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City Hall, Contracts (Or Lack Thereof) and Sovereign Immunity: No Back Pay for Being On Call

City Hall, Contracts (Or Lack Thereof) and Sovereign Immunity: No Back Pay for Being On Call

A recent Texas Supreme Court case determined municipal employees are not entitled to wages for being “on call.”  The city employees in Denton, Texas, had no contract that enabled such pay and there was no provision for it in the employee policies, but the city manager altered the employee policies and included pay for “on-call” time and defined a pay schedule for on-call time. The policy change was not approved by city council, nor adopted by an ordinance, but were reviewed by the City’s Executive Committee before published in the Employee Manual.

According to the March 15 court opinion, City of Denton v. Rushing, an on-call period lasts for seven days. City employees were required to be available in case of an emergency 24 hours per day; in the event there was an emergency at the city landfill, they were expected to return to the landfill within 30 minutes to drive a bulldozer or heavy equipment. If they came back to work, they were paid for their time, but weren’t paid otherwise.  The city also disciplined or fired employees who didn’t respond in the 30 minutes.

The employees claimed that the city manager had removed the provision from the Employee Policies stating they only got paid when showing up for work, and therefore were owed back-pay.  They argued the unilateral change to the Employee Manual created a contract and therefore they were owed back-pay. The 2nd Court of Appeals in Fort Worth sided with the trial court and the three employees, saying the employees could sue the city for failing to pay them for being on call.  But, the Texas Supreme Court reversed the court of appeals decision and dismissed the case filed in the lower state court.

The state’s highest court decided a change in compensation policy did not constitute an altogether new policy and therefore the City did not owe back wages; essentially, a change in the employee policies does not create a contract. Although city ordinances may create enforceable contracts, the Court held it has not previously determined a municipality’s policies and procedures manual can create an enforceable contract.

This case is not about back wages or wages for being on-call. The two key principles are contract law and the concept of sovereign immunity. You know the saying; “you can’t fight city hall?” Well, you can’t in court due to the concept of sovereign immunity. Political subdivisions of the state—such as counties, municipalities, and school districts—share in the state’s inherent immunity.[1]  The Texas Supreme Court has repeatedly decided immunity from suit serves the purpose of allowing governmental entities to avoid contractual obligations. Sovereign immunity and precluding suits for breach of contract prevent governmental entities from being bound by policy decisions of their predecessors.[2] 

For governmental immunity to be waived under section 271.152 of the Local Government Code, there must first be an enforceable, written contract.  The Texas Supreme Court decided a change in employee manual, approved by the city manager does not create a contractual agreement with city employees.  The city of Denton is a home-rule city and has a charter provision that states the city manager is the chief executive officer and the head of the administrative branch of the city government and shall be responsible to the council for the proper administration of all affairs of the city, including a list of 7 additional responsibilities. Black’s Law Dictionary defines a contract as: “An agreement between parties creating obligations that are enforceable.” But there is no contract without an offer and acceptance.  Arguably the offer was when the provision was added to the Employee Manual, not before. Can’t say I agree with all the legal analysis and decisions of the current Texas Supreme Court, but the result is logical, even if the analysis is less than satisfactory.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our municipal law practice can be found here.

[1] Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex. 2006).

 

[2] City of Houston v. Williams, 353 S.W.3d 128, 131 (Tex. 2011).

Since joining the Randle Law Office in April 2017, Ms. ElMasri has provided legal advice to the City of Fulshear, Texas, the City of Brazos Country, Texas, the City of Mont Belvieu, Texas, and the City of Meadows Place, Texas. In that regard, El Masri has worked closely with City Council, Planning and Zoning Commission, Parks Board, and all department and divisions including Parks, Police, Public Works, Fire, Human Resources, Finance, Planning, Code Enforcement, Communications, City Secretary, and City Manager’s office...

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