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IFA Challenges Seattle Wage Law Franchise Provision

The International Franchise Association (IFA), a Washington, D.C.-based trade group, and five franchisees today filed a lawsuit in U.S. District Court in Seattle seeking to block Seattle’s recently enacted law to increase to the city’s minimum wage to $15 per-hour. The complaint alleges the new law illegally discriminates against franchisees and improperly treats them not as the small, locally-owned businesses they are, but as large, national companies.

Seattle Mayor Ed Murray last week signed the law, which requires large businesses, defined as those with more than 500 employees, to raise the minimum wage they pay their employees to $15-an-hour over three years beginning on April 1, 2015. Smaller businesses have an extra four years, or a total of seven years, to phase in the wage increase.

IFA’s lawsuit asserts that the Seattle statute unfairly requires Seattle’s 600 franchisees, who own 1,700 franchise locations and employ 19,000 workers, to meet the three year deadline for large businesses simply because they operate as part of a franchise network. The lawsuit argues that the Seattle ordinance defies years of legal precedent clearly defining a franchisee as an independent local business owner who operates separately from the corporation that provides brand and marketing materials. Read the full press release here.

In response to IFA’s lawsuit, the American Hotel & Lodging Association (AH&LA) issued the following statement:

“The wage increase in Seattle contains a very troubling anti-franchise provision not previously utilized anywhere else in the country, and small hotels and businesses will suffer the brunt of the consequences as a result,” said Katherine Lugar, AH&LA president/CEO. “It’s absurd to think that the mom-and-pop hotels making up the vast majority of our industry would be considered large employers under Seattle’s new provisions, simply because of their affiliation with national chains. AH&LA strongly supports the efforts of the International Franchise Association to file a legal challenge to overturn the franchisee provision in the city’s minimum wage ordinance. We are an industry comprised of many franchisees, and we hope the final outcome protects the small business status of many of our Seattle hoteliers. Seattle—and any other city taking steps to adopt extreme wage mandates—will soon find that these proposals only serve to harm Main Street businesses, deny opportunities for men and women seeking to climb the ladder of opportunity and success, undermine employer-provided health benefits, and hurt their local travel and tourism industry.”

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