Industry Group Files Lawsuit Seeking to Kill Seattle's Minimum Wage, Claiming It Violates Their Free Speech

By Ian Millhiser, ThinkProgress

13 June 14

ast week, Seattle Mayor Ed Murray (D) signed a bill that will eventually raise his city’s minimum wage to $15 an hour. It took eight days for a lobbying group representing major employers like McDonald’s and Taco Bell to file a lawsuit asking the courts to repeal the legislation.

In a sensible world, this lawsuit would have no chance of prevailing. Many of its claims are frivolous — and comically so. The lobbying group argues, for example, that Seattle’s new minimum wage violates the First Amendment because “by increasing the labor costs of franchisees, the Ordinance will reduce the ability of franchisees to dedicate funding to the promotion of their businesses and brands.” In other words, the law requires businesses to spend money paying workers a living wage that they could otherwise spend on advertising, and this somehow violates the Constitution’s guarantee of free speech. If this were actually what the Constitution required, then any law imposing costs on anyone would be unconstitutional, including all taxes. After all, every dollar paid in taxes is a dollar that can’t be spent to buy an ad promoting the deliciousness of the Big Mac.

The crux of the lawsuit, however, is rooted in the way Seattle’s minimum wage ordinance treats franchised businesses as opposed to other employers. The ordinance contains two different schedules for large and small businesses that phase in the higher minimum wage at a different pace. Many large businesses, defined as “all employers that employ more than 500 employees in the United States,” are required to pay a $15 minimum wage by 2017, while smaller businesses do not not reach this milestone until 2021. Franchises, such as an individual McDonald’s restaurant, are treated as part of the larger company. So, because McDonald’s as a whole employs over 500 employees, each individual McDonald’s franchise is also subject to the same schedule that applies to large employers.

The lawsuit primarily objects to this decision to classify individual McDonald’s restaurants and other franchises as part of the whole, and it offers several legal challenges to this classification that can generously be described as “imaginative.” It argues for example, that, by treating franchisees of out-of-state companies like McDonald’s differently than mom-and-pop hamburger shops, the Seattle law violates a constitutional doctrine prohibiting states from discriminating against out of state businesses. This argument would have merit if franchisees of in-state companies — like, say, Starbucks — were treated differently under the minimum wage ordinance than McDonald’s franchisees. They aren’t. This claim has no merit.

Party Like It’s 1905

The suit does contain two claims, however, that are entirely plausible — if this were 1905. In the Nineteenth and early Twentieth Centuries, judges frequently invoked open-ended doctrines that have largely been discarded as unworkable. One of these was a prohibition on “class legislation,” defined as “legislation that picks out a group of people for special benefits or special burdens without adequate public justification.” On the surface, this seems reasonable, but it turned out that nearly any law can be characterized as discriminatory if a judge tries hard enough — laws banning murder, after all, discriminate against killers. If judges have the final word on which laws have an “adequate public justification,” then they have an effective veto power that they could and did use quite arbitrarily. In an infamous New York case, one judge claimed that a law prohibiting bakery owners from overworking their workers was unconstitutional class legislation in large part because it only applied to the “small fraction of the community who happen to conduct bakeries or confectionery establishments.”

When the New York bakery case reached the United States Supreme Court, it became what is now known as Lochner v. New York. Lochner is widely taught in law schools, often alongside cases upholding separate-but-equal segregation or Japanese detention camps, as an example of how judges must not behave. It is what legal scholars often refer to as “anti-canon” — a decision that is instructive only because it warns the reader that judges wield tremendous power that can be used in terrible ways.

The Supreme Court’s Lochner opinion relied on a somewhat different reasoning than the New York judge with his fear of class legislation; it relied on a so-called “liberty of contract” to strike down the law limiting the number of hours bakers could work in a given day or week. Under Lochner‘s reasoning, if a worker is foolish enough or desperate enough to sign a contract requiring him to work punishing hours — even in brutal conditions and for little pay — then the courts will be very reluctant to allow lawmakers to interfere with that contact. Subsequent Supreme Court decisions applied Lochner‘s reasoning to invalidate minimum wage laws and laws protecting workers’ right to organize.

Zombies On Steroids

Which brings us back to the much more recent Seattle lawsuit. The plaintiffs in this lawsuit do not simply want to resurrect a very Lochnerian notion of freedom of contract, they want to inject it with steroids and then send it on a rampage through the American system of law. According to these plaintiffs’ complaint, they are subject to a franchise contract that “comprehensively define[s] the rights and obligations of each party.” Seattle’s minimum wage ordinance, they argue, “will make it difficult—if not impossible—for the franchisees to continue to meet their obligations in terms of operating hours and product quality due to the increased costs imposed by the Ordinance.”

It is certainly true that, if a business has higher labor costs then it will have less surplus cash lying around enabling it to meet its other financial obligations. But, once again, if a law became unconstitutional simply because it imposes financial obligations on businesses, than taxing or regulating businesses would be impossible. McDonald’s franchises are also subject to a web of health regulations, and they could presumably save money if they were allowed to serve diseased meat that they could purchase at a discount. That doesn’t make food safety regulations unconstitutional.

The Seattle lawsuit also seeks to revive something very close to antiquated notions regarding class legislation. The ordinance engages in unconstitutional discrimination, according to the lawsuit, because it “arbitrarily and irrationally discriminates against small franchisees, i.e., those that employ 500 or fewer workers but are associated with a franchise network that collectively employs more than 500 workers.”

It should be noted that there is nothing unusual about laws that treat larger employers differently than smaller ones. Many federal laws banning employment discrimination, for example, only cover “private employers, state and local government employers, and educational institutions that employ 15 or more individuals.” Similarly, there is nothing irrational or arbitrary about treating a McDonald’s franchise differently than an independent restaurant. McDonald’s franchises, for example, benefit from a national supply chain and national advertising paid for by the McDonald’s corporation. Independent businesses do not. It’s entirely reasonable for Seattle lawmakers to conclude that the financial benefits of associating with a large national company offset the costs of having to pay a higher wage a few years sooner.

Judges Are Not Kings

Now, it’s possible that Seattle was wrong when it made this reasonable conclusion. Maybe the benefits of associating with the McDonald’s brand and using its well-developed supply chain do not actually overcome the costs of paying more money to its workers. Even if this is true, however, it is irrelevant. As the Supreme Court explained nearly sixty years ago, it is not the job of the courts “to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought.” If the Seattle City Council enacts bad laws, the remedy is to vote its members out of office and replace them with people who will enact good laws. The appropriate remedy is not a lawsuit asking unelected judges to second-guess elected officials.

This is why the old class legislation framework ultimately proved unworkable. It is because it transferred broad discretion to the one branch of government that is typically not elected, and it imposed few limits on how judges exercised that discretion. Conservative judges were free to strike down liberal legislation based on little more than their own desires, and liberal judges were free to do the same to conservative legislation. America’s economic policy has to be set by someone, and it is better to leave it to people who can actually be held accountable to voters than to place that power in the hands of an aristocracy of unelected federal officials who serve for life.

So the Seattle lawsuit relies on arguments that are either silly, dangerous or both. It calls for a wholesale transfer of power away from the American people. And it would repeat some of the worst mistakes of American governments’ past. Indeed, many of the arguments raised in the plaintiffs’ complaint are so absurd that they raise an important question — why should anyone care that this lawsuit was filed? People file silly lawsuits all the time. One guy once filed a federal suit against “Satan and his staff,” claiming that “Satan has placed deliberate obstacles in his path and has caused [his] downfall.” But there was never much risk that a federal judge would issue an injunction against the Devil.

The answer to this question is that the Seattle lawsuit does have one thing going for it that the guy who sued Satan did not. It is being litigated by Paul Clement, the conservative superlawyer that we have rather archly referred to as the “Solicitor General of the Republican Party.” Clement is the go-to lawyer for Republican interest groups seeking to implement Republican policies through the judiciary, and he has a knack for making ridiculous legal arguments sound plausible to conservative judges. Recall that Clement nearly convinced the Supreme Court to strike down the entire Affordable Care Act, largely relying on a legal theory that one very conservative judge mocked for having no basis “in either the text of the Constitution or Supreme Court precedent.”

Clement, it should be noted, is a lawyer. He’s not a wizard. So there is only but so much that even a man with his considerable legal skills can do to convince judges to adopt silly arguments. The fact that he argues a case does not mean that he will win it. He did, after all, fail to repeal Obamacare.

But there’s also a reason why lawyers do not typically make the kind of arguments that Clement signed his name to in the Seattle case. A lawyer’s most important commodity is his or her credibility before the judges that hear their cases. Attorneys, or, at least, attorneys of Clement’s caliber, do not typically argue that the First Amendment prohibits the government from costing businesses money because this argument is so ridiculous that it undermines the lawyer’s credibility with the court. If an attorney is willing to make an argument that is this outlandish, how can judges trust anything else he has to say? Clement, however, is such a successful attorney in large part because he has his finger on the pulse of the conservative legal thinkers who dominate the Supreme Court of the United States. He is a better judge of how far he can push the justices than nearly anyone else in the country. And, if he thinks that the kind of arguments that he makes in his brief can be made with a straight face, then that is saying something quite significant.

The conventional wisdom, based not just on speculation but on the justices’ own statements, is that the Roberts Court is quite conservative but it certainly isn’t prepared to revive the judicial overreach that pervaded the Lochner Era. One of the best lawyers in the country, however, appears to have concluded that this conventional wisdom is wrong. If Clement turns out to be correct, that should frighten anyone who works for a living.