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Austin’s Paid Sick Leave Mandate Is on Hold

Austin’s paid sick leave ordinance that was scheduled to go into effect on Oct. 1 has been put on hold. While Austin is the first Texas city to pass a paid sick-day mandate, San Antonio recently adopted a nearly identical one for 2019 and support is gaining in Dallas. However, state legislators are working hard to overturn these local rulings, a feat 14 other states—including Oklahoma and Louisiana—have accomplished. For now, the Texas 3rd Court of Appeals has blocked the Austin ordinance from taking effect while legislation is pending.

Austin’s paid sick leave rule mandates that private employers allow their workers to accrue one hour of paid sick leave for every 30 hours worked, with up to eight days of allowed paid sick leave per year. Small businesses with 15 or fewer employees are mandated to provide up to six work days.

“Even though the ordinance has been adopted in Austin and San Antonio and it’s being considered in other Texas cities as well, this is only the beginning chapter—not the last word—on the issue,” explains  Robert Henneke, General Counsel for the Texas Public Policy Foundation. “The State of Texas represented by the Texas Attorney General’s Office and 29 members of the Texas legislature are all claiming it’s illegal, that it violates the Texas Constitution. These very credible sources of analysis show the defects of the ordinance.”

Several of those defects were most recently called out in an Austin Business Journal exclusive available here, including Texas Restaurant Association General Counsel Kenneth Besserman pointing out that sick leave requirements will “significantly diminish” the ability of businesses to allow shift trading prevalent among service workers.

As Austin businesses (and those with workers in Austin) readied themselves for the original Oct. 1 deadline, they discovered that’s it’s easier said than done. State Senator Donna Campbell mentions some of these complications in a recent op-ed. The American Staffing Association points out the complications such mandates cause for temporary staffing. And the Austin Technology Council has explained how this particular mandate doesn’t work for most tech companies.

The Star-Telegram Editorial Board also brought up concerns—not with paid sick leave itself, but with city governments stepping in to mandate it, a sentiment shared by many Texas businesses who already have solid paid time off policies in place.

“It’s unfortunate that the Austin City Council didn’t truly consult with the business community on the passage of the sick pay ordinance,” says Mark Turpin, Founder and CEO of The HT Group.  “As a local business interested in the welfare of our work force, it would have been nice to have an ordinance endorsed by the business community. We have been offering paid time off for our temps and contractors at The HT Group in the form of holiday pay and a vacation benefit for over 15 years.”

Henneke has heard numerous testimonies from Austin business owners and those doing business in Austin, claiming mounting software and other expenses to meet reporting requirements, anticipated net profit impacts of nearly 20%, and unique industry effects like issues faced by airlines whose employees often travel between several jurisdictions daily.

“There’s also evidence in Austin that the accrual of paid leave this ordinance mandates will appear as a negative debt, which could impact the rate at which a business can borrow money or secure financing,” he told us. “And then there’s the concern about competitiveness. Businesses in Austin will have a higher cost of doing business than their competitors based just outside city limits.”

For now, Austin employers will need to wait and see what becomes of the ordinance. SHRM reports that judicial review will begin in September. In the meantime, the federal government may get in on the action. SHRM helped draft the H.R. 4219, Workflex in the 21st Century Act proposed federal bill, which calls for a nationwide standard “rather than complying with a patchwork of state and local laws,” states Nancy Hammer, SHRM’s Vice President of Regulatory Affairs and Judicial Counsel.

Will Austin’s mandate stick? Will the state overturn? And will a federal policy take its place? We’ll keep you updated.