The International Franchise Association’s (“IFA”) motion for preliminary injunction of the Seattle $15 minimum wage ordinance (“Ordinance”) was denied by U.S. District Court Judge Richard Jones, paving the way for the law to come into effect as passed. Seattle’s $15 minimum wage Ordinance was challenged by the IFA as unconstitutional or federally preempted because it was alleged to unfairly categorize franchise owners at the Ordinance’s large employer threshold (>500 employees) that requires those employers ramp up to a $15 minimum wage by January 1, 2017, instead of the January 1, 2021 timeline set for small employers (≤500 employees).
The Ordinance goes into effect on April 1, 2015, initially requiring large employers to pay workers $11 per hour, instead of the initial $10 per hour requirement for small employers. IFA’s challenge related to how the Ordinance applied to the franchise model and did not seek to invalidate the Ordinance as a whole.
The Ordinance applied the large employer definition to franchises and integrated enterprises even though the local businesses themselves may be operationally independent from the franchisor or enterprise, and may only employ a handful of workers. IFA argued the Ordinance’s application to franchise owners violated federal law including the Commerce Clause, Equal Protection Clause and First Amendment, as well as the Washington State Constitution.
The Court determined IFA and its association of franchisees was not likely to succeed on its claims because the Ordinance did not have the requisite discriminatory effect or purpose, and there was no demonstration of irreparable harm if the Ordinance was not enjoined. The Court further determined the faster pace for franchise owners to adopt the $15 minimum wage was rationally related to the purpose of the Ordinance to allow smaller employers with less resources (as compared to similarly situated franchise owners) to have a longer reprieve from its implementation.
The City of Seattle has over 600 franchises that operate within its limits. A number of other businesses likely fall within the Ordinance’s integrated business model as well, which applies to businesses with interrelated operations, management, ownership and centralized control over labor relations. If you have concerns over how the Ordinance’s wage increase schedule will apply to your business, please contact Teru Olsen or any of the other attorneys in Ryan Swanson’s Employment Rights, Benefits & Labor practice group.
This message has been created by the Employment Rights, Benefits & Labor Group at Ryan, Swanson & Cleveland, PLLC to advise of recent developments in the law. Because each situation is different, this information is intended for general information purposes only and is not intended to provide legal advice on any specific facts and circumstances. Ryan, Swanson & Cleveland, PLLC is a full-service law firm located in Seattle, Washington.