The franchise industry went to war against Seattle’s new $15 wage. Seattle won.

Lydia DePillis
March 18, 2015
Washington Post
A federal court just ruled that the city can treat franchises like big businesses.
In June of last year, Seattle became the first city in the United States to boost its minimum wage to $15. But not all at once: “Small” businesses, defined as those with fewer than 500 employees, will have until 2021 to get there.
Some cities treat franchisees like small businesses, too. But under the Seattle law, the neighborhood McDonald’s won’t qualify. Even if it’s technically owned by a local and the business only has 30 employees, for the purposes of the new law, it’s considered to be as big as McDonald’s worldwide.
That’s why the franchise industry has been the biggest opponent of Seattle’s law, and brought all of its substantial resources to bear in opposition — in the press, in the political arena, and when all that failed, in the courts. The International Franchise Association drafted former U.S. solicitor general Paul Clement to build the case against treating franchisees like large businesses, asking for an injunction on the new rules, which go into effect April 1.
Tuesday, a federal judge threw out their objections, removing the last obstacle to implementation of the measure — as well as clearing the way for cities across the country to do the same — and adding ammunition to the argument that franchisees are solely responsible for the people they employ.
Now, the judge didn’t decide definitively that franchisees are fundamentally different from independent small businesses of comparable size. Rather, weighing expert evidence and franchise agreements submitted by the plaintiffs — owners of a Holiday Inn, a Brightstar Care and an AlphaGraphics — he found that there was a reasonable basis for the determination that franchisees receive enough help from their relationships with franchisors to allow them to pay the higher wage. If that’s all cities have to do in order to make franchisees raise their wages as quickly as large businesses, then they don’t have to worry too much about being sued over it (the district court’s decision isn’t binding on other courts throughout the rest of the country, but may be referenced).
But the decision has relevance for another reason: the ongoing argument over how closely franchisees are tied to their franchisor, and therefore whether the franchisor should be held liable for their franchisees’ conduct. The judge found that franchisors have enough of a hand in their franchisees’ operations that the two could plausibly be treated as one and the same. Right now, business interests are fighting hard against the National Labor Relations Board, which has signaled it may move in the same direction by treating franchisors as “joint employers” when their franchisees commit labor violations.
That could have massive implications for how easy it is to unionize — or at least how much care the franchisors take in making sure employees are treated lawfully.