Ninth Circuit Hears Oral Argument on Franchisors’ Challenge to Seattle $15

Seattle’s first-in-the-nation $15 minimum wage began to phase in this spring after a federal court rejected the fast food industry’s attempt to block the measure in court.  After failing to persuade the city council and a federal trial judge that the city’s new minimum wage was unfair and illegal, this week, fast food chains continued their legal attack with an oral argument before the Ninth Circuit U.S. Court of Appeals in the legal case, International Franchise Ass’n v. Seattle.  In their appeal, the fast food chains continue to argue that the Seattle measure unfairly discriminates against franchised chains by treating them like large companies, for which the Seattle $15 phases in more rapidly than it does for smaller businesses.

In this week’s argument, the appellate panel pressed the International Franchise Association’s (IFA’s) attorney to explain how franchises, which follow a different business model and structure from independent small businesses and enjoy advantages like access to support, trade secrets, advertising and less costly supplies, are on an equal footing with a mom and pop restaurant. The City of Seattle argued that the many resources available to franchises give them the ability to pay a higher wage sooner like other big businesses. Case studies similarly confirm that these advantages of franchising make franchised restaurants more profitable than comparable independent restaurants – which economic theory explains is why the fast food chains can command multi-million dollar franchise fees from restaurants that join their networks.

The IFA and the US Chamber of Commerce also argued that requiring franchises to pay more sooner could have negative impacts on their businesses.  But as detailed in NELP’s amicus curiae brief, the most rigorous economic research on the impact of higher minimum wages and the real world experiences of businesses in cities that have implemented higher local minimum wages show that they have been manageable for employers and that companies that pay higher wages enjoy benefits such as lower turnover and a more productive workforce.  With more than $9 billion profits last year among the largest publicly traded fast food chains, there is plenty of revenue in the industry to pay for significantly higher wages.

The panel has taken the case under advisement and a ruling is expected next year.  In the meantime, momentum for the $15 minimum wage continues to grow nationwide.