Are franchises small, independent businesses or are they a part of a large company? It’s one question that is at the heart of two legal cases involving the franchise system this month. And the results could have a big impact on all kinds of franchises.
First up, Seattle’s minimum wage law. The law, slated to go into effect April 1, raises the minimum wage in the city to $15 per hour. Under the law small businesses have seven years to comply with the law; big businesses have three years. At issue is where franchises fall into this system. Currently, franchises are classified as big businesses and therefore have three years to raise minimum wage for employees. Franchisees and the International Franchise Association are challenging that part of the law, and that is the focus of the hearing being held today.
Later this month also brings the first of a series of hearings into complaints against McDonald’s and some of its franchisees brought by the National Labor Relations Board. Over the summer, the NLRB ruled that McDonald’s is a joint employer with its franchisees and should be held responsible if franchisees are found to have committed labor law violations.
The franchise industry is concerned that the cases could end up requiring all franchisors to oversee how franchisees manage employees; thus changing the franchise system. But this issue is so divisive there are those in the franchise industry who expect no change at all.
Although hearings on both cases are starting this month, they are likely to continue into April and maybe beyond. There is also the chance these cases get taken up to the Supreme Court. All of that has yet to be seen, as are any permanent changes to the franchise system. One thing that is certain, business leaders and employees alike are watching.