BrightStar CEO: ‘Slippery Slope’ if Franchises Are Considered Big Businesses

Last week, a franchisee of home health care company BrightStar Care was in court fighting a “discriminatory” law over a provision of Seattle’s new minimum wage law, which would increase the city’s rate to $15 per hour.

The law classifies franchise businesses in the same category as businesses with more than 500 employees and requires them to ramp up minimum wage to $15 per hour by 2017 or 2018. However, small, independent businesses are allowed up to seven years to reach the same rate. 

Shelly Sun, co- founder and CEO of BrightStar Care, told SHN why she’s on the foreground of the fight and standing behind one of her Seattle franchise owners, Kathy Lyons, who has signed on as one of four plaintiffs in a lawsuit against Seattle by the International Franchise Association.

“Even though Kathy Lyons is completely independent with 50 employees, she’s considered to be the same size employer as Microsoft or Starbucks in the Seattle marketplace,” Sun told SHN. “That feels unfair and discriminatory.” 

Sun says the lawsuit is not about the money, but fair classification under the law. 

“We’re not in any way against increases in minimum wage,” she says. “Our concern in Seattle is that franchises are being required to increase their minimum wage faster than independents are.”

Last week, a three-judge panel from the U.S. Ninth Circuit Court of Appeals heard oral arguments from franchise owners about why the law is discriminatory, after a judge denied a proposed injunction from the IFA in March that would block the franchise provision of the law. 

Sun says it is crucial to stand up at this stage, before similar laws are enacted elsewhere. 

“It’s a pace a small business can’t undertake,” says Sun. “That’s why we felt it was so important to take a leadership position. If we didn’t fight it in Seattle, we’d see it in other places.”

BrightStar Senior Living is planning to expand its home care services into senior living through a franchise model of assisted living facilities. 

As the minimum wage movement continues to sweep across the nation, franchise models could be in for quick change if provisions in the Seattle law are taken up elsewhere, Sun says.

“Discriminatory wages that cause our franchisees to be unable to compete with independent businesses, whether home care or assisted living, absolutely will impede our growth,” Sun told SHN. “As long as all businesses pay the same wages for the same qualifications of employees, then we will expand and our franchisees would adapt by increasing prices to customers.”

Sun also warns that the classification as seen in the Seattle law could impact other areas, such as new regulations under the Affordable Care Act (ACA). 

“It’s a slippery slope,” Sun explains. “Once you classify a franchise as a large business because they are affiliated with a franchiser, where does it stop? Does it extend to the ACA? Equating all franchises to every single benefit level of a big business makes it cost prohibitive for a small business.”

Sun hopes the lawsuit will block the franchise provision of the law so that all small businesses increase minimum wages “at the same dollar amount and pace.”

Written by Amy Baxter