If Pain, Yes Gain — Part 85: Supreme Court of Texas Remains Silent on Austin Paid Sick Leave Ordinance Temporary Injunction

Seyfarth Synopsis: Last Friday, the Supreme Court of Texas issued a one-line decision, without explanation, denying the City of Austin’s petition for review of an appellate decision temporarily enjoining the Austin paid sick leave (“PSL”) ordinance. As a result, the appellate court’s decision, which justified the temporary injunction on grounds that the ordinance was unconstitutional, stands and the Austin ordinance remains enjoined. While litigation over a permanent injunction lies ahead at the trial court, Austin employers can breathe a sigh of relief pending a final outcome on the merits. However, the high court’s silence leaves Dallas and San Antonio employers with some uncertainty about the outcome of similar litigation over the constitutionality of the PSL ordinances in those cities.

The Austin PSL Ordinance was scheduled to go into effect on October 1, 2018, but decisions by the Texas Court of Appeals for the Third District (“Third District”) in August and November 2018 prevented the ordinance from taking effect. In the latter decision, the Third District found that the Austin PSL Ordinance violates the Texas Constitution because it is preempted by the Texas Minimum Wage Act (“TMWA”).  In particular, the Third District noted that because the Austin PSL Ordinance increases the pay of employees using paid sick leave, it establishes a TMWA-defined wage. As such, the Third District held the TMWA preempts the Austin PSL Ordinance as a matter of law, and is therefore unconstitutional. The Third District’s ruling remanded the case to the lower court to issue the temporary injunction. 

In March 2019, the City of Austin appealed the Third District’s temporary injunction order to the Supreme Court of Texas. Without first deciding whether it would hear the case, the high court ordered briefs on the merits in August 2019, and also accepted various amicus briefs. It thus comes as somewhat of a surprise that nearly 15 months after the City’s appeal, the Supreme Court of Texas denied Austin’s petition for review in a one-line decision without any substantive analysis, thereby allowing the Third District’s decision to stand.

The effect of the Texas Supreme Court’s silence is not limited to Austin. In November 2019, a San Antonio trial court temporarily enjoined San Antonio’s Sick and Safe Leave Ordinance – amended after an agreement to stay litigation seeking to enjoin the city’s first PSL ordinance – on the same grounds as those relied on by the Third District to invalidate the Austin ordinance. The trial court presiding over the San Antonio litigation set a trial date for September 21, 2020, at which time it was anticipated that the Supreme Court of Texas would have issued binding authority on whether local PSL ordinances are preempted by the TMWA and unconstitutional. But alas, the trial court in the San Antonio case won’t have guidance from the Texas Supreme Court.

Moreover, on March 30, 2020, a federal district court ordering a temporary injunction of the Dallas PSL Ordinance – which had taken effect on August 1, 2019 despite the lawsuit to enjoin filed two days prior, but had not been enforced apart from its retaliation provisions given an April 1, 2020 “grace period” provision – reasoned “[a]bsent ‘convincing evidence’ that the Texas Supreme Court would rule differently on this issue, the Court must follow the Austin court’s [i.e., the Third District’s] interpretation of Texas law.” The March 30 Dallas PSL decision also noted that “there is no reason to believe the Texas Supreme Court would reach a different conclusion than the Austin court on the question of whether the Austin paid sick leave ordinance establishes a wage and is therefore preempted by the TMWA and unenforceable.”

As interested employers and the PSL community begin moving beyond the Texas Supreme Court’s sick leave silence, here are where things stand in the three municipalities discussed above:

• Austin: As a reminder, the Third District’s decision simply remanded the case to the lower court to issue the temporary injunction. At a glance, this simply will prevent the Austin PSL Ordinance from taking effect during the course of the litigation. However, given that the Third District’s temporary injunction decision involved an assessment of whether the TMWA preempts the Austin PSL Ordinance, it is likely that the lower court will follow the Third District’s analysis when deciding the case on its merits.
• San Antonio: On January 2, 2020, the City of San Antonio filed a notice of appeal of the November 2019 trial court order enjoining its amended PSL ordinance with the Texas Court of Appeals for the Fourth District (the “Fourth District”). The appeal was met with a motion to abate the appeal from the prevailing business plaintiffs “on the ground that the Supreme Court of Texas [was] considering the same dispositive legal issues with a substantively identical ordinance,” which the Fourth District granted on March 4, 2020. The Fourth District specifically abated the City’s appeal “until the Supreme Court of Texas either denies the petition for review or issues its opinion in [the Austin case], or until further order of [the Fourth District],” and did not opine on the issue of whether the San Antonio ordinance was constitutional. Importantly, neither the San Antonio PSL trial court nor the Fourth District is bound by the Third District’s ruling on the Austin PSL ordinance. As a result, the San Antonio PSL ordinance’s ultimate fate remains to be seen.
• Dallas: Since the federal district court’s March 30, 2020 temporary injunction of the Dallas PSL ordinance (see above), there has been no indication of an appeal to the Fifth Circuit Court of Appeals. The Dallas business plaintiffs moved for summary judgment on May 7, 2020, and an extension has been granted on the City’s response. Importantly, while the federal district court deferred to the Third District’s findings on the Austin ordinance when issuing its preliminary injunction, a different conclusion out of the Fourth District regarding San Antonio PSL could shift the landscape enough for the City of Dallas to file an appeal.

Once any outstanding temporary injunction issues are squared away, all three PSL ordinance litigations will eventually result in trial court decisions on whether to permanently enjoin the respective ordinances. Such decisions could be subject to the appellate process once more, and ultimately end with the Texas Supreme Court providing binding guidance on the issue of whether local PSL ordinances violate the state constitution. In the absence of such binding guidance, it is not clear whether the respective litigations will all end in permanent injunctions of the PSL ordinances at issue, though they have all resulted in temporary injunctions to date.

Legislative intervention regarding the issue of local PSL ordinance permissibility is also possible. As a reminder, the Texas legislature introduced multiple bills aimed at preempting municipal PSL ordinances in late 2018. While the preemption bills appeared poised for passage, the state legislature was unable to finalize them by the close of the state’s 2019 legislative session.

As the Austin, San Antonio, and Dallas PSL ordinances are currently enjoined, employers need not take steps at this time to bring their policies and practices into compliance with these ordinances, as applicable. That said, potentially affected employers should continue to monitor legislative and judicial developments to determine whether they may need to do so down the line. We will continue to monitor Texas PSL developments at all levels, and issue updates as appropriate.

With the paid sick leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with these laws and sick leave requirements generally.

To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list. Companies interested in Seyfarth’s paid sick leave laws survey should reach out to sickleave@seyfarth.com.