A federal judge in Sherman, Texas on Monday issued an injunction blocking enforcement of the City of Dallas Paid Sick Leave Ordinance (“Ordinance”). Businesses with employees in Dallas for now will not need to comply with the Ordinance that was set to be enforced starting today.
Enactment of the Ordinance
The City enacted the Ordinance on April 24, 2019, and it became effective on August 1, 2019 for “medium or large employers”; and for “small employers” it would become effective on August 1, 2021. The Ordinance required businesses to accrue and provide a certain amount of paid sick leave for employees working at least 80 hours during the year within the limits of the City of Dallas, regardless of the employer’s location. Although many businesses already provided some form of paid time off (PTO), the Ordinance required specific accrual and recording that was often inconsistent with existing policies, requiring changes to the existing policies and accrual methods. Moreover, it regulated businesses that were not even located in Dallas to the extent any employee worked as little as 80 hours during a year within the Dallas city limits.
Challenge to the Ordinance
As a result, two Collin County businesses filed a lawsuit in the Eastern District of Texas just before the Ordinance was to take effect. They requested a temporary injunction to block the Ordinance. They argued, among other things, that the City’s ordinance infringed on the regulation of wages reserved to the state by the Texas constitution.
The City had agreed not to enforce the Ordinance until April 1, 2020, but the Court granted the requested injunction on March 30, 2020, agreeing that the City could not regulate wages, including paid sick leave, regulated by the state. The City of Austin had previously passed a similar ordinance that was also challenged in state court as unconstitutional. The state judge enjoined that ordinance as well, and the injunction is currently on appeal to the Texas Supreme Court. Although the City of San Antonio, like Dallas, had subsequently enacted a similar ordinance, San Antonio decided to postpone its effective date until the City of Austin’s original ordinance is resolved on appeal. Unlike San Antonio, however, the City of Dallas went forward with its Ordinance.
Families First Coronavirus Response Act
Supporters of the Ordinance have already expressed their dismay at the timing of the court’s decision during the current COVID-19 pandemic. However, the pandemic has already spurred the passage of new national paid sick leave for reasons related to COVID-19 under the Families First Coronavirus Response Act. Arguably, the federal government has addressed the specific impact of the novel coronavirus, and the COVID-19 disease it causes. More specifically, however, the federal court agreed that any such paid sick leave should be implemented at the state or national level, and the City of Dallas did not have the authority to pass the Ordinance.
No Final Resolution
Unfortunately, the ruling is not the final word. Since the injunction is temporary, the challenge to the Ordinance is not ultimately resolved, but will last until the lawsuit is resolved by settlement or a final judgment. Employers should also monitor the City of Austin’s appeal to the Texas Supreme Court, which should have authority on this state issue. Regardless, for now, the City’s enforcement of the Ordinance has been blocked providing some clarity for businesses with any employees working in Dallas more than 80 hours this year.
Download the injunction: ESI Employee Solutions, L.P., et al. v. City of Dallas, et. al. (E.D. Tex. 2020)