By Dana Dikas

Law360 (April 17, 2020, 5:55 PM EDT )

Dana Dikas

Employers with employees in the city of Dallas were thrown for a loop on March 30 — just two days before the city was set to begin enforcing its paid sick leave ordinance — when U.S. District Judge Sean D. Jordan of the Eastern District of Texas temporarily enjoined the ordinance while a lawsuit against the city remains pending.

The ordinance had previously gone into effect for employers with more than five covered employees on Aug. 1, 2019. Thus, by the time of the injunction, many Dallas employers had already implemented paid sick leave policies in accordance with the ordinance. These employers must now decide what to do in the middle of a public health crisis as the future of the law is uncertain and employee needs for paid sick leave are at an all-time high.

Dallas' paid sick leave ordinance was intended to apply to all private employers with employees working at least 80 hours per year in the city of Dallas. It requires that employers with more than 15 employees provide employees with up to 64 hours of paid sick leave per year. Employers with 15 or fewer employees must provide up to 48 hours of paid sick leave per year.  

Under the ordinance, employees accrue at least an hour of paid sick leave for every 30 hours of work performed in the city.  Alternatively, employers may offer the full amount of the paid sick leave at the beginning of the year. If covered employers chose the former accrual method, employees may carry over all earned but unused paid sick time into the following year, up to the annual cap. Employees are permitted to utilize paid sick leave for specified reasons, including the need for time off due to an employees' own mental or physical illness, health condition or preventative care and that of employees' family members.

Shortly before the ordinance became effective, a lawsuit was filed by ESI/Employee Solutions LP and Hagan Law Group LLC, and the state of Texas thereafter joined, challenging the constitutionality of the ordinance and seeking a preliminary injunction that would bar enforcement of the ordinance.

After extensive briefing, in an order issued on March 30, 2020, the federal court granted the plaintiffs' motion for preliminary injunction, finding that the plaintiffs' claim that the ordinance is preempted by the Texas Minimum Wage Act (and, therefore, violative of the Texas Constitution) is substantially likely to prevail on the merits.

Noting the absence of sufficient guidance from the Texas Supreme Court on this issue, the court relied on a decision from Texas' Third Court of Appeals, in which a similar ordinance that was enacted in Austin was enjoined. Austin, San Antonio and Dallas — three major Texas cities — have each enacted paid sick leave ordinances that require private employers to provide paid sick leave to employees, and each have been met with staunch opposition.  All three ordinances are now enjoined. 

The city of Austin has appealed the appellate court's order to the Texas Supreme Court. If the Texas Supreme Court decides to review it, a ruling may come this summer.

While a ruling from the Texas Supreme Court would only address the propriety of the injunction in connection with Austin's paid sick leave ordinance, because one of the elements entitling a party to a preliminary injunction is the likelihood of success on its claim, the Texas Supreme Court's ruling will likely provide welcomed insight on the court's opinion about the strength of the constitutional arguments that have been made in all three cases.

Until a decision is rendered on the merits of the constitutional claims, the state of Dallas' paid sick leave law remains uncertain. Nevertheless, employers may still have a legal obligation to provide their Dallas employees with paid sick leave. 

Employers who have implemented paid sick leave policies to comply with Dallas' paid sick leave ordinance may have contractual obligations to provide accrued and unused paid sick leave. Generally, Texas employers may decide to make prospective changes to their policies.

Employers who wish to rescind paid sick leave policies should consult with counsel to determine their contractual obligations and should consider the morale issues that may result from such a rescission, especially in light of our current national emergency.

Moreover, Texas employers may be obligated under federal law to provide paid sick leave. On March 18, President Donald Trump signed into law the Families First Coronavirus Response Act, or FFCRA, which, among other things, requires private employers with under 500 employees to temporarily provide up to 80 hours of emergency paid sick leave for permitted reasons.

The FFCRA became effective on April 1 and will remain in effect until Dec. 31. The statute entitles employees to full or partial paid sick leave (depending on the reason for the absence) up to a daily and total cap when the employee is:

• Subject to a federal, state or local quarantine or isolation order related to COVID-19;
  
  
• Advised by a health care provider to self-quarantine due to COVID-19 concerns;
  
  
• Experiencing COVID-19 symptoms and seeking medical diagnosis;
  
  
• Caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns;
  
  
• Caring for the employee's child if the child's school or place of care is closed or the child's care provider is unavailable due to public health emergency; or
  
  
• Experiencing any other substantially similar condition specified by the secretary of the U.S. Department of Health and Human Services in consultation with the secretary of the U.S. Department of the Treasury and the secretary of the U.S. Department of Labor.

Notably, paid sick leave under the FFCRA is in addition to any paid sick leave currently provided by employers. Accordingly, if employers are currently providing paid sick leave to Dallas employees pursuant to a company policy, they may be required to provide an additional 80 hours of paid sick leave under the FFCRA.

However, employers are entitled to a refundable tax credit equal to 100% of the wages paid by employers for paid sick leave under the FFCRA. While Dallas' paid sick leave law is currently enjoined, the fate of the law remains to be seen. 

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Dana Chang Dikas is an associate at Fisher Phillips.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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