No Mercy on the Minimum Wage Hike

Date: May 03, 2016

The Supreme Court struck down a challenge to Seattle's minimum wage law.

The nation’s highest court has weighed in on Seattle’s minimum wage—and it’s not good news for small business owners.

The court refused to hear a challenge to the city’s controversial minimum wage law that will gradually raise wages to at least $15 an hour over the next several years. The justices did not provide a rationale for their decision.

JOIN THE MINIMUM WAGE FIGHT. 

The International Franchise Association and five franchise businesses filed a lawsuit in 2014 claiming the city’s minimum wage law is discriminatory against franchise businesses because it treats them like big businesses and violates interstate commerce. 

Because they are not seen as a small business, franchises have the same amount of time to comply with the minimum wage law as big businesses, despite only having a handful of employees. Under Seattle law, a small business is defined as having 500 or fewer employees. 

Sixty-five percent of franchise businesses would likely reduce staff as a result of the minimum wage hike and another 64 percent would likely decrease their staff’s hours, according to an Employment Policies Institute study. These numbers fall in line with NFIB’s previous coverage that the wage increase is costing the city jobs. 

“Seattle’s ordinance is blatantly discriminatory and affirmatively harms hard-working franchise small business owners every day since it has gone into effect,” said Robert Cresanti, president of the International Franchise Association, in a statement issued after the Supreme Court’s decision. 

Seattle officials argued that franchised businesses have a distinct advantage in absorbing the cost of a wage increase, “such as access to loans, brand recognition and bulk purchasing,” Reuters reported.

At the same time, an increase in rent, royalties paid to their parent company, and franchisee fees counteract gains for franchises, according to Reuters.

Photo credit: Jonathan Miske

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