ESI/Employee Solutions, LP et al v. City of Dallas et al
MEMORANDUM AND OPINION: The Court ORDERS that Plaintiffs' Motion for Summary Judgment and Memorandum in Support 66 is hereby GRANTED in part and DENIED as moot in part. Signed by District Judge Sean D. Jordan on 3/31/2021. (ldm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
ESI/EMPLOYEE SOLUTIONS, L.P.,
CITY OF DALLAS, ET AL.
§ CIVIL NO. 4:19-CV-570-SDJ
MEMORANDUM OPINION AND ORDER
In recent years, several Texas cities, including the City of Dallas, enacted paidsick-leave ordinances requiring employers to pay employees who use earned sick
leave for hours spent not working. Two Texas intermediate appellate courts have now
concluded that paid-sick-leave ordinances enacted by the City of Austin and the City
of San Antonio, which mirror Dallas’s paid-sick-leave ordinance, are preempted by
the Texas Minimum Wage Act (“TMWA”) and therefore unenforceable. See Tex. Ass’n
of Bus. v. City of Austin. 565 S.W.3d 425 (Tex. App.—Austin 2018, pet. denied);
Washington v. Associated Builders & Contractors of S. Tex. Inc., No. 04-20-00004-CV,
2021 WL 881288 (Tex. App.—San Antonio March 10, 2021, no pet. h.).
After the City of Dallas (the “City”) 1 passed such an ordinance, mandating that
employers provide Dallas-based employees one hour of paid sick leave for every thirty
hours worked, Plaintiffs ESI/Employee Solutions, L.P. (“ESI”) and Hagan Law Group
L.L.C. (“Hagan”) (together, the “Employer-Plaintiffs”), two employers subject to the
ordinance, challenged its validity. The Employer-Plaintiffs filed suit alleging
For the purposes of this opinion, the Court will refer to all the Defendants collectively
as “the City.”
violations of the First, Fourth, and Fourteenth Amendments to the United States
Constitution. They also joined the State of Texas (collectively, “Plaintiffs”) in alleging
that Dallas’s paid-sick-leave ordinance is preempted by the TMWA. Following the
Court’s dismissal of the federal constitutional claims, only the state preemption claim
Before the Court is Texas and the Employer-Plaintiffs’ summary-judgment
motion requesting that the Court hold that Dallas’s paid-sick-leave ordinance is
preempted by the TMWA and therefore violates the Texas Constitution and that the
Court render judgment permanently enjoining the City from enforcing the ordinance.
(Dkt. #66). 3 The City has responded, (Dkt. #70), asserting that the TMWA’s definition
of “wages” does not encompass paid sick leave. Plaintiffs have replied, (Dkt. #74), as
well as filed a notice of supplemental authority, (Dkt. #84).
Having reviewed the motion, the parties’ briefing, and the relevant law, the
Court concludes that the motion should be GRANTED in part and DENIED as moot
A complete history of Dallas’s paid-sick-leave ordinance and the events giving
rise to this case is set forth in the Court’s Memorandum Opinion and Order granting
Notwithstanding the dismissal of the Employer-Plaintiffs’ federal claims, and for the
reasons explained in the Court’s recent decision granting in part the City’s Rule 12(b)(1)
Motion and Renewed Motion to Decline Supplemental Jurisdiction, the Court has determined
that it is appropriate to retain jurisdiction over the state preemption claim. See (Dkt. #85).
The summary-judgment motion was filed before the Court’s dismissal of the
Employer-Plaintiffs’ Fourth and Fourteenth Amendment claims. See (Dkt. #85). The Court
addresses in this opinion only the remaining state preemption claim.
Plaintiffs’ Motion for Preliminary Injunction, (Dkt. #64), and the Court’s
Memorandum Opinion and Order granting in part and denying in part Defendants’
Motion to Dismiss, (Dkt. #85). See also ESI/Emp. Sols., L.P. v. City of Dallas,
450 F.Supp.3d 700, 709–12 (E.D. Tex. 2020) (“ESI”). Accordingly, the Court will
describe here only the facts most germane to the resolution of the summary-judgment
The City enacted its Paid Sick Leave Ordinance (the “Ordinance”) on April 24,
2019. Dallas, Texas, Ordinance No. 31181; Municipal Code § 20–1—20–12. The
Ordinance, which became effective for “medium or large employers” on August 1,
2019, and which will become effective for “small employers” on August 1, 2021,
requires employers to grant one hour of paid sick leave for every thirty hours worked
by an employee within Dallas, regardless of the employer’s location. DALL., TEX.,
CODE § 20–4(a), (b). The Ordinance allows employees working in Dallas to earn up to
sixty-four hours of sick-leave time per year for medium or large employers and fortyeight hours of sick-leave time per year for small employers. Id. § 20–4(c)(1), (2). 4
When an employee uses accrued paid-sick-leave time, employers are directed
to pay employees their normal rate, exclusive of overtime premiums, tips, and
commissions, for each hour the employee is absent from work for reasons that are
authorized under the Ordinance. Id. § 20–5(a). Authorized reasons include absence
arising from mental or physical illness and preventative care for the employee or his
or her family members. Id. § 20–5(c).
Employees under a collective-bargaining agreement may negotiate to modify the
yearly cap. Id. § 20–4(e).
Texas and the Employer-Plaintiffs seek declaratory and injunctive relief, and
have now moved for summary judgment, asserting that they have established as a
matter of law that the Ordinance is preempted by the TMWA and therefore violates
the Texas Constitution. The City has responded that Plaintiffs have failed to show
that they have standing to pursue their claim and that the Court should not read the
TMWA to preempt the Ordinance. The Court previously granted a preliminary
injunction and entered an order enjoining the City from enforcing the Ordinance
pending resolution of this case. ESI, 450 F.Supp.3d at 732–38.
II. LEGAL STANDARD
When a party moves for summary judgment on an issue for which it bears the
burden of proof, that party “must establish beyond peradventure all of the essential
elements of the claim or defense to warrant judgment in [its] favor.” Fontenot v.
Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). Summary judgment is appropriate
“only when ‘the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.’” Shepherd ex rel.
Estate of Shepherd v. City of Shreveport, 920 F.3d 278, 282–83 (5th Cir. 2019) (quoting
FED. R. CIV. P. 56(a)). A “dispute about a material fact is ‘genuine,’ . . . if the evidence
is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202
III. OBJECTIONS TO SUMMARY-JUDGMENT EVIDENCE AND REQUEST FOR
ADDITIONAL DISCOVERY UNDER RULE 56(d)
Texas and the Employer-Plaintiffs cite two declarations in support of their
summary-judgment motion: (1) the declaration of ESI’s Chief Executive Officer,
David F. Bristol, (“Bristol Declaration”); and (2) the declaration of Hagan Law Group,
L.L.C.’s Founder, John P. Hagan, (“Hagan Declaration”). Bristol’s and Hagan’s
Declarations purport to establish, among other things, the confidential nature of the
companies’ business records and the harm to the Employer-Plaintiffs associated with
complying with the Ordinance, including cost estimates. The City objects to several
portions of these declarations. The objections fall into three categories: (1) objections
that testimony regarding the confidential nature of the Employer-Plaintiffs’ business
records contain impermissible legal conclusions; (2) objections that Bristol’s
testimony that ESI will suffer a unique and particularized injury is an impermissible
legal conclusion; and (3) objections that testimony regarding the estimates of costs to
the Employer-Plaintiffs is irrelevant, unsupported by documents, speculative, or
misleading. For the reasons stated below, the Court hereby OVERRULES each of
the City’s objections.
As to the first category, the testimony to which the City objects relates solely
to the Employer-Plaintiffs’ Fourth Amendment claim. See (Dkt. #3-1 ¶ 6) (Bristol
Decl.); (Dkt. #3-2 ¶ 5) (Hagan Decl.). Because the Court has since dismissed the
Fourth Amendment claim, that objection is now moot. The Court has not considered
the cited testimony in rendering its summary-judgment decision and the City’s
objections to this testimony are OVERRULED.
As to the second category of objections, the City asserts that Bristol’s testimony
that ESI will suffer unique and particularized injuries is a legal conclusion. See
(Dkt. #3-1 ¶¶ 4, 7) (Bristol Decl.). If Bristol’s statements were divorced from any other
factual testimony, the City would be correct. But the Court concludes that Bristol’s
complained-of statements serve merely to introduce the specific, non-conclusory
testimony that follows, which details the kinds of harm that ESI will incur. See, e.g.,
(Dkt. #3-1 ¶¶ 7, 11–12) (testifying that keeping track of how many hours each
employee works within the City of Dallas, hiring an additional employee to track
those hours, and revising training materials will cause ESI to incur additional
expenses). Thus, the City’s legal-conclusion objections are OVERRULED.
As to the third category of objections, the Court understands the cost estimates
provided in the declarations to merely reflect that the Ordinance will cause the
Employer-Plaintiffs some harm for the purpose of establishing standing—not to
precisely calculate losses—and the estimates are relevant for that purpose. This
conclusion is bolstered by the fact that the Employer-Plaintiffs do not seek money
damages in this case and, therefore, the cost estimates can serve only to establish de
minimis harm for standing purposes. Thus, the Employer-Plaintiffs need not
supplement the cost estimates with documents showing the exact figures of losses.
Further, Bristol and Hagan, as executives at their respective companies, have
personal knowledge of their companies’ business models, operations, and finances,
and thus their cost estimates are not speculative for the purpose of showing de
minimis harm. Because the Court has considered this evidence only for the purpose
of determining whether Plaintiffs have established de minimis harm, the City’s
objections to the cost estimates are hereby OVERRULED.
The City also requests that, if the Court concludes that Texas and the
Employer-Plaintiffs have presented sufficient evidence for summary judgment, the
Court allow the City to conduct additional discovery regarding the EmployerPlaintiffs’ allegations of injury. Again, though, because the Employer-Plaintiffs do not
seek money damages, and thus the exact degree of harm is not in dispute, the Court
concludes that additional discovery would not be helpful. The summary-judgment
evidence establishes that the Employer-Plaintiffs have suffered at least a de minimis
harm, which is sufficient for standing purposes. As discussed in greater detail below,
the evidence also establishes that the kind of harm alleged is, by its nature,
irreparable. Further discovery would illuminate only the degree of harm, which is
Moreover, this is not a case in which the Court adjudicated the summaryjudgment motion before the City had an opportunity to fully conduct discovery.
Rather, the Court’s scheduling order set the discovery deadline in this case for
August 17, 2020, and the deadline for all dispositive motions for August 21, 2020.
(Dkt. #60 at 2). Plaintiffs filed their summary-judgment motion on May 7, 2020,
meaning that the City had at least 5 three months from the filing of the summaryjudgment motion until the close of discovery to conduct additional discovery relevant
to its response. The City does not explain why it did not take the depositions of
The City could have requested an extension of the discovery period at any time before
the close of discovery but did not.
Bristol, Hagan, or any other person with knowledge of the Ordinance’s harm to the
Employer-Plaintiffs. Absent an explanation as to why it could not conduct discovery
during these three months, it appears to the Court that the City had ample time to
conduct discovery to adduce rebuttal evidence and merely failed to do so. Thus, the
Court concludes that the City’s additional-discovery request should be DENIED.
Texas and the Employer-Plaintiffs’ summary-judgment motion requests that
the Court hold that the Ordinance is preempted by the TMWA and therefore
unenforceable under the Texas Constitution and that the Court enter a permanent
injunction preventing enforcement of the Ordinance. To obtain a permanent
injunction, a party must meet a four-part test. Specifically, it must establish:
“(1) success on the merits; (2) that a failure to grant the injunction will result in
irreparable injury; (3) that said injury outweighs any damage that the injunction will
cause the opposing party; and (4) that the injunction will not disserve the public
interest.” VRC LLC v. City of Dallas, 460 F.3d 607, 611 (5th Cir. 2006). “In an express
preemption case, however, the finding with respect to . . . success carries with it a
determination that the other three requirements have been satisfied.” Id. (quotation
omitted). Because controlling Texas law confirms that the Ordinance is preempted by
the TMWA, and because the other requirements for injunctive relief have been met,
the Court will grant the requested injunction.
At the outset, the City contends that neither the Employer-Plaintiffs nor the
State of Texas has sufficiently established standing to support the summaryjudgment motion. This argument fails. “[O]ne party with standing is sufficient to
satisfy Article III’s case-or-controversy requirement.” Texas v. United States, 809 F.3d
134, 151 (5th Cir. 2015) (citation omitted). Here, both the Employer-Plaintiffs and
Texas satisfy Article III’s requirements.
To show standing, plaintiffs “must set forth by affidavit or other evidence
specific facts” of their injury. Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S.Ct.
2130, 119 L.Ed.2d 351 (1992) (internal quotation marks omitted) (quoting FED. R.
CIV. P. 56(e)). More specifically, plaintiffs must demonstrate that: “(1) [they have]
suffered an ‘injury in fact’ that is (a) concrete and particularized and (b) actual and
imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the
challenged action of the defendant; and (3) it is likely, as opposed to merely
speculative, that the injury will be redressed by a favorable decision.” Friends of the
Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528 U.S. 167, 180–81, 120 S.Ct. 693,
145 L.Ed.2d 610 (2000).
As to the Employer-Plaintiffs, “if a plaintiff is an object of a government
regulation, then that plaintiff ordinarily has standing to challenge that regulation.”
Duarte v. City of Lewisville, 759 F.3d 514, 518 (5th Cir. 2014); see also Lujan, 504 U.S.
at 561–62 (holding that, when a plaintiff is the object of the challenged regulation,
establishing standing is generally not difficult); Contender Farms, L.L.P. v. USDA,
779 F.3d 258, 266 (5th Cir. 2015) (“An increased regulatory burden typically satisfies
the injury in fact requirement.”).
Although it is undisputed that the Employer-Plaintiffs are subject to the
Ordinance, each of the Employer-Plaintiffs has submitted a declaration confirming
this fact. See (Dkt. #3-1 ¶ 4) (confirming that ESI employs over 300 employees within
the City of Dallas and is therefore subject to the Ordinance’s paid-sick-leave
mandate); (Dkt. #3-2 ¶ 7) (confirming that Hagan’s “employees appear in court and
engage in other client related matters within the City of Dallas on average for more
than 80 hours total per year” and thus that Hagan is subject to the Ordinance’s paidsick-leave mandate). Both of the Employer-Plaintiffs have also submitted evidence of
more than de minimis costs that their companies have incurred or anticipate
incurring to comply with the Ordinance. See (Dkt. #3-1 ¶¶ 7–12) (confirming that ESI
will have to hire an employee to track how many hours its employees work within
Dallas, pay other employees to fill in for those who take leave, and pay to revise and
reprint its training materials); (Dkt. #3-2 ¶¶ 9–12) (confirming that, in addition to
the cost of paying for the sick leave itself, Hagan will have to employ a more complex
and costlier time-reporting system, train employees to use the new system, rearrange
the mix of pay and benefits for its employees, and raise client rates). Although the
City argues that the evidence submitted by the Employer-Plaintiffs as to costs
imposed on their companies is not adequately supported, there is no question that,
because both Employer-Plaintiffs are subject to the Ordinance, each necessarily faces
some regulatory burdens imposed by the Ordinance’s paid-sick-leave requirements.
In this regard, as the Fifth Circuit has explained, because “the injury in fact
requirement under Article III is qualitative, not quantitative, in nature,” an injury
alleged as an Article III injury-in-fact “need not be substantial.” OCA-Greater
Hous. v. Texas, 867 F.3d 604, 612 (5th Cir. 2017). Indeed, “it need not measure more
than an identifiable trifle.” Id. (quotation omitted). 6 The Employer-Plaintiffs have
sufficiently shown standing to support the summary-judgment motion before the
As to the standing of the State of Texas, “[t]he State has a sovereign interest
in enforcing its laws.” Castillo v. Cameron County, 238 F.3d 339, 351 (5th Cir. 2001);
see also Alfred L. Snapp & Son, Inc., v. Puerto Rico ex rel. Barez, 458 U.S. 592, 601,
102 S.Ct. 3260, 73 L.Ed.2d 995 (1982) (holding that the State has a “sovereign
interest” in “the exercise of sovereign power over individuals and entities within
[its] jurisdiction”). A violation of the State’s legal code, including the provisions of the
TMWA limiting municipal power, is an Article III injury in fact to the State. It harms
“Texas’s concrete interest, as a sovereign state, in maintaining compliance with its
laws.” Texas v. EEOC, 933 F.3d 433, 447 (5th Cir. 2019); see also Abbott v. Perez,
138 S.Ct. 2305, 2324 n.17, 201 L.Ed.2d 714 (2018) (explaining that a State’s “inability
to enforce its duly enacted [laws] clearly inflicts irreparable harm”). The Fifth Circuit
has held that an injunction purportedly allowing local officials to act “in violation of
For the same reasons, the City’s argument that some of the costs identified by the
Employer-Plaintiffs may be a result of the requirements of the Families First Coronavirus
Response Act (FFCRA), as opposed to the Ordinance, is also unavailing. Moreover, the
FFCRA’s leave requirements expired on December 31, 2020. See Families First Coronavirus
Response Act, Pub. L. No. 116-127, §§ 5102(a)–(b), 5108–09, 5110(2)(B), 134 Stat. 178 (2020).
state law” creates an Article III injury in fact because “[t]he State has a sovereign
interest in enforcing its laws.” Castillo, 238 F.3d at 350–51; see also id. at 349 n.16.
Finally, a declaratory judgment that the Ordinance violates the Texas Constitution
and a permanent injunction prohibiting the City from enforcing the Ordinance will
wholly redress the State’s injury. Thus, the Court concludes that the State of Texas
B. Preemption Claim
1. Controlling Texas law confirms that the Ordinance is preempted
by the TMWA.
Whether the Ordinance is preempted by the TMWA and therefore violates the
Texas Constitution is a matter of state law. “A federal court exercising [supplemental]
jurisdiction over state law claims . . . must apply the substantive law of the state in
which it sits.” Sommers Drug Stores Co. Emp. Profit Sharing Tr. v. Corrigan,
883 F.2d 345, 353 (5th Cir. 1989) (citing United Mine Workers of Am. v. Gibbs,
383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)). That law is enunciated by
the state’s highest court. Troice v. Greenberg Traurig, L.L.P., 921 F.3d 501, 505
(5th Cir. 2019). When a state’s highest court has yet to speak on an issue, a federal
court “must follow the decisions of intermediate state courts in the absence of
convincing evidence that the highest court of the state would decide differently.”
Stoner v. N.Y. Life Ins. Co., 311 U.S. 464, 467, 61 S.Ct. 336, 85 L.Ed. 284 (1940)
The Texas Supreme Court has explained the standard for evaluating the type
of preemption claim asserted by Texas: the preemption of a municipal ordinance by
state legislation. Home-rule cities, 7 like the City of Dallas, “possess the power of selfgovernment.” BCCA Appeal Grp. v. City of Houston, 496 S.W.3d 1, 7 (Tex. 2016). But
the Texas Constitution circumscribes that power: no city ordinance “shall contain any
provision inconsistent with the Constitution of the State, or of the general laws
enacted by the Legislature of this State.” TEX. CONST. art. XI, § 5(a); see also Dall.
Merch.’s & Concessionaire’s Ass’n v. City of Dallas, 852 S.W.2d 489, 490–91 (Tex.
1993). Thus, although home-rule cities in Texas enjoy broad self-governance
authority, the State’s constitution and laws place affirmative limits on that authority.
BCCA, 496 S.W.3d at 7.
Texas may limit the authority of home-rule cities through “either an express
limitation or one arising by implication.” Lower Colo. River Auth. v. City of San
Marcos, 523 S.W. 2d 641, 645 (Tex. 1975). However, regardless of whether a statutory
limit on local laws is implicit or explicit, it “must appear with unmistakable clarity”
to foreclose coregulation of a matter. City of Laredo v. Laredo Merchs. Ass’n,
550 S.W.3d 586, 593 (Tex. 2018) (internal quotation marks omitted) (quoting Lower
Colo. River Auth., 523 S.W.2d at 645)).
Although home-rule cities can regulate broadly, when a municipal ordinance
purports to regulate subject matter that is already regulated by a state statute, it is
unenforceable “to the extent it conflicts with the state statute.” Dall. Merch.’s,
852 S.W.2d at 491 (citing City of Brookside Vill. v. Comeau, 633 S.W.2d 790, 796 (Tex.
Home-rule cities are those operating under a municipal charter as provided for in
the Texas Constitution. Barnett v. City of Plainview, 848 S.W.3d 334, 337 (Tex. App.—
Amarillo 1993, no pet.); TEX. CONST. art. XI, § 5.
1982)). Mere coexistence in the same statutory ambit as state legislation does not
preempt a municipal ordinance per se where it can operate “in harmony with the
general scope and purpose of the state enactment.” Laredo Merchs., 550 S.W.3d
at 593 (internal quotation marks omitted) (quoting Comeau, 633 S.W.2d at 796). But
where the purpose of the state legislation is frustrated by concurrent operation of a
municipal ordinance, the ordinance will be unenforceable—even if the laws do not
regulate the same subject. See S. Crushed Concrete, L.L.C. v. City of Houston,
398 S.W.3d 676, 679 (Tex. 2013) (concluding that a municipal ordinance that
ostensibly regulated land use was preempted by a state statute that regulated air
quality in part because the ordinance rendered the state statute ineffective); BCCA,
496 S.W.3d at 7 (explaining that “a home-rule city’s ordinance is unenforceable to the
extent that it is inconsistent with [a] state statute preempting that particular subject
As relevant here, the TMWA has two provisions that expressly prohibit homerule cities from regulating the wages that private employers pay.
First, Section 62.0515 of the Texas Labor Code preempts any local ordinance
that requires private employers to pay a wage other than the state minimum wage:
“[T]he minimum wage provided by this chapter [i.e., the TMWA] supersedes a wage
established in an ordinance, order, or charter provision governing wages in private
employment.” TEX. LAB. CODE § 62.0515(a). On its face, the statute’s command is
unequivocal. The TMWA sets a minimum wage that all covered employers must
follow. Id. § 62.051. And to the extent that any city ordinance sets a “wage in private
employment,” state law “annul[s]” or “make[s] void” that provision. See W.H.V., Inc. v.
Assocs. Hous. Fin., LLC, 43 S.W.3d 83, 92 (Tex. App.—Dallas 2001, pet. denied)
(treating “super[s]ed[ing]” and “preemp[ting]” identically); Redman Homes, Inc. v.
Ivy, 920 S.W.2d 664, 666 (Tex. 1996) (recognizing that a clause that “preempts state
law” “supersede[s]” that law).
Second, Section 62.151 preempts any local ordinance that governs wages, in
any way, for an employer subject to the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§§ 201–19. That section of the TMWA states: “a municipal ordinance or charter
provision governing wages in private employment . . . do[es] not apply to a person
covered by the [FLSA].” TEX. LAB. CODE § 62.151. Thus, when the Texas legislature
made clear that it would not regulate wages for employers and employees subject to
the FLSA, it also provided that local governments cannot regulate them either. See,
e.g., Chambers v. Sears, Roebuck & Co., 793 F.Supp.2d 938, 963 (S.D. Tex. 2010), aff’d
428 F.App’x 400 (5th Cir. 2011) (per curiam). In sum, Texas declined to regulate in
this area and ensured that, to the extent local governments seek to add wage
regulations on top of federal law, those local regulations are preempted.
The Texas Supreme Court has not yet addressed the specific preemption issue
in this case: whether a city ordinance that requires private employers to provide paid
sick leave to their employees is preempted by the TMWA. However, the issue has
been decided by both Texas’s Third Court of Appeals and Fourth Court of Appeals.
See Tex. Ass’n of Bus. v. City of Austin, 565 S.W.3d 425 (Tex. App.—Austin 2018, pet.
denied); Washington v. Associated Builders & Contractors of S. Tex., Inc., No. 04-20-
00004-CV, 2021 WL 881288 (Tex. App.—San Antonio Mar. 10, 2021, no pet. h.). In
both instances, the Third and Fourth Courts of Appeals considered paid-sick-leave
ordinances enacted by the City of Austin and the City of San Antonio, respectively,
that included substantive provisions virtually identical to the Dallas Ordinance at
issue here. In all three ordinances, employees are granted one hour of paid sick leave
for every thirty hours worked and employers must pay employees what they would
have made if they had been working during hours taken as sick leave. Compare Tex.
Ass’n of Bus., 565 S.W.3d at 430 (quoting AUSTIN, TEX., CODE
§ 4–19–2(A), (J)) (“[E]mployers must ‘grant an employee one hour of earned sick time
for every 30 hours worked’”) and Washington, 2021 WL 881288, at *1–2 (quoting SAN
ANTONIO, TEX., CODE
ORDINANCES § 15–269—15–281) (same) with DALL., TEX.,
CODE § 20–4(a), 20–5(a) (same).
In both Texas Association of Business and Washington, the plaintiffs brought
a preemption claim that required the Texas intermediate appellate courts to
determine whether the ordinances established a “wage” in contravention of the
TMWA and the Texas Constitution. Absent “convincing evidence” that the Texas
Supreme Court would rule differently on this issue, the Court must follow the Third
and Fourth Courts’ interpretation of Texas law. Stoner, 311 U.S. at 467.
The Third Court of Appeals concluded that the “legislative intent in the TMWA
to preempt local law is clear.” Tex. Ass’n of Bus., 565 S.W.3d at 439; see also
Washington, 2021 WL 881288, at *6 (“[W]e hold that the TMWA preempts a homerule city’s ordinance that establishes a mandatory minimum wage.”). The Third Court
explained that the TMWA “expressly prohibits municipalities from regulating the
wages of employers that are subject to the federal minimum-wage requirements of
the [FLSA].” Tex. Ass’n of Bus., 565 S.W.3d at 439. 8 In support of this conclusion, the
court cited and quoted TMWA Section 62.151’s command that
ordinance “governing wages in private employment . . . [does] not apply to a person
covered by the [FLSA].” Id. (internal quotation marks omitted) (quoting TEX. LAB.
CODE ANN. § 62.151). The Third Court further explained that, “the TMWA explicitly
provides that ‘the minimum wage provided by [the TMWA] supersedes a wage
established in an ordinance . . . governing wages in private employment.” Id. (quoting
TEX. LAB. CODE ANN. § 62.0515(a)).
The Court has no reason to believe that the Texas Supreme Court would reach
different conclusions than Texas’s Third and Fourth Courts of Appeals concerning
the operation and preemptive effect of the TMWA. In this regard, the Court notes
that a petition for review was filed with the Texas Supreme Court in the Texas
Association of Business case, and, although all parties urged the Court to grant
review, after receiving full briefing on the merits, the Texas Supreme Court denied
review of the Third Court of Appeals’ decision. This result suggests that the Texas
Supreme Court was comfortable with the lower court’s core holding on preemption.
Generally, the FLSA applies to employers whose “annual gross volume of sales made
or business done” is greater than $500,000. See 29 U.S.C. § 206(a) (setting minimum wage
for enterprises “engage[d] in commerce”); id. § 203(s)(1)(A)(ii) (stating that an enterprise is
“engaged in commerce” if its “annual gross volume of sales made or business done” is greater
Further, the Texas Legislature’s intent to limit local government regulation of
wages is perspicuous. As described herein, the TMWA’s plain text states that
municipal ordinances governing wages in private employment are inapplicable to
employers subject to the FLSA and Section 62.151 of the Texas Labor Code and that
the minimum wage provided by the TMWA “supersedes” a wage established in,
among other things, a municipal ordinance. TEX. LAB. CODE § 62.0515(a). Working in
concert, these TMWA provisions unequivocally yoke the minimum wage in Texas to
the TMWA itself and the federal minimum wage, explicitly preempting upward
departures imposed by municipalities. Therefore, as the Third and Fourth Courts of
Appeals concluded regarding the Austin and San Antonio ordinances, if the paid sick
leave required by the Ordinance establishes a wage, it is preempted by the TMWA
Because the TMWA does not define the term “wage,” the Third and Fourth
Courts of Appeals gave that word its ordinary meaning. Tex. Ass’n of Bus., 565 S.W.3d
at 439; Washington, 2021 WL 881288, at *7; see also Laredo Merchs., 550 S.W.3d
at 594 (“To decide [the preemption issue], we look, as usual, to the statutory text and
the ordinary meaning of its words.”). The Third Court noted that the word “wage”
“refers to a ‘payment to a person for service rendered [or t]he amount paid
periodically, esp. by the day or week or month, for the labour or service of an
employee, worker, or servant.’” Tex. Ass’n of Bus., 565 S.W.3d at 439 (quoting
COMPACT OXFORD ENG. DICTIONARY 693 (2d. ed. 1989), and then citing WEBSTER’S
THIRD NEW INT’L DICTIONARY 2568 (2002) (defining “wage” as “a pledge or payment
of usu[ally] monetary remuneration by an employer esp[ecially] for labor or
services”)). Likewise, the Fourth Court cited to various dictionary definitions of
“wage,” finding that the “common concepts in each definition are a payment, to a
person, for the labor or services the person performs” and concluding that “the
common meaning of wage is a payment to a person for services rendered.”
Washington, 2021 WL 881288, at *7.
In light of the ordinary meaning of “wage,” and under the TMWA’s plain
language, the Third Court of Appeals concluded that the Austin ordinance was
preempted because it “establishes the payment that a person receives for services
rendered to an employer.” Tex. Ass’n of Bus., 565 S.W.3d at 439. The Austin
ordinance, like the Dallas Ordinance, mandated that employers provide one hour of
sick leave for “every 30 hours worked.” Id. (quoting AUSTIN, TEX. CODE
ORDINANCES § 4–19–2(A)). Also like the Dallas Ordinance, Austin’s sick-leave
mandate required employers to “pay employees who use sick leave for hours that they
did not actually work.” Id. The Third Court held that the “effective result” of such
provisions was “that employees who take sick leave are paid the same wage for fewer
hours worked, or, stated differently, that employees who take sick leave are paid more
per hour for the hours actually worked.” Id. at 439–40.
In short, the Third Court concluded that the paid-sick-leave provisions of the
Austin ordinance “increase[d] the pay of those employees who use paid sick leave.”
Id. at 440. Based on these conclusions, the Third Court determined that (1) the
TMWA preempts local regulations that establish a wage, (2) the Austin paid-sick-
leave ordinance establishes a wage and that, accordingly, (3) the TMWA preempts
the Austin ordinance as a matter of law, thus making the ordinance unconstitutional.
Id. at 440–41 (citing TEX. CONST. art. XI, § 5) (mandating that no city ordinance “shall
contain any provision inconsistent with the Constitution of the State, or of the general
laws enacted by the Legislature of this State”).
Similarly, the Fourth Court of Appeals concluded that, because the San
Antonio ordinance “requires employers to pay sick leave,” the ordinance requires
employers to “pay those employees who earn and take sick and safe leave more than
employees who work the same hours without paid sick leave” and thus “establishes a
minimum wage.” Washington, 2021 WL 881288, at *9 (cleaned up) (quoting Tex. Ass’n
of Bus., 565 S.W.3d at 440). The Fourth Court further held that “the TMWA
supersedes the [San Antonio] Ordinance’s paid sick and safe leave provision, which
makes the [San Antonio] Ordinance unconstitutional.” Id. at *10.
Again, there is no reason to believe that the Texas Supreme Court would reach
a different conclusion than the Third and Fourth Courts on the question of whether
the Austin and San Antonio ordinances establish a wage and are therefore preempted
by the TMWA. To the contrary, in construing the relevant provisions of the TMWA
and the ordinances, the Third and Fourth Courts of Appeals employed statutory
construction tools consistently endorsed and applied by the Texas Supreme Court.
Both courts focused on the statutory text to determine legislative intent, adhering to
the oft-repeated admonitions of the Texas Supreme Court. See, e.g., In re Off. of Att’y
Gen., 422 S.W.3d 623, 629 (Tex. 2013) (“Legislative intent is best revealed in
legislative language.”). Likewise, both courts followed the Texas Supreme Court’s
guidance that, “[w]here statutory text is clear, that text is determinative of legislative
intent unless the plain meaning of the statute’s words would produce an absurd
result.” Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex. 2012); see also, e.g.,
State v. Shumake, 199 S.W.3d 279, 284 (Tex. 2006) (“[W]hen possible, we discern
[legislative intent] from the plain meaning of the words chosen.”).
Applying these tools to interpret the TMWA and the Austin and San Antonio
ordinances, the Third and Fourth Courts both reached the conclusion that, when the
text of a municipal ordinance mandates that employees be paid their regular wage
for hours not actually worked based on taking sick leave, the result is an increased
wage for hours that are worked. Because such an ordinance has the inevitable effect
of increasing the pay of employees who use paid sick leave, it is preempted by the
plain language of the TMWA and therefore unenforceable under the Texas
Constitution. Finally, the Third and Fourth Courts’ preemption rulings also comport
with the Texas Supreme Court’s guidance that “a home-rule city’s ordinance is
unenforceable to the extent that it is inconsistent with [a] state statute preempting
that particular subject matter.” BCCA, 496 S.W.3d at 7.
The Court concludes that it is bound to follow the Third and Fourth Courts’
well-reasoned preemption rulings, which apply equally to the Dallas paid-sick-leave
ordinance because its substantive provisions mirror those of the Austin and San
Antonio ordinances held to be unenforceable. Compare Tex. Ass’n of Bus., 565 S.W.3d
at 430 (quoting AUSTIN, TEX., CODE OF ORDINANCES § 4–19–2(A), (J)) (“[E]mployers
must ‘grant an employee one hour of earned sick time for every 30 hours worked.’”)
and Washington, 2021 WL 881288, at *1–2 (quoting SAN ANTONIO, TEX., CODE
ORDINANCES § 15–269—15–281) (same) with DALL., TEX., CODE § 20–4(a), 20–5(a)
(same). For these reasons, the Court holds that Plaintiffs have established that they
are entitled to summary judgment on their preemption claim.
2. The remaining requirements for a permanent injunction are met.
Having determined that the Ordinance is preempted by the TMWA, the Court
notes that this conclusion “carries with it a determination that the other three
requirements [for a permanent injunction] have been satisfied.” VRC, 460 F.3d at 611
(referring to the additional requirements that a movant establish that a failure to
grant the injunction will result in irreparable injury, that its injury outweighs any
damage that the injunction will cause the opposing party, and that the injunction will
not disserve the public interest). For this reason alone, a permanent injunction is
appropriate. However, even examining the additional requirements for an injunction
individually, the Court concludes that the requested relief is warranted.
To begin, a failure to grant the requested injunction would mean that the State
of Texas could not enforce the TMWA, at least as to the City of Dallas. As the Supreme
Court has recognized, “the inability to enforce its duly enacted plans clearly inflicts
irreparable harm on the State.” Perez, 138 S.Ct. at 2324 n.17 (citing Maryland v.
King, 567 U.S. 1301, 133 S.Ct. 1, 183 L.Ed.2d 667 (2012) (Roberts, C.J., in chambers));
see also New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 434 U.S. 1345, 1351,
98 S.Ct. 359, 54 L.Ed.2d 439 (1977) (Rehnquist, J., in chambers) (holding that a state
was irreparably harmed when a court enjoined the enforcement of its laws). Because
the Texas Constitution forbids municipal laws from conflicting with laws enacted by
the Texas legislature, TEX. CONST. art. XI § 5, and because the Ordinance conflicts
with the TMWA, the State will suffer irreparable harm if a permanent injunction is
Absent an injunction, the Employer-Plaintiffs also face irreparable harm
because they would bear the cost of complying with the Ordinance. The EmployerPlaintiffs have shown that they will have to pay employees when they take sick leave,
will have to hire additional personnel to oversee compliance, update training
materials, rearrange the mix of pay and benefits offered to employees, raise client
rates, and change acquisition and benefit priorities. Because the City enjoys
governmental immunity as a home-rule city under Texas law, see, e.g., City of
Galveston v. State, 217 S.W.3d 466, 469 (Tex. 2007), the Employer-Plaintiffs will not
be able to remedy their injuries at law, see Harris v. Cantu, 81 F.Supp.3d 566, 580
(S.D. Tex. 2015) (concluding that economic loss that is unrecoverable due to immunity
constitutes irreparable harm) rev’d on other grounds sub nom. Harris v. Hahn,
827 F.3d 359 (5th Cir. 2016); Teladoc, Inc. v. Tex. Med. Bd., 112 F.Supp.3d 529, 543
(W.D. Tex. 2015) (same); Chamber of Commerce of U.S. v. Edmondson, 594 F.3d 742,
770–71 (10th Cir. 2010) (same).
Again, as with Plaintiffs’ prior request for a preliminary injunction, the City
questions the accuracy of the Employer-Plaintiffs’ alleged compliance costs. For
instance, ESI has provided proof that it will incur damages that are “approximately
$269,000.00 annually if each of its Dallas employees take the full amount of paid
leave,” and that it will have to hire another employee to “track where employees are
placed, track their hours, calculate leave earned and send monthly reports.”
(Dkt. #3-1 ¶¶ 10–11). The City takes issue with these estimates, arguing that they
are not supported by any other evidence. But the City’s argument does not detract
from the Employer-Plaintiffs’ demonstration of irreparable harm.
The City is correct that Plaintiffs carry a heavy burden to establish irreparable
injury. See White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir. 1989) (citing Enter. Int’l,
Inc. v. Corporaction Estatal Petrolera Ecuatoriana, 762 F.2d 464, 472 (5th Cir. 1985))
(“Without question, the irreparable harm element must be satisfied by independent
proof, or no injunction may issue.”). But after that harm has been established, the
element is satisfied; the degree of harm is irrelevant. It is beyond dispute that there
are greater than de minimis compliance costs associated with the Ordinance—the
Employer-Plaintiffs must spend money on employees that are not working because
they are taking sick leave, must track sick leave accrual, and must amend their
handbooks and training materials. See, e.g., Dennis Melancon, Inc. v. City of New
Orleans, 703 F.3d 262, 279 (5th Cir. 2012) (finding that $2,000 in damages is more
than de minimis). Because governmental immunity will preclude recovery against
the City regardless of the amount of damage, the irreparable harm element is met.
The balance of equities and public interest also favors granting the requested
permanent injunction. Because the Court has already determined that Plaintiffs have
succeeded on their preemption claim, the balance of equities and public interest
factors weigh in favor of granting the injunction. VRC, 460 F.3d at 611 (holding that,
in an express preemption case, success on the merits carries with it a determination
that the other three requirements have been satisfied); accord Tex. Midstream Gas
Servs., L.L.C. v. City of Grand Prairie, No. 3:08-CV-1724, 2008 WL 5000038, at *20
(N.D. Tex. Nov. 25, 2008) (“Because [the plaintiff] has demonstrated a substantial
likelihood of success on the merits of part of its express preemption claim, this
suggests that the balance of hardship and public interest factors weigh in favor of
granting the preliminary injunction.”), aff’d, 608 F.3d 200 (5th Cir. 2010).
Finally, the public interest is best served by upholding the structure of
government chosen by the citizens of Texas. Under the Texas Constitution, home-rule
cities may not override public policy that the Texas legislature has enacted into law.
As the Texas Supreme Court has explained, “[t]he Legislature determines public
policy through the statutes it passes.” Fairfield Ins. Co. v. Stephens Martin Paving,
L.P., 246 S.W.3d 653, 665 (Tex. 2008); see also Tex. Com. Bank, N.A. v. Grizzle,
96 S.W.3d 240, 250 (Tex. 2002) (recognizing that “the State’s public policy is reflected
in its statutes” (citation omitted)). On the other hand, there is no public interest in
the enforcement of an unlawful ordinance. See N.Y. Progress & Prot. PAC v. Walsh,
733 F.3d 483, 488 (“The Government does not have an interest in the enforcement of
an unconstitutional law.” (cleaned up)).
The State of Texas is “inviolably sovereign,” Wasson Interests, Ltd. v. City of
Jacksonville, 489 S.W.3d 427, 429 (Tex. 2016), and its legislature stands above local
governments, see TEX. CONST. art. XI, § 5(a). As the Court has previously held, ESI,
450 F.Supp.3d at 738, each day the Ordinance operates against the express mandate
of the Texas legislature to preempt local laws governing wages, the State’s
sovereignty is violated and the relationship between the legislature and local
governments, guaranteed by the Texas Constitution, is turned on its head.
For the foregoing reasons, the State of Texas and the Employer-Plaintiffs’
request for a permanent injunction is GRANTED.
.The Court ORDERS that Plaintiffs’ Motion for Summary Judgment and
Memorandum in Support, (Dkt. #66), is hereby GRANTED in part and DENIED
as moot in part. Insofar as Plaintiffs’ Motion seeks summary judgment on the nowdismissed Fourth Amendment claim, Plaintiffs’ requested relief is DENIED as
moot. Insofar as Plaintiffs’ Motion seeks summary judgment on the state preemption
claim, Plaintiffs’ requested relief is GRANTED. The Court will enter a final
judgment and permanent injunction by separate order.
So ORDERED and SIGNED this 31st day of March, 2021.
SEAN D. JORDAN
UNITED STATES DISTRICT JUDGE
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