The International Franchise Association’s hilarious lawsuit challenging the constitutionality of Seattle’s $15 minimum wage ordinance prompted instant ridicule from actual lawyers. “Crazy talk,” laughed labor and employment attorney Dmitri Iglitzin. “Frivolous,” scoffed University of Washington School of Law lecturer David Ziff. “Bonkers,” wrote Ian Millhiser, the Senior Constitutional Policy Analyst at the Center for American Progress Action Fund.
But while most of the suit’s claims were based on absurdly broad constitutional reaches (like alleging that impinging on a business’s profits would violate its First Amendment right to commercial speech), there was one claim that gave some attorneys pause—that the slower phase-in schedules for businesses providing health benefits were preempted by the federal Employee Retirement Income Security Act (ERISA). It’s not that the attorneys thought the claim had any merit, just that ERISA is an incredibly complex area of the law in which none of them had particular expertise.
Well in fact, there is plenty of relevant case law on this issue, and not surprisingly it turns out that the IFA’s ERISA claim is just as frivolous as the rest of its ridiculous suit. From Ironworkers Dist. Council of the Pacific Northwest v. Woodland Park Zoo Planning & Development:
We agree with the attorney general opinion that the prevailing wage statute does not require employers to establish benefit programs or make benefit contributions. The respondents concede, both in their briefing and at oral argument, that an employer can satisfy the statute by making cash payments in lieu of benefits. Because J.A. Jones ‘s preemption holding was based on the faulty premise that the statute requires employers to make ERISA contributions and to make them at a certain level, we do not adopt it. Rather, we follow other jurisdictions that hold that ERISA does not preempt prevailing wage statutes similar to Washington’s, which consider the amount of usual benefits in computing the total prevailing wage, but do not require that employers actually make such contributions. See Associated Builders & Contractors, Saginaw Valley Area Chapter v. Perry, 115 F.3d 386 (6th Cir.1997); Burgio & Campofelice, Inc. v. NYS Dep’t of Labor, 107 F.3d 1000 (2d Cir.1997); WSB Electric v. Curry, 88 F.3d 788 (9th Cir.1996), cert. denied, 519 U.S. 1109, 117 S.Ct. 945, 136 L.Ed.2d 834 (1997); Minnesota Chapter of Assoc. Builders & Contractors v. Minnesota Dep’t of Labor & Indus., 47 F.3d 975 (8th Cir.1995); Keystone Chapter, Assoc. Builders & Contractors v. Foley, 37 F.3d 945 (3d Cir.1994).
Each of these cases hold that prevailing wage statutes that consider the amount of usual benefits but do not require the establishment of benefit programs or benefit payments are not preempted by ERISA because they regulate wages, not benefits. Wages are a traditional subject of state concern and are not within ERISA’s coverage. Massachusetts v. Morash, 490 U.S. 107, 118, 109 S.Ct. 1668, 1674–75, 104 L.Ed.2d 98 (1989). Like the prevailing wage statutes in the above cases, Washington’s statute does not prescribe the type of benefit plans or amount of contributions. Nor does it impose any sort of administrative burden on ERISA plans. Most importantly, the employer can comply with the prevailing wage statute without any ERISA plan whatsoever. Accordingly, applying the Travelers analysis, we conclude that the prevailing wage statute does not “relate to” any employee benefit plans because Congress did not intend that ERISA control state wage regulation and the prevailing wage statute does not have an impermissible effect on ERISA plans.
That’s a lot of federal case law the Washington State Court of Appeals cites, and it all concludes the same thing: “Congress did not intend that ERISA control state wage regulation.” And while the above case deals with prevailing wage law rather than minimum wage law, the issues raised in the IFA suit are entirely analogous. IFA claims that the ordinance is preempted by ERISA because it “relates to” employee benefit plans, but the courts have repeatedly ruled that such wage statutes do not.
Minimum wage critics love to disparage “burger flippers” as unworthy of earning a livable wage, yet they have no qualms about paying attorneys $1,000 an hour to file a ridiculous lawsuit like this. Amazing.
Let’s be clear: the International Franchise Association, which purports to represent both franchisors and franchisees to the benefit of both, is really an industry trade group for the franchisORS. There is an alternative organization that may be more friendly to franchisEES and consumers, the American Association of Franchisees and Dealers:
“The American Association of Franchisees and Dealers (AAFD) came into existence because United States laws which purport to regulate franchising effectively legalize abusive franchising practices, rather than restrict franchise fraud. As long as the franchisor discloses the details of its practices, the unethical practices are enforceable.”
It would be interesting if some blogger, or journalist, got the AAFD to issue a statement on fair compensation for labor, or at least the relative ethics and benefits of fighting first and foremost to damage low-wage workers versus banding together to better regulate franchises, and to pressure franchisORS to reduce supply-contract prices as well as licensing and marketing fees.
(What happened to the HTML-tag tools for commenters, Goldy?)
I also note that the Wikipedia page for the International Franchise Association was deleted in July of last year. The Talk Page provides no clear indication why.