The Death Star Law: Unprecedented Preemption
Known officially as the Texas Regulatory Consistency Act, and by opponents as “the Death Star Law,” House Bill 2127 (HB 2127) took effect September 1, 2023. But this bill has not had a smooth ride, and the battle is just heating up. What has happened so far, and what does the law even say?
Unprecedented Texas Law
HB 2127 grants state lawmakers, for the first time in Texas history, exclusive authority over any activities covered by eight state codes:
(1) Agriculture,
(2) Business and commerce,
(3) Finance,
(4) Insurance,
(5) Labor,
(6) Natural resources,
(7) Occupations, and
(8) Property.
These preemption clauses remove the cities and counties' ability to pass laws, and grants the state the power to override any local ordinances in these areas.
The bill’s text explains its purpose is to “provide statewide consistency by returning sovereign regulatory powers to the state where those powers belong.” In other words, it intends to correct the patchwork of inconsistent business regulations that different city ordinances create, and to return broad regulatory power to the state.
Preemption and Preservation
Workplace Rights and Protections – Front and Center
Although the preemption clauses facially forbid local regulation in these eight areas, HB 2127 gives special attention to employment law practices.
The bill specifies that the regulatory field occupied by the Labor Code includes “employment leave, hiring practices, breaks, employment benefits, scheduling practices, and any other terms of employment that exceed or conflict with federal or state law for employers other than a municipality or county.”
It eliminates mandated water breaks for construction workers in Austin and Dallas, blocks local ordinances providing mandatory paid sick leave, and prevents other cities from passing such rules in the future.
Other Targeted Areas
One provision in the legislation (to be codified at Section 51.002 of the Local Government Code) states that “the governing body of a municipality may adopt, enforce, or maintain an ordinance or rule only if the ordinance or rule is consistent with the laws of this state.”
This targets, for example, proposed municipal ordinances banning landscaping companies from using gas-powered equipment, or ordinances requiring banks to disclose lending activity to the city government.
Moreover, rural Texas counties have considered placing moratoria on developing wind and solar energy facilities within their jurisdictions—often based on claims involving counties’ police powers, or their general authority over county roads. HB 2127 casts serious doubt on the legality of these measures.
Limited Preservation; Health and Safety Untouched
The bill also preserves local government authority in several important regulatory fields.
For example, the Finance Code preemption language preserves existing payday lending ordinances, but preempts cities and counties from adopting, or amending existing ones, going forward.
And it appears that cities and counties are able to regulate in multiple areas of local concern, such as building and maintaining roads; levying taxes; conducting public awareness campaigns; and supervising and regulating local government employees.
Notably, the bill did not touch the Health and Safety Code.
A Shield and a Sword
HB 2127 is meant to shield businesses and individuals from onerous and duplicative local regulation. But it can also be used as a sword.
The bill creates a private cause of action that confers standing on a person or trade association to sue a city or county for an ordinance, order, or rule that violates one of the above-mentioned regulatory areas.
What Opponents and Supporters Are Saying
Supporters see it as an elegant way to curb what they consider regulatory overreach by cities. “We were starting to see a dangerous trend in regard to regulating small businesses pretty much to extinction,” said Annie Spilman, the former Texas director for the National Federation of Independent Business (an industry trade group that helped draft the law). And state lawmakers say the law provides the state with regulatory consistency.
At its heart, opponents say, the issue is that local governments must now be less responsive to the needs of local residents, for fear of adverse legal actions against them. And they fear that cities won’t be able to enforce their existing regulations and ordinances that make cities attractive places to live or do business. Such as regulations governing overgrown lots that are considered eye sores, short-term rentals that often disrupt quiet neighborhoods, and corporate tax incentives.
Ongoing Legal Battle
In July, shortly after Governor Greg Abbott signed HB 2127 into law, Houston sued the state to prevent it from taking effect (San Antonio and El Paso later joined the suit).
Then, in August, two days before the bill was scheduled to go into effect, a Travis County judge issued a short, two-page ruling, holding that HB 2127 is unconstitutional.
But the Attorney General’s Office immediately appealed the ruling, which ensures the law will remain in effect while the case goes through the appeals process.
Looking Ahead
The bill’s sweeping preemption language will raise many questions—and disputes—over its exact scope. Determining whether a different state law authorizes a specific local ordinance, rule, or regulation, will prove a challenging and time-consuming task for city and county officials.
Whether a local law is “consistent” with state law is seldom immediately clear. What, exactly, does it mean, for a local regulation to be inconsistent with or conflict with a state law? Does it mean actual conflict, or that compliance with both is impossible? Or that a local law creates an unacceptable obstacle to the operation of the preempted areas?
Expect both sides to contest these issues with vigor.
Meanwhile, in staying with the holiday spirit, we ask: How did Darth Vadar know what Luke was getting for Christmas?
He felt his presents.
We’ll keep you updated as the case progresses.
Cobb & Johns are Special Forces for Complex Property and Government Disputes.