United States: Texas Two-Step: San Antonio Joins Austin In Mandating Paid Sick And Safe Leave; Then Court Enjoins Austin Law From Taking Effect During Appeal

On August 16, 2018, the San Antonio City Council adopted a paid sick and safe leave ordinance which, aside from minor linguistic differences, is identical to the ordinance passed earlier this year in Austin. The next day, the Texas Court of Appeals, Third District, issued an order that temporarily enjoins Austin's ordinance from taking effect until the appeal is resolved. This article first discusses the Austin appeal and the impact it—or anticipated state legislative action—could have, including on San Antonio's ordinance. The article then outlines what employers with San Antonio operations need to know about the new ordinance should it eventually take effect.

Lawsuit Challenging Austin's Law

The City of Austin is currently embroiled in a legal challenge to its law, which, depending on the outcome, could impact San Antonio's ordinance. Various organizations, including the Texas attorney general, have argued that state law preempts the Austin ordinance (and any similar local law). A state district court judge denied the challengers' request for a temporary injunction preventing the ordinance from taking effect. However, the denial was appealed to a state appellate court, which, as noted above, issued a temporary order that prevents the Austin law from taking effect as scheduled on October 1, 2018, until the appeal is resolved. On appeal, the only issue that will be addressed is whether the lower court should have granted a temporary injunction. The appellate court will not decide the lawsuit's merits, i.e., whether the ordinance is valid or preempted by existing state law.

Even if the legal challenge to Austin's ordinance does not eventually succeed, the Austin ordinance may not exist for long, and the San Antonio law might never take effect, because state representatives are expected to introduce a law that expressly prohibits local governments from enacting paid sick and safe time ordinances. Such a legislative bill has a higher-than-average likelihood of passing in Texas' conservative environment.

Those unfamiliar with the Texas Legislature may be surprised to learn that it meets every two years only. The Austin and San Antonio developments occurred in 2018, during what could be described as the legislature's "off" year. The legislature is back in session on January 8, 2019, the second Tuesday in January, and legislators already have announced that they will act swiftly.

Absent remarkably swift resolution of the appeal, the state could act before the courts do. For example, the briefing may not be completed until the end of September (the City of Austin's brief for the appeal is due on September 6, and the challengers must file their reply 15 days after the city's brief is filed). Both parties also have requested that the appeals court hear oral arguments, so, if the court grants the request—which is anticipated—a time to hear arguments would need to be scheduled. Only after hearing the oral argument and considering the written briefs will the court will issue a decision, which could take some time. Even if the city prevails at this stage, the challengers could appeal to the Supreme Court of Texas and request similar temporary relief that would further halt the ordinance from taking effect. Accordingly, it is possible that the law could be tied up in litigation for some time. This would not be the first time this happened. For example, Pittsburgh, Pennsylvania's paid sick leave law was scheduled to take effect in March 2016, but it never did because of a legal challenge, and a final decision about the law's validity remains pending at the state supreme court. Therefore, the state may have sufficient time to draft, introduce, and enact a law preempting local leave ordinances.1

San Antonio's New Law

Should Austin succeed in defending its law's validity and/or the state does not enact a preemption law, employers with San Antonio operations will need to familiarize themselves with what the new law requires. The ordinance originally was proposed as a ballot measure. The city had the option of sending the proposal to voters this November by not adopting the measure or revising it, but instead, it chose a wholesale adoption of the ballot proposal. San Antonio's ordinance is scheduled to generally take effect on August 1, 2019, although for employers with five or fewer employees in the preceding 12 months, compliance obligations are delayed until August 1, 2021. Below we discuss the more common questions employers will likely have when a new paid sick and safe leave is enacted.

Covered Employers, Employees, and Relations

The law covers all private employers. However, a greater leave amount must be provided by employers with more than 15 employees.

Only employees who perform at least 80 hours of work for pay within the city limits are covered, including those performing work through the services of a temporary or employment agency. The ordinance does not cover independent contractors or unpaid interns. Unlike many similar laws, the ordinance applies to employees covered by a collective bargaining agreement (CBA) and only one provision in the law – accrual caps – may be partially waived via a CBA.

Employees can use leave for themselves or to care for or assist a family member, which includes an employee's child, parent, or spouse, or any other individual related by blood or whose close association with the employee is the equivalent of a family relationship.

Accrual, Caps, and Carryover

If an employer has a paid time off policy that complies with the law's purpose, along with its accrual, yearly cap, and use requirements, it is not required to provide additional leave to employees.

Otherwise, accrual must begin on the day the law is applicable to an employer or when an individual's employment begins, whichever is later. Employees must accrue at least one leave hour for every 30 hours worked in San Antonio. Leave accrues in whole-hour units, not proportionally.

Different annual accrual caps apply based on an employer's size. For employees of employers with 16 or more employees, annual accrual is capped at 64 hours, whereas a 48-hour annual accrual cap applies to employees of smaller employers. As noted above, employers and labor organizations may expressly agree in a valid, written CBA to modify the accrual cap. Generally, accrued leave, up to the applicable cap, must be carried over to the following year. Therefore, practically speaking, an overall accrual cap of twice the annual cap applies. If an employer frontloads the maximum annual leave amount at the beginning of each year, however, carryover is not required. Notably, San Antonio defines a year as a regular and consecutive 12-month period determined by an employer, whereas Austin does not expressly define the term and instead regularly uses the term "calendar" year.

Using Leave

Generally, leave is available for use as soon as it is accrued, but employers may restrict use during the first 60 days of employment for employees whose term of employment is at least one year. Therefore, for your usual at-will employee who is not guaranteed at least one year of employment, if leave is accrued, the employee can immediately use it.

Under the law, an employer is not required to allow an employee to use leave on more than eight days in a year. Like the Austin ordinance, confusion arises because elsewhere the law discusses accrued leave in hours, not days, so, e.g., what happens when an employee uses leave on eight daily occasions but in amount that is less than the applicable cap? Hopefully, San Antonio's enforcement agency will clarify this because, to date, no guidance has been provided by Austin.

Leave can be used for absences due to an employee or family member's illness, injury, or health condition, including preventive care. If an employee or family member is a victim of stalking, domestic abuse, or sexual assault, leave can also be used for medical reasons, to relocate, to obtain services from a victim services organization, and to participate in legal proceedings.

Requesting and Documenting Leave

To use leave, employees must make a timely request before their scheduled work time. Although the law does not provide further details—most similar laws discuss notice requirements when an absence is foreseeable or unforeseeable—it does prohibit employers from preventing use for an unforeseen qualified absence.

Under the law, if employees are absent for more than three consecutive work days, employers can request that they provide verification to demonstrate leave was taken for a covered purpose, but an employer cannot require an employee to explain the nature of the illness, injury, health condition, domestic abuse, sexual assault, or stalking. Currently, it is unclear whether this applies only to documentation requests or to any request to verify leave was taken for a covered purpose, e.g., completing a form in which the employee attests that leave was used for reasons permitted under the law.

Payment for Leave

When employees use leave, they must be paid what they would have earned had leave not been taken, which cannot be less than the minimum wage. Although the law says overtime premiums, tips, and commissions are excluded when calculating the employee's rate of pay, it is otherwise silent concerning how certain employees must be paid, e.g., employees that are exempt, paid on a piece rate basis, or perform different jobs or work at different rates.

End-of-Employment Issues

Unlike the vast majority of paid sick and safe leave laws, the San Antonio ordinance fails to expressly state that payout of accrued, but unused, leave is not required when employment ends. Nevertheless, in light of the fact that the law requires such leave to be reinstated should a separated employee be rehired within six months, it is implied that, like the other laws, payout is not mandatory.

Notice, Posting & Recordkeeping Requirements

The ordinance requires that employers provide monthly electronic or written statements to employees showing the amount of available leave. If an employer provides an employee handbook, included in the handbook must be a notice identifying the employees' rights and remedies under the ordinance. Additionally, employers must conspicuously display any poster created by the city describing the law's requirements in English and any other languages the city may eventually require. The law requires employers to maintain records concerning an employee's accrued and used leave. Concerning the length of time records must be kept, the ordinance, like Austin's, cites a non-existent federal recordkeeping regulation, so uncertainty exists whether the city intends for records to be maintained for two or three years (the length of time certain records must be kept under the general regulatory scheme cited).

Prohibitions, Penalties & Enforcement

Employers cannot require employees to find replacement workers to cover the hours they use leave. Additionally, they cannot transfer, demote, discharge, suspend, reduce hours, or directly threaten these actions against an employee because that employee: 1) requests or uses leave; 2) reports or attempts to report a violation of the law; 3) participates or attempts to participate in an investigation or proceeding under the law; 4) otherwise exercises any rights afforded by the law. The last item is something that does not appear in the Austin ordinance.

The San Antonio Metropolitan Health District is responsible for enforcing the Ordinance. Employees do not have a private right of action. Complaints must be filed with the District by or on behalf of an aggrieved employee within two years from the date of the violation. A civil penalty in an amount not to exceed $500 per violation may be assessed, with each violation constituting a separate offense. However, during the first eight months the law is in effect— August 1, 2019, through March 30, 2020—the District may issue a notice to an employer that a civil penalty may be assessed for a violation that occurs on or after April 1, 2020. Note, however, that retaliation penalties can be assessed during this period of limited enforcement.

Miscellaneous Provisions

Under the law, employers can allow employees to donate their accrued leave to coworkers or to voluntarily exchange hours or trade shifts instead of using accrued leave. Additionally, employers can advance leave to employees. If employees are transferred to a different facility, location, division, or job position with the employer, they keep pre-transfer accrued leave. The law also provides that employees hired by successor employers – i.e., those acquiring a controlling interest in a predecessor or one of its recognized divisions – retain leave they accrued with the predecessor employer before the acquisition.

Next Steps

So, in the interim, what should employers in Austin and San Antonio do?

Employers that may be covered under the Austin ordinance should monitor the lawsuit, the enforcement agency's website, and the state legislature's website, to see whether, and when, the law might take effect. If policies and procedures have not yet been developed, employers might consider discussing with knowledgeable employment law counsel whether now is the right time to develop a plan B should the ordinance in fact go into effect, which could require a fast rollout. For employers that already developed and/or announced programs that would go into effect on October 1, that discussion could include whether and how to proceed with the program; and, if a decision is made to not proceed until the appeal is resolved, how to explain the decision to employees.

Given there is almost one year until the San Antonio law is scheduled to take effect, employers with operations in the city may favor a "wait and see" approach instead of expending time and resources developing policies and procedures for a law that may never take effect. However, if such an approach is adopted, it would be prudent to set recurring check-in dates to ensure that, should the law go forward, sufficient time exists to consult with counsel, weigh policy options, and roll out an appropriate leave program.

Footnote

1. In recent years more state preemption of local laws have been enacted. Most of these laws were adopted before a local law was even on the books. However, some state laws were enacted after one or more local laws had taken effect. For example, when Oregon enacted its statewide paid sick and safe time law, which preempted local laws, Portland's law was already in effect (and a similar measure had been adopted, but was not in effect yet, in Eugene). More recently, New Jersey's statewide law contains a preemption provision that will invalidate the existing 13 local laws in the Garden State when the state law takes effect on October 29, 2018. Unlike Oregon and New Jersey, however, Texas preemption is not expected to be part of a compromise measure that eliminates local requirements in favor of a state standard. Rather, returning to the status quo (i.e., no local laws) will likely be at the heart of any introduced measure. This would not be the first time this occurred, e.g., after Milwaukee passed its ordinance, but before that law had a chance to take effect, Wisconsin enacted a statewide preemption law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Sebastian Chilco
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