Under the ordinance, businesses with more than 500 employees must raise the minimum wage they pay to $15 an hour over a three-year period. Smaller businesses have seven years to phase in the raise. The law went into force on April 1, 2015.

The International Franchise Association (IFA) and five Seattle franchisees challenged the city’s minimum wage law in 2014 arguing that the law treats franchisees as large, national companies instead of small, locally owned businesses.  The complaint also said the city’s ordinance was a violation of the Commerce clause of the United States Constitution.

“Today’s decision from the Supreme Court is clearly a disappointment as our appeal has always focused solely on the discriminatory treatment of franchisees under Seattle’s wage law and the motivation to discriminate against interstate commerce,” Robert Cresanti, IFA president and CEO, said in a statement. “Seattle’s ordinance is blatantly discriminatory and affirmatively harms Seattle’s hard-working franchise small business owners every day since it has gone into effect. We are simply attempting to level the playing field for the 600 local franchise business owners employing 19,000 people in Seattle.”

The city said the ordinance was aimed at addressing wage inequality. Lower courts agreed with the city, ruling there is nothing unlawful about viewing a franchise as a large business. Also, the Ninth Circuit Court of Appeals in San Francisco ruled in September 2015 that the ordinance appeared “highly local” and that IFA did not demonstrate “…how a wage requirement imposed on in-state franchisees affects interstate commerce…”

“Rather, to the extent the ordinance has an effect, its primary or perhaps exclusive effect is to harm in-state firms — franchisees located in Seattle,” the court said in its ruling. “These in-state firms will face a higher wage requirement relative to franchisees outside of Seattle and non-franchisees.”