In court filings this week, the International Franchise Association provided new details in support of its legal challenge to the provisions of Seattle’s new minimum wage law that discriminate against small franchise businesses.
This past June, the IFA and several local franchise business owners in Seattle filed a lawsuit to challenge the discriminatory provisions of Seattle’s new minimum wage law. In August, the IFA requested a preliminary injunction to halt, pending the completion of the litigation, the part of the new law that unfairly classifies small franchise businesses as large employers.
If the minimum wage law were to go into effect in April 2015 as written, small franchise businesses would be forced to pay a much higher wage than other small businesses. That would put those local franchise business owners at a significant competitive disadvantage and could result in closed businesses and lost jobs.
In the past few weeks,more briefs have been filed and depositions have been taken as part of IFA’s lawsuit.
On Friday, Oct. 10, the IFA filed a response to the city’s brief regarding the preliminary injunction request. That IFA brief can be found in two parts here (Reply Brief) and here (Supporting Declaration).
IFA’s Reply Brief includes legal arguments in favor of the preliminary injunction, and IFA’s Supporting Declaration includes new evidence in the form of emails from city officials and business leaders and excerpts of depositions of the city’s expert witness, Scott Shane, and three of the Seattle franchise business owners who filed the lawsuit along with IFA: Kathy Lyons, Ronald Oh and Chuck Stempler.
Some of the highlights from IFA’s latest filing:
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The IFA notes that the city did not counter the documents and emails filed by IFA in August that showed the city’s move to add the discriminatory provisions against local franchise business owners was at the behest of the Service Employees International Union (SEIU), which in turn wanted to “break the franchise model” and enable unions to organize employees at franchise businesses. Nick Hanauer, a member of Mayor Ed Murray’s advisory committee, is quoted in the August brief telling City Council President Tim Burgess that the local franchise business owner provisions were added because Hanauer and his allies on the Mayor’s advisory committee didn’t like franchise businesses and wanted them out of the city.
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In its brief Friday, IFA said the city has not offered declarations from Mayor Murray, Mr. Hanauer, Council member Kshama Sawant or local SEIU head David Rolf – to counter the IFA’s documents showing the city’s discriminatory motive for treating small franchise businesses less favorably than small non-franchise businesses. (Reply Brief, Pgs. 13 and 19)
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In a deposition of Scott Shane, a professor at Case Western Reserve University and the city’s expert witness on franchises, Shane agrees that franchisors and local franchise business owner are separate and independent companies and that a local franchise business owner is just as legally independent as a non-franchise business. He agrees that a local franchise business owner’s employees are not the franchisor’s employees. (Supporting Declaration, Pgs. 15-33)
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In depositions of three Seattle franchise business owners who filed the lawsuit with IFA – Kathy Lyons, the owner of a BrightStar Care home health care business; Ronald Oh, the general manager and an owner of a Holiday Inn Express; and Chuck Stempler, the owner of two AlphaGraphics print shops in Seattle – the business owners say they will be at a disadvantage compared to their non-franchise competitors if the law goes into effect. They will suffer a large increase in their labor costs and be subject to a $15 per hour minimum wage in just three years, while their non-franchise competitors will have seven years to phase in the higher minimum wage. (Supporting Declaration, Pgs. 34-69)
Seattle’s new minimum wage law treats local franchise business owners not as the small businesses they are, but as large employers. Local franchise business owners with fewer than 500 employees must adopt the $15 minimum wage on the same expedited three-year timetable as big businesses with more than 500 employees, beginning in April 2015. The new law gives non-franchised businesses with fewer than 500 employees seven years to phase in the $15 minimum wage.
“With such a blatant discriminatory attack on the business community, Seattle may find it difficult to attract future business conventions like the American Bar Association (ABA) franchise conference, which has drawn 1,200 franchise attorneys to Seattle this week and brought at least $1.5 million to Seattle hotels, restaurants and other businesses,” said IFA President & CEO Steve Caldeira.
“Franchise businesses are one of the largest drivers to Seattle’s economy, with 600 local franchise business owners employing 19,000 people, and this economic strength is on display with the ABA conference this week,” Caldeira said. “In the U.S., franchise businesses are responsible for one out of every eight private-sector jobs and 3.4 percent of the gross domestic product. Local franchise business owners create new local jobs and new businesses at twice the rate of other business segments.”
Go to SeattleFranchiseFairness.com to learn more about the lawsuit and the coalition of Seattle small business owners working together to oppose the local franchise business owner provisions in the city’s minimum wage law.