Supreme Court Tells Industry Group Attacking The $15 Minimum Wage To Go Away

Protesters supporting a $15 an hour wage rally outside a McDonald’s CREDIT: AP PHOTO/KEITH SRAKOCIC
Protesters supporting a $15 an hour wage rally outside a McDonald’s CREDIT: AP PHOTO/KEITH SRAKOCIC

Once upon a time, International Franchise Association v. City of Seattle was going to be an epic showdown over government’s ability to regulate employers. The case presented a series of arguments against Seattle’s $15 an hour minimum wage ordinance that ranged from ambitious to an outright assault on lawmakers’ power over businesses. One of the plaintiffs’ arguments, for example, suggested that the minimum wage violates the First Amendment because it forces companies to spend money on wages that could otherwise be spent on advertising.

Really. We’re not making that up. That was an actual argument advanced by top lawyers in a federal court.

On Monday, however, the Supreme Court announced that it will not hear an appeal from a federal circuit court’s decision refusing to halt Seattle’s minimum wage. That doesn’t end this lawsuit altogether, but it is only the latest in a series of embarrassments for the plaintiffs in this case. And it most likely means that this effort to undermine Seattle’s protections for low-income workers will gain no traction in federal court.

The lead plaintiff in this case, the International Franchise Association, represents hundreds of franchise companies such as McDonald’s or Yum Brands, the parent company for Taco Bell, Pizza Hut, and KFC. And IFC put together a powerhouse legal team to lead their charge against Seattle’s ordinance, led by former Solicitor General Paul Clement. The original complaint Clement filed in this case, just eight days after Seattle’s mayor signed the $15 minimum wage bill into law, included several arguments that were as aggressive as anti-regulatory readings of the Constitution that the Supreme Court abandoned three generations ago.

Nevertheless, as the case progressed, it shrank in ambition. By the time it reached a federal appeals court, Clement and his legal team abandoned their unusual argument about a right to spend money on advertising and not wages. After the plaintiffs lost in that appeals court, Clement pared their arguments down to a single, relatively unambitious claim in a petition he filed asking the Supreme Court to review this case.

That petition complains about the schedule the city uses to implement its new wage. Under that schedule, businesses with 500 or more employees ramp up to a $15 minimum fairly quickly, eventually having to pay that wage in January of 2017. Meanwhile, smaller employers ramp up to the $15 minimum wage more slowly, reaching that level in 2021. Franchises are treated as part of the larger company they are affiliated with — so, for example, an individual McDonald’s restaurant must comply with the schedule applying to large employers because McDonald’s as a whole employs more than 500 workers.

IFC and its fellow plaintiffs object to this treatment of franchises, claiming that each individual franchise should be treated the same way as an independent small business. At the Supreme Court level, they allege that treating franchises as large employers and not small employers violates a doctrine known as the “dormant commerce clause,” which prevents state laws that favor in-state business interests over out-of-state business interests.

An opinion handed down by a ideologically diverse panel of the United States Court of Appeals for the Ninth Circuit explains why this argument fails. Clement argued that treating franchises differently than independent small businesses punishes those franchises that are affiliated with an out-of-state company, and that this is not allowed because the overwhelming majority of Seattle franchise companies are based out-of-state. Yet the Ninth Circuit offers several reasons why this claim does not matter.

Among other things, the court explains, Seattle’s minimum wage ordinance “does not classify employers based on the location of their headquarters, the location of their workers, or the extent to which they participate in interstate commerce. Rather, it classifies based on the number of employees (a facially-neutral classification) and the business model (a facially-neutral classification).” Under this ordinance “a franchisee affiliated with a network that has 500 employees in the State of Washington and a headquarters in Seattle is treated just like a franchisee affiliated with a franchise that has 10 employees in Washington, 490 in Oregon, and a headquarters in Boston.” That’s not discrimination, because both in-state and out-of-state franchise companies are treated exactly the same.

Though the Supreme Court decided not to question the Ninth Circuit’s reasoning, a few things are worth noting. One is that the Court’s decision not to hear a case should not be read as an endorsement of the decision below. It’s possible that the justices could take this issue up again at a later date — indeed, they could even do so in this same case, which has not been fully litigated in the lower courts.

Additionally, it’s also worth noting that Clement plausibly argues in his petition to the justices that the Ninth Circuit’s decision is at odds with an opinion handed down by a conservative Eleventh Circuit panel. The Supreme Court is normally fairly eager to take cases where there is a conflict among federal appeals courts. The fact that they decided not to take the Seattle case suggests that the justices may be reluctant to take up a contentious issue while the Court’s membership is in flux (although it should also be noted that the issues in the Ninth and Eleventh Circuit cases are similar but not identical).

For the time being, however, the Court appears unwilling to disturb Seattle’s ability to recognize that there’s a difference between a business that can tap into the resources of a national corporation and a truly independent small business. Unless the Court’s membership lurches to the right, it’s unlikely that the justices’ position on this issue will change.