In June of 2014, Seattle became the first major city in the United States to raise their minimum wage, incrementally, to $15 by 2017 for businesses with at least five hundred employees. This wage increase, more than double the federal minimum wage of $7.25, has lead the International Franchise Associate to turn to the Supreme Court to determine if franchised businesses are unfairly included in the new law.
The IFA, along with 6 local Seattle franchises, stand by their position that they are not opposed to the increase in minimum wage, but would like to see independently-owned franchises receive the same treatment as small businesses with less than 500 employees. These smaller businesses have been given a longer period of time to increase their wages up to $15 an hour, with incremental increases expected to hit the new city-mandated minimum wage by 2021. The case has been tried in lower court, as well as the US 9th Circuit Court of Appeals, and was ruled against the franchisees in both instances. The Supreme Court will make a decision sometime in the spring of 2016 as to whether it will hear the case.
This decision comes on the heels of the National Labor Relation Board’s decision against mega-franchise McDonalds. In that ruling, the NLRB found that McDonalds is a “joint-employer”, since they monitor and control each of their franchises, even though nearly 90% of McDonald’s locations are independently-owned. The ruling essential deems all employees of a franchise, whether it be a restaurant, hotel, salon, etc. are employees of the franchise itself, even though their checks may be signed by the independent franchisee.
When taking a closer look at how these two ruling affect each other, one can see that the Seattle franchises are being considered as “joint employer” companies, despite being independently owned. The Seattle franchise industry is very strong, with over 600 independent franchise owners who operate 1,700 franchise locations and employee 19,000 workers. Seattle Mayor Ed Murray doesn’t seem on the same level as the franchise owners, claiming that the whole point of raising minimum wage was to address concerns by fast food workers employed by these franchise restaurants who are now looking for an extension, going as far as saying “they are not the same as the local sandwich shop…not even close.”
If you are a franchise owner in an area where a minimum wage increase has been discussed, is in motion, or is currently being voted on, it’s important to make sure your restaurants and business are able to continue operating profitably. Speak with a Restaurant Programs of America agent today to learn more about how RPA can help your franchise not only prepare for wage increases, but also help to identify areas of savings that can help to counterbalance those new costs.