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Dallas Paid Sick Leave Law Blocked Despite Pandemic (1)

March 31, 2020, 3:10 PMUpdated: March 31, 2020, 8:28 PM

The state of Texas and two Dallas-area businesses convinced a federal judge to block the city from enforcing a paid sick leave law just days before its penalty provision went into effect, despite the ongoing Covid-19 pandemic forcing many workers to stay home.

The city’s interest for businesses to provide paid sick leave benefits is outweighed by the state’s interest in upholding its constitution and laws, Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas said Monday. Allowing employees to accrue paid sick leave under a law that’s probably unenforceable, and at the expense of businesses, isn’t in the public interest, he said.

The decision follows similar rulings in courts across the state to block paid sick leave laws in San Antonio and Austin.

Jordan found that the Dallas law constitutes a wage increase, and therefore is likely preempted by Texas’ Minimum Wage Act and unenforceable under its constitution. The state and Dallas employers also will suffer irreparable harm from enforcement, which was set to begin April 1, he said.

Paid sick leave is an important public policy issue, especially now, but it’s one designated to the Texas Legislature, and the court must uphold the state’s constitution and statutes regardless of current circumstances, Jordan said, granting a preliminary injunction against the ordinance.

The city’s law, enacted in April 2019, requires businesses to provide employees with earned paid sick leave and follow certain notice and reporting rules. It also authorizes the city to investigate complaints about compliance using administrative subpoenas, then assess penalties for violations.

Rulings Against Austin, San Antonio

In November 2019, a state judge granted a preliminary injunction on a paid sick leave law passed by the San Antonio City Council. Meanwhile, a state appeals court in November 2018 ruled that Austin’s paid sick leave law violates the state’s minimum wage law.

The Austin mandate now awaits action from the Texas Supreme Court, and the San Antonio ordinance lawsuit also is on hold until the state’s high court decides to grant or deny review.

“As much as the proponents of this ordinance want to argue to the contrary, there continues to be unanimity among courts in Texas, and now a third jurisdiction has reached the same conclusion in agreeing with our argument and finding preemption,” said Rob Henneke, general counsel at the Texas Public Policy Foundation who represents the plaintiffs in all three suits challenging the city laws. The consistency across the courts gives “even greater weight that cities are just wrong about their power to do this,” he said.

The state of Texas and two employers based in Dallas challenged the law, saying it violates various provisions of the federal and state constitutions.

A representative for the Dallas City Council declined a request for comment.

Leave Benefits, Public Health

Proponents of the paid sick leave laws in Austin, San Antonio, and Dallas argued the leave is necessary to maintain public health. Without paid, job-protected sick leave, they said employees are more likely to come to work ill.

Congress recently enacted legislation in response to the novel coronavirus pandemic that will require many employers across the country to provide workers with leave benefits.

The Dallas decision “brings us back to the pre-pandemic reality of doing business in Texas,” said Becky Baker, a Texas-based partner in Bracewell LLP’s labor and employment practice. Dallas employers have worked for months to develop policies to comply with the local law, Baker said in a statement Monday.

But now, they “can focus on the FFCRA, which of course provides a much narrower qualifying reason for paid sick time, as it only relates to COVID-19,” Baker said, referring to the Families First Coronavirus Response Act also set to go into effect April 1.

‘Different Minimum Wage’

The court found that the ordinance would have “the inevitable effect of increasing the pay of employees who use paid sick leave.”

As such, the ordinance “creates a different minimum wage” for Dallas workers, and directly conflicts with the TMWA, which expressly preempts municipal ordinances that establish higher wages, it said.

This would cause irreparable harm to the state, as the TMWA “has been effectively nullified as to those workers,” despite its “clear intent to normalize the minimum wage statewide,” the court said. Employers would also suffer irreparably from “compliance costs and increased regulatory burden.”

Texas Public Policy Foundation represents the employers. Attorneys from the Office of the Attorney General of Texas represent the state. Attorneys from the Dallas City Attorney’s Office represent the city.

The case is ESI/Employee Sols., LP v. City of Dallas, 2020 BL 117980, E.D. Tex., 4:19-CV-570-SDJ, 3/30/20.

(Updated with additional reporting throughout.)

To contact the reporters on this story: Kathleen Dailey at kdailey@bloomberglaw.com; Genevieve Douglas in Washington at gdouglas@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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