City Contracts and State Statutes
In a previous blog post, this firm addressed some instances of first amendment issues implicated by state laws. Particularly of note, was a state statute which prevented Cities from contracting with companies who take a particular political stance.
As a brief recap, in 2017, the Texas legislature passed H.B. 89 which provided that a governmental entity may not enter into a contract with a company for goods or services, unless the contract contains a written verification from the company that it does not boycott Israel and will not boycott Israel during the term of the contract. The term “company” included “a for-profit sole proprietorship.” This new law was challenged on first amendment grounds in multiple lawsuits.
As previously noted, in 2019 a district court Judge granted a preliminary injunction against enforcement of this statute to a group of plaintiffs who were all sole proprietors.
During an appeal on the case, the legislature amended the statute through H.B. 793 which modified the previous definition of “company” by excluding sole proprietorships from the statute’s reach. The amendments went on to provide that the anti-boycott certification requirement was limited to government contracts with “company[ies] with 10 or more full-time employees” and that have a value of $100,000 or more. On appeal, the 5th Circuit court dismissed the appeal, finding that the plaintiffs’ claims had been resolved by the 2019 amendments to the original bill since it no longer applied to sole proprietorships.
It is worth noting that the Court did not uphold the statute as constitutional. The court instead found that the controversy was rendered moot since sole proprietors had no grounds to challenge a law which no longer applied to them. With the lawsuit dismissed, this statute was allowed to stay on the books.
Texas lawmakers have now taken action to extend these types of restrictions into other areas.
In the most recent legislative session, two similar bills were passed regarding new topics. As of September 1, 2021, Texas Cities cannot contract with certain companies who boycott energy companies or firearms. Companies contracting with cities, must sign a written verification that they do not, and will not boycott energy companies during the term of the contract. Likewise, a similar bill was passed regarding companies boycotting or discriminating against a firearm entity or firearm trade association. Under S.B. 13, Cities are prohibited from entering into a contract with a value of $100,000 or more with a company which has more than 10 full-time employees unless the company signs a written verification that the company does not boycott energy companies and will not do so during the term of the contract.
Under S.B. 19, Cities are similarly prohibited from contracting with a company with 10 or more employees where the contract has a value of $100,000 or more unless the contract contains a verification that the company does not “have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association”; and that it will not do so during the term of the contract. There is an exception carved out when a city contracts with a sole-source provider, or if the city doesn’t receive any bids from a company which is able to provide the written verification. Those few exceptions aside, the law has really expanded as far as when a company has the right to voice its stance through boycott.
Going forward, any company who does not sign a statement saying that they do not, and will not boycott Israel, firearms, or energy companies is essentially out of luck when it comes to government contracts.
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 commercial and business litigation practice can be found here.