State Appeals Court Says Austin’s Paid Sick Leave Ordinance Is Unconstitutional

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Rachel Zein for The Texas Tribune

The Texas 3rd Court of Appeals in Austin on Oct. 17, 2018.

The Austin-based Third Court of Appeals declared Austin’s paid sick leave ordinance unconstitutional Friday morning, saying the ordinance is preempted by the State’s minimum wage law.

In a 24-page opinion, a three-judge panel ordered a district court judge who originally heard the case to issue a temporary injunction against the ordinance. The judges also remanded the case back to the district court “for further proceedings consistent with [the appeals court’s] opinion.”

Passed by the city council in February, the ordinance is the first of its kind in Texas. It requires most employers to offer eight days of earned sick leave for a year of work, or six days for employees of businesses with fewer than 15 employees. The lawsuit against the ordinance was brought forth by a number of powerful business-aligned groups. In August, the State joined the business groups in requesting a temporary injunction against the ordinance and also requested a permanent injunction on the grounds that it violated the Texas Minimum Wage Act.

San Antonio’s City Council in August approved a similar ordinance and is scheduled to go into effect on Jan. 1. That city’s business community also has widely opposed the ordinance since a coalition of advocacy groups submitted more than 140,000 petition signatures in late May.

Austin’s ordinance was originally scheduled to take effect Oct. 1, but it was temporarily blocked by the appeals court in August as judges heard arguments.

“This court of appeals opinion reverses and usurps the ruling of the Austin trial judge, who heard the case, weighed the evidence, and ruled in the city’s favor earlier this year,” said City of Austin spokesperson Andy Tate. “Ensuring workers are able to take time off work when they are sick is simply the right and responsible thing to do, as many cities have already acknowledged.”

Tate said the City will review its options in the case.

Speaking in San Antonio at a panel discussion with mayors from San Antonio, Dallas, and Houston, Austin Mayor Steve Adler said the fight for paid sick leave will continue because “it’s the right thing to do,” and it’s only a matter of time before it wins.

“Austin, and I think [cities in general], have historically been at the cutting edge of the arc of history,” Adler said. “And I think the arc of history is leading to having universal sick leave. … It’s inevitable.”

At the heart of the case was whether or not the ordinance establishes a wage and is at odds with the Texas Minimum Wage Age Act, which supersedes a minimum wage established by a local government.

“The issue for us then is to determine whether the city’s ordinance falls within the TMWA’s ambit; specifically, whether the ordinance establishes a ‘wage,’” wrote Chief Justice Jeff Rose in the opinion.

Rose, along with justices David Puryear and Scott Field, ultimately determined that the ordinance does establish a wage, writing in the opinion that “the effective result is that employees who take sick leave are paid the same wage for fewer hours worked.” The City has long argued that wages involve compensation for services and do not include benefits like paid vacation time and paid sick leave.

Opponents of the ordinance have argued that providing paid sick leave is too expensive for employers. The Austin Chamber of Commerce estimates that the ordinance could cost businesses $140 million annually in overhead. Opponents of the ordinance said that could trickle down to workers, leading to fewer jobs and less paid vacation time.

In San Antonio, Mayor Ron Nirenberg told an audience gathered for the San Antonio Hispanic Chamber of Commerce panel discussion that while cities need to maintain local control in the next state legislative session, he prefers statewide regulations for paid sick leave.

“I think there is a limit to the jurisdiction of cities as it relates to mandates on the business community,” Nirenberg said.

The passage of the ordinance there, he said, “allows us to take a deep breath” and have a conversation about the issues as well as see what the courts and legislature is going to do ahead of its slated implementation in August.

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