International Franchise Association Seeks Supreme Court Appeal In Minimum Wage Case

Date: January 26, 2016

Association Says Seattle’s Minimum Wage Is Discriminatory, Seeks To Reverse Lower Court Ruling

Reuters reported that the International Franchise Association is asking the US Supreme Court to hear its appeal of a lower-court ruling tossing out its challenge of part of Seattle’s law to increase the minimum wage to $15. The IFA said in its June 2014 lawsuit that the law favors independent businesses because franchisees, along with all businesses in Seattle with more than 500 employees nationwide, are required to phase in the $15 minimum wage by 2018. Smaller companies have until 2021 to implement the increase. Specifically, the lawsuit challenges the law’s treatment of franchises as subsidiaries of their parent companies rather than as completely separate businesses. A federal judge denied the IFA’s lawsuit last March, and the 9th US Circuit Court of Appeals upheld that decision in September. The Seattle Times quoted the International Franchise Association’s president and chief executive Robert Cresanti: “Our appeal has never sought to prevent the city of Seattle’s wage law from going into effect … Our appeal to the Supreme Court will be focused solely on the discriminatory treatment of franchisees under Seattle’s wage law and the motivation to discriminate against interstate commerce.” The article added that franchise owners have argued that they function similar to small businesses and don’t have the resources to absorb higher labor costs, but added that “so far, the courts have not bought that argument.”

What This Means For Small Business

The National Federation of Independent Business originally reported on the Association’s challenge to the law in federal court, observing that “it doesn’t consider the size of a franchisee’s operation, but rather the size of the parent company.” While establishing such a high minimum wage will be deleterious to all businesses and the economy in general, this aspect is particularly discriminatory against franchise owners. If this provision stands, small businesses, rather than large corporations (the intended target of this measure) will be subjected to higher costs and will likely be unable to compete.

Additional Reading

The AP also covered the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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