Employment Law Daily Supreme Court won't review Seattle minimum wage ordinance’s impact on franchise businesses
Wednesday, May 4, 2016

Supreme Court won't review Seattle minimum wage ordinance’s impact on franchise businesses

By Pamela Wolf, J.D. The Supreme Court has denied the International Franchise Association’s bid for review of Seattle’s $15 an hour minimum wage ordinance that treats some franchise businesses as large employers permitted only three years to phase in the new minimum wage requirements, as compared to non-franchise small businesses, which get seven years to phase it in. Under the ordinance, franchisees associated with a franchisor, and/or a network of franchisees employing more than 500 employees nationwide, are classified as large employers—regardless of the number of persons employed by the particular franchisee or the number of persons employed in Seattle. On May 2, the Court denied the IFA’s petition for certiorari. In the Ninth Circuit, the IFA asserted that the franchisee classification in the ordinance violated the federal Commerce Clause, Equal Protection Clause, First Amendment, and the Washington State Constitution, and was preempted by the Lanham Act. The association argued that the district court had erred in ruling that the IFA failed to show a likelihood of succeeding on the merits of its claims and that the remaining preliminary injunction factors weighed against a preliminary injunction. Much of the Ninth Circuit’s holding focused on the IFA’s dormant Commerce Clause challenge, which did "not resemble an established type of dormant Commerce Clause case." The case was novel in the sense that the challenged ordinance "arguably imposes costs on a class of businesses said to be highly correlated with out-of-state firms or interstate commerce," the appeals court noted, but ultimately, the IFA was unable to establish that Seattle franchisees are "out-of-state entities," or that the corresponding franchises "are so interstate in character relative to non-franchises that a distinction drawn on this basis interferes with interstate commerce." The question that the Justices have declined to take up is, "Whether a state or local law that discriminates against certain in-state businesses based solely on their ties to interstate commerce discriminates against interstate commerce."

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