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Appeals Court Blocks Austin City Ordinance Requiring Paid Sick Leave

Published by and on November 29, 2018

The 3rd Court of Appeals issued a temporary injunction and determined the ordinance violated existing state minimum wage law.

On November 16, 2018, the 3rd Court of Appeals in Austin, Texas, held the city’s paid sick leave ordinance unconstitutional and preempted by the Texas Minimum Wage Act. The three-judge panel remanded the earlier ruling in favor of the city and ordered the district court judge to issue a temporary injunction against the ordinance and proceed in a manner consistent with its ruling.

The Austin City Council initially passed the ordinance in February, which was the first ordinance passed in Texas to require 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 ordinance was originally scheduled to take effect October 1, 2018 but was temporarily blocked after the National Federation of Independent Business and other business groups filed suit. The Austin Chamber of Commerce estimated that the ordinance would cost businesses operating in Austin $140 million annually.

The 3rd Court of Appeals panel determined that the ordinance violated the Texas Minimum Wage Act, which prohibits cities from setting or regulating employee wages, because “the effective result is that employees who take sick leave are paid the same wage for fewer hours worked.” The court was not persuaded by the city’s argument that wages involve compensation for services and do not include benefits, such as paid vacation time or paid sick leave.

Welter Insight

The debate over Austin’s paid sick leave ordinance will continue with the remand to district court. Additionally, business advocacy groups will likely challenge similar ordinances in San Antonio and legislation will be considered in the upcoming Texas Legislative session that could prohibit cities from implementing ordinances required employers to provide paid sick leave. Employers should stay informed of evolving local, state, and federal law regarding wage requirements and paid sick leave to ensure compliance.

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