Executive Summary: Texas does not require private employers to provide paid sick leave to any employee. However, three major Texas cities – Dallas, San Antonio and Austin – have all recently passed ordinances which would require almost all employers with employees who work in those cities to provide paid sick leave to those employees. It was thought that the Texas Legislature would pass legislation that would prohibit these ordinances from existing in the first place. The legislative session ended, however, with no such legislation making its way to Governor Abbott’s desk after a disagreement arose over whether city ordinances prohibiting discrimination on LGBTQ status should be included in this prohibition. With the Austin ordinance declared unconstitutional by the Austin Court of Appeals and the Dallas and San Antonio ordinances scheduled to take effect on August 1, 2019, Texas employers are left wondering what to do about implementing paid sick leave for Dallas and San Antonio employees. This legal alert will provide employers an update on the current state of these ordinance and possible next steps.
Austin: On August 17, 2018, the Third Court of Appeals in Austin, Texas, issued an injunction enjoining the Austin paid sick leave ordinance from taking effect until the appeal was resolved. In November 2018, the Court of Appeals declared the Austin paid sick leave ordinance unconstitutional. As we advised in our prior legal alert, the Court of Appeals held that the ordinance establishes a “wage” and, as such, it is preempted by Texas Minimum Wage Act. A petition for review was filed on behalf of the City of Austin in the Texas Supreme Court on March 29, 2019. Multiple extensions to file a response were filed as the Texas Legislature considered this issue. A response is now due on June 28, 2019. So, for now, employers with Austin employees do not have to make any changes to their existing sick leave policy or create a new one. This, of course, could change if the Texas Supreme Court grants the petition for review and sides with the City of Austin.
San Antonio and Dallas: On August 16, 2018, the day before the Austin ordinance was enjoined, the city of San Antonio passed the Earned Paid Sick Time ordinance. On March 28, 2019, the city of Dallas passed its Earned Paid Sick Time ordinance. The two ordinances are virtually identical in their material requirements and are virtually identical to the Austin ordinance which has been declared unconstitutional. Here is what employers who have employees working in those cities need to know:
- Effective dates: August 1, 2019, except for very small employers having no more than five employees. Very small employers must implement by August 1, 2021.
- Who is entitled? Any employee who performed at least 80 hours of work for pay within the city in a year, including work performed through a temporary or employment agency. Independent contractors are not entitled to paid sick leave. Note, the employer does not need to have a location within the city limits of Dallas or San Antonio – where the employee worked and for how many hours are the determining factors.
- What are qualified employees entitled to? One hour of earned paid sick time for every 30 hours the employee worked in the city. Accrual is in one-hour increments unless the employer chooses smaller increments. Accrual begins the first date of employment or the effective date of the ordinance, whichever is later. There is a yearly cap of 64 hours per employee per year for medium or large employers (more than 15 employees) and a yearly cap of 48 hours per employee per year for small employers (not a medium or large employer), unless the employer chooses a higher limit. All unused, earned paid sick time must be carried over to the following year unless the employer makes the yearly cap of earned paid sick time available to an employee at the beginning of each year.
- What can the leave be used for? The employee’s own physical or mental illness, physical injury, preventative medical or health care or health condition or the employee’s need to care for a family member’s physical or mental illness, physical injury, preventative medical or health care or health condition. The leave may also be used in cases involving domestic abuse, sexual assault, or stalking involving the employee or the employee’s family member. If the leave involves the employee’s or a family member’s illness, injury or health care, the employer may adopt reasonable verification procedures if the leave is to be longer than three consecutive work days. This does not apply in domestic abuse, sexual assault or stalking situations. Employees should make a request to use earned paid sick time before the start of their shift unless the absence is unforeseeable.
- Notice requirements: The employer must provide an employee at least a monthly statement showing the amount of the employee’s available earned paid sick time. The employer’s employee handbook must provide notice of an employee’s rights and remedies under the ordinance.
- Retaliation: An employer cannot retaliate against an employee for requesting or using earned paid sick time, reporting or attempting to report a violation, participating or attempting to participate in an investigation or proceeding or otherwise exercising any rights under the ordinance.
- What happens if an employer violates the ordinance? There is no private right of action in either ordinance. Employees may make a complaint to the “director.” In San Antonio that would be the Director of the San Antonio Metropolitan Health District or their authorized designee. In Dallas, the director is the director of whatever department designated by the city manager to handle these types of complaints (TBD). A civil penalty of not more than $500 may be assessed per violation, but the city must give the employer up to 10 business days to voluntarily comply before any civil penalty is assessed, except in cases of retaliation.
So does this mean I should start drafting and implementing a new paid leave policy for my San Antonio and Dallas employees to take effect August 1, 2019? It depends. If you already have a paid sick leave policy in effect that is the same as or more generous than these ordinances, we recommend waiting to do anything else until the Texas Supreme Court has its say. Since there is no private right of action and any non-compliance with requirements such as notice can be cured before any fine may be assessed, there is no real need to make any changes to how you do business already.
If you have more than five employees working in San Antonio and/or Dallas and do not currently have a paid sick leave policy that is compliant with these ordinances, the fact that the Austin Court of Appeals has found a virtually identical ordinance to be unconstitutional technically does not absolve you from compliance with the San Antonio and/or Dallas ordinance, although you certainly have a good faith argument right now that these ordinances are also unconstitutional. The problem is there is currently no legal challenge to the San Antonio or Dallas ordinances pending in any court. This is likely because the Texas legislature was expected to resolve this issue in the 2019 legislative session; however, the ordinances, technically, stand as written.
An employer could take a “wait and see” approach until the Texas Supreme Court takes some action. Because of the delayed briefing schedule, it is unlikely that the Texas Supreme Court will take any action prior to August 1, 2019, when the ordinances take effect. Since neither San Antonio nor Dallas seems to be currently prepared to handle compliance complaints, and employers must be given an opportunity to cure before any civil fines can be assessed, this approach may be appropriate for your organization. Employers should keep in mind, however, that the ordinances allow civil penalties to be assessed without the opportunity for cure for successful retaliation claims. Also, a “wait and see” approach could cause a morale issue with employees who want this paid sick leave. An employer may also decide to plan for compliance on August 1, 2019, but remember, once you provide your employees with this benefit, it may be an even greater morale issue to “take it back.”
We will continue to keep you updated on this issue. If you have any questions about the ordinances or other labor or employment issues, please feel free to contact the author of this Alert, Rachel Z. Ullrich, rullrich@fordharrison.com, partner in our Dallas office. Of course, you may also contact the FordHarrison attorney with whom you usually work.