State appeals court says Austin's paid sick leave ordinance is unconstitutional

The case was being challenged in the Austin-based 3rd Court of Appeals.

The Texas 3rd Court of Appeals in Austin on Oct. 17, 2018.
The Texas 3rd Court of Appeals in Austin on Oct. 17, 2018.  Rachel Zein for The Texas Tribune

The Austin-based 3rd 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 Austin 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. A number of powerful business-aligned groups sued over the ordinance. 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.

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

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“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.

At the heart of the case was whether the ordinance establishes a wage and is at odds with the Texas Minimum Wage Act, which supersedes a wage established by a local government.

Chief Justice Jeff 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.

In a written statement, Bo Delp, a policy director with the Workers Defense Project, called the ruling “disappointing” for working families and pointed to judicial politics at play.

“Given today’s ruling, it is hardly surprising that a majority of judges involved were soundly defeated at the ballot box in November and will not be returning to office in January,” Delp said. “Make no mistake: this was a desperate, final attempt by humiliated judges to side against working families on their way out the door.”

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Puryear and Field lost their seats to Democrats in last week’s election.

Annie Spilman, the Texas state director at the National Federation of Independent Business, one of the groups that sued Austin over the ordinance, said that the justices “were just doing their job.”

She said that her group is not against having discussions about paid sick leave but that the discussions should be held at the state level.

“When local city councils try to dictate what local employers do, they’re doing it in these backroom meetings and all stakeholders don’t have an opportunity to weigh in on it,” Spilman said. “It’s a more open and transparent process at the Legislature.”

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

The ordinance could have a long battle ahead of it in court and in the Legislature. Delp said he is confident that the case “will prevail on the merits in district court.” Spilman said her group will use the court’s decision to attempt to strike down a similar ordinance in San Antonio. State Rep. Matt Krause, R-Fort Worth, has filed a bill ahead of the upcoming Legislative session that would prohibit cities from requiring employers to provide paid sick leave.