Hunton Employment & Labor Perspectives

On June 14, 2023, Texas Governor Greg Abbott signed HB 2127, the Texas Regulatory Consistency Act (“TRCA”), into law. Once the TRCA goes into effect on September 1, 2023, it will preclude all municipalities and counties in Texas from adopting or enforcing ordinances regulating conduct with respect to certain subject matters, including labor.

The TRCA was promulgated in an effort by the Texas Legislature to reduce inconsistency throughout the state caused by localities enacting ordinances affording local residents rights and legal causes of action not provided by the Texas Legislature. For example, the cities of Austin, Dallas, and San Antonio each passed ordinances in 2018 and 2019 requiring employers within those cities to offer their employees paid sick leave benefits, a requirement not imposed upon employers by the State of Texas. Each of these ordinances led to litigation wherein separate Texas courts determined the ordinances were preempted by the Texas Minimum Wage Act and violated the Texas Constitution. To remedy the concerns and confusion caused by these and similar ordinances enacted by municipalities, the TRCA is designed to preempt and render unenforceable any such ordinances.

This legislation stands to offer employers increased predictability when doing business within the State of Texas and reduce challenges associated with monitoring and seeking to comply with a patchwork of varying and inconsistent local employment law requirements in addition to those imposed at the state and federal levels. For instance, the TRCA will have the effect of nullifying the Austin, Dallas, and San Antonio paid sick leave ordinances, Austin’s 2016 “ban-the-box” ordinance, and other similar enactments. The uniformity created by the TRCA will enable employers to streamline currently applicable policies and ease the burden on employers seeking to implement new policies on a Texas-wide basis, as employers will no longer be required to consider the effects differing local regulations may have on their practices and procedures.

Notably, the TRCA creates a private right of action for any person who sustains an “actual or threatened” injury. Commonly, state preemption laws will permit parties to bring suit against a municipality that attempts to enforce a preempted ordinance against them. The TRCA’s language, however, provides abnormally expansive rights for employers to seek legal redress against a municipality that merely threatens to violate the provisions of the TRCA by adopting or enforcing an ordinance seeking to regulate employers’ conduct. Accordingly, employers should be cognizant of any municipality conduct that could threaten injury to their businesses, as the TRCA would permit employers to bring preemptive legal action prior to realizing the actual harms associated with such conduct. Though the TRCA offers significant potential benefits to employers, the law has become the subject of intense scrutiny since its promulgation. Several Texas cities, including Houston, El Paso, and San Antonio, have joined in a lawsuit against the State of Texas challenging the TRCA as unconstitutional and unenforceable. Because the TRCA is set to go into effect on September 1, 2023, there is a high likelihood that the lawsuit will progress rapidly. Accordingly, employers should continue to monitor the status of the TRCA and the ongoing legal action prior to initiating any sweeping changes to their practices or policies in accordance with the provisions of the TRCA.