Texas business owners have listened closely to the buzz surrounding paid sick leave ordinances for some time. While Austin and San Antonio were the first cities in Texas to address the issue, several other cities in the Lone Star State are considering their own versions of requiring business owners to provide paid sick leave.
In Texas, like most other states, there is no law requiring employers to provide paid sick leave to employees. While some businesses voluntarily provide this benefit to workers, the lack of uniformity in the workplace is causing more local governments to tread where state legislatures avoid. With the rise in paid sick leave ordinances, businesses are seeing more government regulation interfere in their daily operations, sometimes as an unfunded mandate such as a paid sick leave ordinance.
Why, you may ask, are cities now pushing for mandatory paid sick leave for workers? According to a 2017 study by the Institute for Women’s Policy Research, approximately 40% of Texas workers lack paid sick time. In Austin alone, roughly 223,000 workers don’t receive paid sick leave, which spurred the city to implement this ordinance on businesses operating within the city limits.
Austin Paid Sick Leave
In February, the Austin City Council passed the Paid Sick Leave Ordinance, which requires privately-owned businesses to allow workers to accrue up to 64 hours of paid sick leave per year. Microbusinesses with less than 15 employees can offer 48 hours. Those with 5 or fewer employees won’t be required to provide this leave until October 2020.
The burden of the Austin Paid Sick Leave Ordinance is that any business with employees that work within the city limits. Yes, an employee working in Austin, even though you are headquartered elsewhere, does NOT exempt your business from the ordinance. If your employee regularly works in Austin, the employee must be covered.
As expected, the Paid Sick Leave Ordinance is subject to various legal challenges brought by state lawmakers, businesses of all sizes, and some of the surrounding community. The Texas Third Court of Appeals issued a temporary injunction, blocking the ordinance from taking effect while the appeal is pending and the merits of the legal challenges are being sorted out. The major thrust of the legal argument against Austin (and soon to be San Antonio’s ordinances) is that forcing business to provided paid sick leave violates the Texas Minimum Wage Act, which prohibits, among other things, any municipality from regulating private-sector wages.
While the Austin ordinance is currently on hold until the appeal process runs its course, that does not mean that you can stick your head in the sand like an Ostrich. It is important that you go about setting up a plan to comply with the Austin ordinance if your employees regularly work in Austin. As the old saying goes, it is better off to be safe, as opposed to sorry – in this case, prepared for the ordinance as opposed to facing fines for not having a plan in place – many of which have doubled from initial estimates.
San Antonio Paid Sick Leave
While Austin’s Paid Sick Leave Ordinance remains tied up in court, for the time being, San Antonio quickly followed Austin’s lead and passed its own paid sick leave ordinance. Mirroring its sister city’s plan, San Antonio’s Paid Sick Leave Ordinance also allows workers to accrue up to 64 hours of paid sick leave each year, with the new requirements becoming effective on January 1, 2019.
Wait, you may say, I thought that the Third Court of Appeals stopped the rule from becoming effective. While that is true, it is important to understand that the Third Court of Appeals, which is based in Austin, lacks the authority to tell San Antonio what to do. Because San Antonio is in a different appellate district, its ordinance could take effect absent a suit being filed to stop the enforcement of San Antonio’s Ordinance as well.
Other Texas Cities
After seeing Austin and San Antonio pass Paid Sick Leave ordinances, other cities are contemplating joining their ranks. For instance, while the Dallas City Council has not yet addressed the issue, organizers in Dallas are trying to obtain enough signatures to force a citywide vote on the issue. Similarly, Houston has organizers discussing how best to secure a similar benefit for workers there. This then begs the question – what is the cost of such a benefit upon businesses?
The Financial Burden for Businesses
In an economy as diverse as that in Texas, where businesses range from a single solopreneur in a home office to corporations with hundreds of employees headquartered in swanky downtown skyscrapers, one size does not fit all in virtually any situation. Small businesses make decisions much differently than their larger business counterparts. In terms of pay and benefits like a paid sick leave ordinance, such an unfunded mandate could prove to be an extreme financial burden on businesses when compared to the economic benefit obtained by an employee.
An example of the economic impact caused by similar ordinances is evident in other places that implemented ordinances similar to Austin’s, such as San Francisco and Connecticut. There, many businesses suffered a negative impact on profitability and had to cut expenses, sometimes in key areas such as R&D, marketing, or refraining from hiring additional workers, just to remain afloat.
Unfortunately, the cost of such a program is not limited to the cost incurred by providing a sick employee with paid leave. Remember, just because one employee is out sick (and therefore getting paid), the business, especially in small businesses where most of the work involves interacting with the public, another employee is called in to cover the sick person’s job. So, instead of paying one employee to do one job, you end up paying two employees to do one job and depending upon the number of hours the covering employee worked, you could end up paying overtime. Furthermore, the costs do not stop at just the added expense of paying wages to a replacement.
Austin’s ordinance involves a comprehensive record keeping and reporting system with which businesses must comply. This means developing, implementing, and maintaining a system that tracks the number of sick hours an employee both accumulates and uses. Furthermore, businesses need to update their employee policy/handbook to account for this new benefit. This all costs money and cuts into profitability.
Not all financial burdens come directly from the pocket of a business. Adhering to the administrative component will require more effort on HR and administrative team members, leaving smaller teams feeling the bind of additional work. Added work can lead to more stress on employees and eventually lead to the departure from the company.
Not only could a business see folks leave because of added stress caused by more administrative work, you also need to consider the potential impact upon businesses with multiple offices, some of which are in Austin and some of which are not, with a dedicated workforce in each location – meaning that employees work in Austin, while others never go there. Does such a business need to decide to treat the office differently, thereby creating two classes of employees – those with mandated paid sick leave, and those without – or does it treat everyone the same regardless of location? So, in addition to dealing with hard financial costs that such an ordinance imposes, a business also needs to be mindful of the potential impact to morale that could occur depending upon which choice is made when there is more than one office location with dedicated workforces. While it may be simple to say that the business should treat everyone the same, it is important to remember that a lot of small businesses run on very small margins, and adding a cost like this across all employees could be a financial burden that breaks the proverbial camel’s back.
Just because there is an injunction in effect as this article is written, it does not mean that you fail to prepare. While the validity of Austin’s ordinance remains up in the air, it’s imperative that businesses examine their own policies to ensure they are either in compliance with the new law or make other arrangements to become compliant so that they avoid being penalized for denying paid sick leave to employees.