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Fast-Food Franchise Owners May Sue Over Recommended Wage Hike

New York State’s Fast Food Wage Board is recommending a substantial increase in the minimum wage for fast-food restaurant employees. The board determined the state’s current $8.75-an-hour minimum wage is inadequate and is recommending an increase to $15 an hour by 2021, pending approval by the state’s labor commissioner. In response to this announcement, fast-food franchise owners across New York are considering lawsuits against the state.

Michael Schiavone, a noted business attorney, was interviewed by WGRZ about the recommended increase. The full interview is available at WGRZ’s website.

A new way of doing business?

“I expect, if this does move forward and becomes better defined, I am going to hear from my clients who are going to be adversely impacted,” Mr. Schiavone said. He said he has not yet heard from any of his fast-food franchise clients about the recommended increase, WGRZ reports.

Fast-food franchise owners across the state are considering a lawsuit because the new law would apply to them but not to employers in other minimum-wage industries. Some fast-food businesses warn of layoffs and closures.

“Reducing expenses could happen. They could reduce hours and go to an automated system,” Mr. Schiavone said. “But if the definition of ‘fast food’ is over-the-counter, pay-for-it-and-take-it-with-you, the immediate reaction, I think, for many restaurants will be to offer table service.”

The Fast Food Wage Board has said that the requirement would apply to fast-food restaurants that are part of chains with at least 30 outlets. It defines fast food as “food and drinks served at counters where customers pay before eating.”

“I think they will try to reinvent themselves,” Mr. Schiavone said. “There is a very distinct possibility that by providing table-side service, you exempt yourself from the fast-food category.” He noted that with table-side service, there are tipped employees.

Albany’s involvement

WGRZ asked a number of fast-food franchise owners for interviews for the story, but none wanted to comment. The previous owner of 21 Burger Kings in Western New York was quoted in a separate news report, saying the process was “underhanded, slimy, and typical of Albany.” WGRZ reports that he is upset the governor let the wage board issue the proposal instead of letting lawmakers debate the idea.

Mr. Schiavone noted, “It’s going to depend upon the individual location, the individual franchise, in terms of how they can best react.” He said the potential lawsuit could have weight under equal-protection grounds, but warned that it’s premature to suggest it is a viable challenge until all of the details are finalized.

The increase now awaits formal approval by the governor’s labor commissioner.

About Michael Schiavone

The chair of Lipsitz Green Scime Cambria’s Business and Corporate Practice Area, Mr. Schiavone has provided legal guidance to businesses for more than 30 years. He concentrates his practice in the areas of business law, commercial real estate, and estate planning, and he serves clients in a range of industries that includes franchises, hotel and hospitality chains, banking and finance, health care, manufacturing and distribution, and professional sports teams.

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