Federal Complaint Alleges Discrimination
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 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
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.
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.
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.”
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.”
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.
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.
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.
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
Haller, IFA: 202-460-8356, email@example.com
Jenna Weisbord, IFA: 202-662-0766, firstname.lastname@example.org
Ashley Bach, Pacific Public Affairs: 206-579-2414, email@example.com
the International Franchise Association
The International Franchise Association is the world's oldest and largest
organization representing franchising worldwide. Celebrating over 50 years of
excellence, education and advocacy, IFA works through its government relations
and public policy, media relations and educational programs to protect, enhance
and promote franchising. Through its media awareness campaign highlighting the
theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA
promotes the economic impact of the more than 825,000 franchise establishments,
which support nearly 18 million jobs and $2.1 trillion of economic output for
the U.S. economy. IFA members include franchise companies in over 300 different
business format categories, individual franchisees and companies that support
the industry in marketing, law and business development.
1501 K Street, N.W., Suite 350
Washington, DC 20005 USA
Phone: +1 202/628-8000 Fax:
+1 202/628-0812 www.franchise.org