Supreme Court: Franchises Must Pay $15 Minimum Wage by 2018

The U.S. Supreme Court on May 2 rejected a challenge by business groups to Seattle’s law that raises minimum wage to $15 an hour.

Supporters of the increase celebrated the court’s action, which leaves intact a lower court ruling backing the measure.

The International Franchise Association and the businesses that challenged the measure did not target the actual wage hike. Instead, they argued that it was unfair for Seattle to exclude local franchises of companies like McDonald’s and Burger King from the group given extra time to comply.

Seattle’s law, which took effect in April 2015, requires businesses with more than 500 employees nationwide to raise their minimum wage to $15 by 2018. Smaller companies have until 2021 to do so. The suit sought to include franchises in the group that has until 2021.

Seattle was the first major U.S. city to commit to such a high basic wage amid pressure from unions and workers’ rights groups. The move has since been followed to varying degrees by cities such as San Francisco and Los Angeles as well as by state lawmakers in California and New York.

The high court’s move means that cities and states that pass similar wage laws must treat franchises as offshoots of brand parents rather than independent small businesses.

Seattle officials and the Service Employees International Union, which backed the city in the case, said franchises are not typical small businesses because franchising offers inherent advantages such as access to loans, brand recognition and bulk purchasing. But the franchise association countered that those perks come at a cost, namely royalties, fees and rent.

Source: Reuters S