On June 5, 2020, the Supreme Court of Texas declined to hear the petition filed in Texas Association of Business v. City of Austin, 565 S.W.3d 425 (Tex.App.—Austin 2018), petition denied (No. 19-0025). The Supreme Court of Texas’s Order provided no explanation for its denial, but the implication behind it is significant.
By way of background, the City of Austin enacted a paid sick leave ordinance on February 15, 2018, with an effective date of October 1, 2018. The ordinance required private employers of any size to provide paid sick leave to their employees, accrued at one hour of paid sick leave for every thirty hours worked. Employees would be able to accrue up to sixty-four hours of paid sick leave each year. For employers with fewer than fifteen workers, the amount accrued would be capped at forty-eight hours.
Before the ordinance took effect, several Texas business groups filed a lawsuit in the Travis County district court seeking a temporary and permanent injunction to prohibit the ordinance from taking effect. The district court denied the request for a temporary injunction, and the Texas Association of Business appealed. The Court of Appeals for the Third District (the “Third District”) temporarily enjoined the ordinance from taking effect until the resolution of the appeal. On November 16, 2018, the Third District issued its opinion, holding the district court abused its discretion in denying the parties’ application for temporary injunction. Most significantly, the Third District held “that the Texas Minimum Wage Act preempts local regulations that establish a wage, that the ordinance establishes a wage, and that, accordingly, the TMWA preempts the City’s ordinance as a matter of law, thus making the ordinance unconstitutional.” In finding that the ordinance established a wage, the Third District reasoned that “[t]he effective result is that employees who take sick leave are paid the same wages for fewer hours worked or, stated differently, that employees who take sick leave are paid more per hour for the hours actually worked.” The Third District remanded the case to the district court with directions to issue a temporary injunction and for further proceedings consistent with the Third District’s Opinion. Following the Third District’s Opinion, the City of Austin petitioned the Supreme Court of Texas for review. With the Supreme Court of Texas’s decision not to hear the case, it appears the district court will have no option but to hold the ordinance unconstitutional. This declination is likely the end of the Austin paid sick leave ordinance.
By denying review, the Supreme Court of Texas left the future of the City of Dallas’s and San Antonio’s ordinances uncertain. While the decision technically has no bearing on the litigation pending in those actions, the courts will likely interpret the decision as indicative guidance on the constitutionality of the ordinances.
Employers should continue to watch the pending Dallas and San Antonio litigation, though it appears the sick leave ordinance will not take effect in Austin any time soon. Unless the Texas Legislature takes up the issue, local sick leave ordinances face an uphill battle going forward.