SEATTLE — A lawyer for the International Franchise Association told a federal appeals panel on Tuesday that Seattle’s new $15 minimum wage law unfairly discriminates against franchises, but a city attorney said the ordinance is fair and was designed to get more money into the pockets of workers as quickly as possible.
Association attorney Paul Clement told a three-judge panel of the 9th U.S. Court of Appeals that the ordinance treats one class of small employer different from others. The ordinance gives small businesses seven years to phase in the higher wage, but it requires large companies and franchises to meet the $15 target by 2017 or 2018.
Clement says that’s unconstitutional.
The association wants the appeals court to overturn a federal judge’s ruling last year that denied a preliminary injunction against the ordinance. The new law went into effect April 1.
After hearing from both sides, the appellate judges said they’ll issue a ruling at a later date.
Seattle’s City Council passed the ordinance in June 2014, seeking to “promote the general welfare, health and prosperity of Seattle by ensuring that workers can better support and care for their families and fully participate in Seattle’s civic, cultural and economic life.”
At the time, Seattle’s minimum wage was $9.47.
Under the plan, large employers that don’t offer health benefits had to start paying $11 per hour April 1. That will rise to $13 per hour by Jan. 1, 2016, and $15 per hour by Jan. 1, 2017. The timeline for large companies that offer health benefits is spread out to 2018. Franchises fall under this schedule, while small employers get three extra years to hit the $15 target.
Seattle Assistant City Attorney Greg Narver told the appeals panel that the law was set up to require businesses with the ability to pay a higher wage sooner to implement that wage, while smaller companies are given time to adjust to the change.
“It requires businesses with the wherewithal to pay more to pay more,” Narver said. Franchises like McDonald’s were grouped with the large-company timeline because they are connected to large networks that have advantages over the small sandwich shops, such as name recognition, access to loans and purchasing power, he said.
Clement said some franchises operate on a tight margin and won’t be able to pay the higher wages.
The law penalizes businesses for affiliating with a franchise, he said. By 2017, a small employer that is linked to a franchise will have to pay an extra $160 per week for each worker, he said.
“That’s discriminatory treatment,” he said. “The impact is overwhelming.”
One small franchise that provides in-home care won’t be able to keep up with the new labor costs, Clement said.
“This is going to debilitate her business,” he said.
But Seattle lawyer Stacey Leyton said, “There’s no credible evidence that this would cause franchises to close.”
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