Are Minimum-Wage Activists Trying to Kill the Franchise Model in Seattle?
On Wednesday, the D.C.-based franchise trade group launched an ad campaign opposing the section of Seattle's new minimum wage law that forces franchisees to get on the fast track to raise employees pay to $15 per hour. The campaign intends to "inform Seattle residents about the Service Employees International Union's (SEIU) well-planned, strategic attack on independently-owned, small business franchisees, and SEIU's self-serving motives for discriminating against them in the city's new minimum wage law," according to an IFA press release.
The IFA has been vocal about its stance against raising the minimum wage to $15, but its accusations against the SEIU – which represents 2 million workers across the health care, public services and property sectors – beg the question: Is the IFA wrapped up in an anti-labor conspiracy theory, or is the SEIU trying to take down franchisees?
Here are the facts: when Seattle voted in June to raise minimum wage to $15 per hour, small-business owners were given seven years to comply. Businesses with more than 500 employees, however, were given only three years. Franchises, no matter how many employees individual franchisees employed, were also given only three years.
The IFA immediately protested the change. Soon after the law was passed, the IFA and five franchisees filed a lawsuit in the U.S. District Court in Seattle opposing the minimum wage act in its current form. Earlier this month, the IFA filed a preliminary injunction to block portions of the bill. Franchise organizations including the National Restaurant Association, the Asian American Hotel Owners Association and the U.S. Chamber of Commerce filed an amicus brief last week in support of the IFA's motion for an injunction.
The lawsuit and the injunction claim that the minimum wage bill isn't just an attempt to raise minimum wage – a movement it has traditionally opposed – but that it's the product of purposeful discrimination by SEIU and Seattle city leaders who are trying to drive franchisees out of town.
The injunction quotes Seattle Mayor Ed Murray's statement on the issue, which reads, "There is a problem in the franchise business model and I believe this is a discussion franchise owners should be having with their corporate parents. I don't believe that the economic strain comes from a fairly slow phase in of a higher minimum wage, but on a business model that really does – in many cases – harm franchise owners."
The injunction further claims that David Rolf, a co-chairman of the mayor's minimum wage committee and local SEIU head, told bar and restaurant owner David Meinert, another member of the committee, that the law treated franchisees as large employers to "break the franchise model."
Other members of the mayor's minimum wage committee were also anti-franchise, the IFA claims.
"The truth is that franchises like subway [sic] and McDonalds really are not very good for our local economy. They are economically extractive, civically corrosive and culturally dilutive," wrote billionaire venture capitalist Nick Hanauer, who was a member on the mayor's committee, in an email quoted in the injunction. "These companies have optimized their business models around paying workers poverty wages while corporate racks up huge profits and tax payers make up the difference."
Painting all franchises as "economically extractive, civically corrosive and culturally dilutive" is using broad strokes to condemn a very diverse industry, to say the least. However, while Mayor Murray and Hanaur's claims that the franchise industry has a problem feature in the injunction, the IFA focuses most of its blame on the SEIU.
"The SEIU's concern is not for the employees working at franchise businesses, but the union's real mission is to force these hard-working employees to join the SEIU's dwindling membership ranks in order to get dues deducted from their paychecks," said IFA President Steve Caldeira in a statement.
The SEIU did not immediately respond to Entrepreneur.com's request for comment.
According to the IFA, the SEIU refused to support the bill unless franchises were treated as big businesses instead of independent, small businesses. The IFA further argues that the SEIU manipulated the law to fit its political objectives.
The SEIU has become entangled in a number of franchise-related lawsuits in recent months, always on the opposite side of the IFA. Last week, California passed a bill supported by the SEIU and opposed by the IFA that expanded franchisee rights, making it harder for a franchisor to terminate franchise agreements. In July, the labor union supported The National Labor Relations Board's (NLRB) designation of McDonald's as a joint employer, a decision opposed by the IFA and a number of franchisees.
Are these lawsuits intending to tear apart the franchise model? The IFA thinks so.
Both the IFA and SEIU agree that if the franchise system breaks down – as the NLRB's definition of McDonald's as an employer threatens to do – it will be easier to organize and unionize workers fighting for better pay.
"SEIU is a large and powerful political organization whose primary goal is to seek more power," Caldeira said in a statement. "Instead of hiding behind its purported interest in workers' rights, the SEIU should be honest with the public about its goals and political agenda."
"It is a huge step forward as workers across the country build a movement to make sure that fast-growing service jobs pay people enough to become the foundation of the next American middle class," the SEIU said in a statement about the Seattle minimum wage law in June. "Together we will fight to build an economy that works for everyone, with broadly-shared prosperity for all of us."
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