If Pain, Yes Gain—Part 95: Appellate Court Affirms Temporary Injunction Barring San Antonio’s Paid Sick Leave Ordinance

Seyfarth Synopsis: On Wednesday, March 10, 2021, a Texas appellate court affirmed a temporary injunction against the City of San Antonio’s Paid Sick Leave (“PSL”) Ordinance, ruling that the ordinance is unconstitutional and preempted by the Texas Minimum Wage Act (“TMWA”). At this time, only an appeal to the Texas Supreme Court or a surprise ruling on the merits from the trial court would alter the path of the ordinance’s defeat in the coming weeks and months.

As we previously reported, in August 2018, the City of San Antonio passed a PSL ordinance, which was scheduled to take effect in August 2019.  However, several businesses and associates filed a lawsuit seeking an injunction of the San Antonio PSL Ordinance, and the ordinance did not go into effect as planned after the trial court granted a temporary injunction.

The path to implementation hit another bump in the road last week when the Texas Court of Appeals for the Fourth District (“Fourth District”) upheld the trial court’s temporary injunction decision.  The Fourth District adopted the Texas Court of Appeals for the Third District’s (“Third District”) definition of a wage and concluded that the San Antonio PSL Ordinance establishes a minimum wage.  The Fourth District went on to hold that San Antonio PSL Ordinance’s minimum wage is inconsistent with the Texas Minimum Wage Act (“TMWA”) and that the TMWA supersedes the San Antonio PSL Ordinance.  Specifically, the Fourth District found “the TMWA’s plain language states with unmistakable clarity the legislature’s intent to preempt a home-rule city’s ordinance that establishes a mandatory minimum wage.” Therefore, the San Antonio PSL Ordinance violates the Texas Constitution. This recent ruling means that San Antonio’s PSL Ordinance is now in the same boat as other PSL ordinances passed in the Lone Star State (Dallas and Austin).

Austin was the first city to pass a PSL ordinance in Texas in February 2018. Since that time, the Third District found that the City of Austin’s PSL Ordinance violated the Texas Constitution because it was preempted by the TMWA, specifically that Austin’s PSL Ordinance established a TMWA-defined wage. The City of Austin filed a petition with the Texas State Supreme Court, which denied review in a one-page decision.

Dallas joined the fray after San Antonio, and passed a PSL ordinance in April 2019. Although the Dallas PSL Ordinance took effect in August 2019, an injunction from the U.S. District Court for the Eastern District of Texas Sherman Division stopped enforcement of the ordinance in March 2020. In granting the preliminary injunction, the district court found it was bound by the Third District’s reasoning regarding the TMWA’s preemption of the Austin PSL Ordinance.

With the Austin, Dallas, and San Antonio PSL ordinances treading water, here are where things stand in these three municipalities:

• Austin: The Third District’s decision 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: With the Fourth District’s decision, the temporary injunction is affirmed and the matter is remanded back to the lower court for further handling. This, too, means that the San Antonio PSL Ordinance will not take effect during the course of litigation. Given the Fourth District’s analysis, which found the ordinance was preempted by the TMWA, it is likely that the lower court will follow the Fourth District’s analysis when ruling on the merits of the case.
• Dallas: Since the federal district court’s March 30, 2020 temporary injunction of the Dallas PSL Ordinance, there was no appeal to the Fifth Circuit Court of Appeals. The Dallas business plaintiffs moved for summary judgment last year, but the Eastern District of Texas has not issued a ruling yet. The federal district court deferred to the Third District’s findings on the Austin PSL Ordinance when issuing its preliminary injunction. Now that the Fourth District issued similar findings on the San Antonio PSL Ordinance in upholding the trial court’s preliminary injunction, it is likely that the lower court will follow the same analysis when ruling on the merits of this case.

Once any outstanding temporary injunction issues are squared away, courts will likely decide whether permanent injunctions are appropriate for each PSL ordinance and/or whether dismissal of litigation is appropriate. Such decisions could be subject to appellate review once more, and ultimately could end with the Texas Supreme Court providing binding guidance on whether these local PSL ordinances violate the state constitution. In the absence of such binding guidance, it is not clear whether the respective litigations will end in permanent injunctions of the PSL ordinances at issue, though they are likely.

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. 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.