Late last week, a unanimous panel of the United States Court of Appeal for the Ninth Circuit upheld the decision of Washington federal judge Richard A. Jones regarding the Seattle minimum wage law as it applies to franchisees. Specifically, the law provides that the schedule of implementation of the new $15 per hour minimum wage law in Seattle is faster for businesses which employ more than 500 employees. In fact, franchisees will have to fully implement the higher minimum wage in only 3 years, rather than the 7 years allowed for smaller businesses.
The International Franchise Association (IFA) was the principal appellant and, in a stinging defeat for the IFA, the Ninth Circuit disagreed with it on every major issue raised on appeal. The Ninth Circuit concluded both that the IFA was unlikely to succeed on the merits of its arguments before the District Court and that a preliminary injunction was not in the public interest. The Court found that the Seattle minimum wage ordinance does not place a significant burden on interstate commerce or free speech and rationally classifies franchisees as “large employers” due to their association with the franchisor. The Court further held that the law was not preempted by the Lanham Act nor violative of the Washington state constitution. The IFA has said that it is considering all options, including attempting an appeal to the Supreme Court.
While the IFA admittedly faced long odds winning an appeal seeking to reverse the denial of a preliminary injunction, the breath and depth of the opinion is striking. Nonetheless, I am truly at a loss as to how first the District Court and now a panel of the Ninth Circuit conclude to conflate franchisees and franchisors. Somehow everyone seems to be forgetting that franchises are owned by local businessmen and women. People who are Rotarians and sponsors of their local youth sports programs. Clearly, there has been a failure to explain how franchising works and who franchising is. To me, it seems greater outreach is necessary. What do you think?