven years to adjust to the new $15 minimum wage, while large businesses and “all franchises associated with a franchisor” – regardless of employee count – would be forced to do so in just 3 years. For some franchisees, this amounts to labor costs 50 percent higher than their non-franchised competitors.

As Seattle Council members debate a “fair” minimum wage for Seattleites, let’s not forget that the employers paying these higher wage should be treated fairly as well. Rather than picking winners and losers among business owners operating under different models, wage increases should be applied equitably to all of Seattle’s employers.

This piece of the proposal is discrimination against Seattle’s small businesses at its worst. Small business owners should not be punished for choosing to be part of a larger “name brand”. All small businesses, like Seattle’s franchisees, should be celebrated for their sense of entrepreneurship, passion and motivation. Don’t frame franchisees for building their small business using a proven model to provide a service to Seattle’s citizens.

Tell the City Council and Mayor Murray that Seattle franchisees own the store, not the chain. Franchises don’t want special treatment, just the same as others.

Annex Brands joins California Senator Marty Block to Discuss Economic Impact of Franchising

IFA is continuing its industry engagement in California, actively coordinating meetings between franchisees, franchisors and their lawmakers and taking advantage of the time legislators will be spending in their districts.

On May 2, Steve Goble of Annex Brands, Inc. met with Sen. Marty Block (D-39). Emphasizing the franchise business model and Annex Brands’ contributions to San Diego, Goble described the brand and educated Sen. Block on behalf of the franchise industry, while also discussing important public policy concerns such as the minimum wage and its negative impact on small, local franchise business owners.

“With 43 locations, creating 160 jobs and $12 million in economic output in Sen. Block’s district alone, Annex Brands is a franchise network that prides itself on providing more services to more people in more places,” said Goble. A shipping and business service center, Annex Brands is based in San Diego, Calif. with more than 360 independently owned and operated franchise locations throughout the United States.

The importance of franchising in the state, its economic impact and the job opportunities it offers Californians were recognized and well received by Sen. Block. The conversation concentrated on franchising and the business model, but the current issue of minimum wage was also addressed. With the minimum wage set to increase to $10 an hour in 2016, California small-business owners are making adjustments. As Goble described, when the minimum wage rises, so does labor costs. When labor costs rise, you have to account for that additional expenditure from the bottom line. As a small-business owner, that means either raising prices, if the customer will absorb the increase, or having to cut hours, leaving the owner to work longer, harder days.

Goble has been in franchising for more than 20 years and articulated how franchise small-business owners, who put their savings and credit toward business ownership, should be incentivized to grow and expand in the state and contribute to its economic growth. Sen. Block, familiar with the local Postal Annex+, appreciated the number of units, jobs and sales that are generated in his district and state.

Goble summed up the meeting as, “A respectful, thoughtful meeting and a great experience.”

If you would like to participate in this program please contact IFA’s Erica Farage at efarage@franchise.org.

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