Relating to compensation and employment condition standards by municipal charter or collective bargaining agreement and to impasse resolution in collective bargaining with certain political subdivisions.
ModeratePlan for compliance
Low Cost
Effective:2025-09-01
Enforcing Agencies
Texas District Courts (Judicial Review of Arbitration Awards)
01
Compliance Analysis
Key implementation requirements and action items for compliance with this legislation
Implementation Timeline
Effective Date: September 1, 2025.
Compliance Deadline: September 1, 2025. The law explicitly applies to collective bargaining negotiations that are in progress on this date.
Agency Rulemaking: None. The statute is self-executing, with oversight provided by Arbitration Boards and District Courts rather than a regulatory agency.
Immediate Action Plan
Immediate: Determine if your municipality falls within the 950k–1.05m population bracket based on the most recent federal decennial census.
By July 1, 2025: If currently negotiating or preparing to negotiate in an affected jurisdiction, finalize your "best and final" financial offers, as these will likely become your position in binding arbitration.
By August 1, 2025: Review all existing municipal charters and CBAs statewide. If you rely on a custom dispute resolution clause, file a memo confirming its validity under the new Section 174.165.
Ongoing: Establish a "Day 0" protocol for receiving arbitration requests to ensure the 5-day arbitrator selection deadline is never missed.
Operational Changes Required
Contracts
Collective Bargaining Agreements (CBAs):
In Affected Jurisdictions (Pop. 950k–1.05m): You must prepare for binding arbitration. The "legislative out" (where a City Council can simply reject a negotiated contract) is eliminated.
Statewide: Review existing CBAs and Municipal Charters. If your current agreement contains a specific impasse resolution procedure (e.g., mediation or non-binding fact-finding), Section 174.165 now explicitly validates that procedure, shielding it from legal challenges claiming it conflicts with state standards.
Hiring/Training
Negotiation Team Training: Legal counsel and HR directors involved in bargaining must be trained on the strict 45-day waiver rule. Failure to submit a specific issue to the Arbitration Board within 45 days of the arbitration request results in the automatic waiver of that issue.
Arbitrator Selection: Maintain a vetted list of qualified arbitrators. You have only 5 days after a request for arbitration to select your arbitrator.
Reporting & Record-Keeping
Impasse Documentation: You must formally document the date impasse is reached to establish the legal trigger for arbitration.
Notice of Dispute: The initiating party must serve a "Written Notice of Dispute." This document defines the scope of the arbitration. Issues not listed in this notice cannot be arbitrated.
Evidentiary Record: Because arbitration awards are subject to District Court review, you must maintain a judicial-grade record of all arbitration proceedings, including exhibits and testimony regarding the municipality's "ability to pay."
Fees & Costs
Arbitration Expenses: The municipality and the association must split the cost of the neutral third arbitrator and the court reporter.
Budgetary Impact: In affected municipalities, finance departments must model budget scenarios assuming mandatory wage increases, as the binding award may exceed the initial budget proposal.
Strategic Ambiguities & Considerations
"Revenues Available" (Sec. 174.185): The Arbitration Board must consider "revenues available to the municipality." The statute does not define if this means "current cash on hand" or "taxing capacity." Expect unions to argue that "available" includes the ability to raise property taxes, while municipalities will argue it is limited to the current approved budget.
Population Bracket Volatility: The mandate applies to the 950,000–1,050,000 population bracket. As cities like Austin grow or Fort Worth expands, they may drift in or out of this bracket based on Census data, creating a "regulatory flicker" where the requirement to arbitrate could vanish or appear unexpectedly.
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In March 2023, the Texas Supreme Court struck down a city charter amendment passed by Houston voters, which set a floor for fire fighter pay, ruling that the city charter was inconsistent with Chapter 174.
The Texas Supreme Court acknowledged in the opinion that Chapter 174's standards "may prove infeasible."
This Texas Supreme Court decision has called into question provisions that voters, cities, and fire fighters have agreed on to address that infeasibility, which is harming at least seven firefighter groups, including Austin, Corpus Christi, El Paso, Grove, Port Neches, San Antonio, and Texarkana. These groups are simply trying to restore the bargaining impasse tools they had before the Texas Supreme Court ruling.
Chapter 174 of the Texas Local Government Code allows collective bargaining for police and fire fighters only in localities where voters choose to allow it. In some of those localities, like Austin, voters have amended city charters to declare how bargaining impasses should be resolved. In others, the employers and employee associations have included provisions in their collective bargaining agreements (CBAs) about resolution of impasses.
This decision has created uncertainty about the viability of the city charter amendments and CBA provisions structuring dispute resolution procedures to meet particular local needs.
S.B. 777 would end that uncertainty. It applies only to localities that have adopted Chapter 174 and that have enacted city charter provisions or agreed on CBA provisions governing resolution of bargaining impasses.
S.B. 777 makes clear that those local measures are effective even if they have provisions that add to or change the default Chapter 174 procedures, so that voters have freedom to structure those processes to meet their local needs.
As proposed, S.B. 777 amends current law relating to compensation and employment condition standards by municipal charter or collective bargaining agreement and to impasse resolution in collective bargaining with certain political subdivisions.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 174.005, Local Government Code, to create an exception under Chapter 174 (Fire and Police Employee Relations), Local Government Code.
SECTION 2. Amends Section 174.021, Local Government Code, as follows:
Sec. 174.021. New heading: PREVAILING WAGE AND WORKING CONDITIONS REQUIRED; EXCEPTION. (a) Creates this subsection from existing text and creates an exception under Subsection (b).
(b) Provides that a political subdivision that employs fire fighters is considered to be in compliance with the requirements of Subsection (a) (relating to required compensation and employment conditions for firefighters and police officers) if the political subdivision provides those fire fighters with compensation and other conditions of employment that comply with the standards for compensation and other conditions of employment contained in:
(1) except as provided by Subdivision (2), if the political subdivision is a municipality, the municipality's charter; or
(2) if a collective bargaining agreement under this chapter is in effect, that agreement.
SECTION 3. Amends the heading to Subchapter E, Chapter 174, Local Government Code, to read as follows:
SUBCHAPTER E. MEDIATION; IMPASSE RESOLUTION
SECTION 4. Amends Section 174.153(a), Local Government Code, to create an exception under Sections 174.1535 (Mandatory Arbitration) and 174.165, rather than under Section 174.1535.
SECTION 5. Amends Section 174.1535(b), Local Government Code, to create an exception under Section 174.165.
SECTION 6. Amends Section 174.156(b), Local Government Code, as follows:
(b) Requires an arbitration board, in settling disputes relating to compensation, hours, and other conditions of employment, to consider certain factors, including, to the extent applicable, a municipality's charter or a collective bargaining agreement. Makes a nonsubstantive change.
SECTION 7. Amends Section 174.158, Local Government Code, by adding Subsection (e) to require that an award rendered under Section 174.158 (Arbitration Award) be made effective for the period for which the public employer and the association are bargaining and to authorize the period to exceed one year.
SECTION 8. Amends Section 174.163, Local Government Code, as follows:
Sec. 174.163. New heading: COMPULSORY ARBITRATION NOT REQUIRED; EXCEPTIONS. Creates exceptions under Sections 174.1535 and 174.165.
SECTION 9. Amends Subchapter E, Chapter 174, Local Government Code, by adding Section 174.165, as follows:
Sec. 174.165. OTHER IMPASSE RESOLUTION FOR FIRE FIGHTERS UNDER MUNICIPAL CHARTER OR COLLECTIVE BARGAINING AGREEMENT. (a) Provides that this section applies only to:
(1) except as provided by Subdivision (2), if a municipality has a charter that provides for the resolution of an impasse in a collective bargaining process governed by this chapter involving a public employer of the municipality and an association that is a bargaining agent for employees of the public employer, that public employer and bargaining agent; or
(2) if a collective bargaining agreement under this chapter is in effect and provides for the resolution of an impasse in a collective bargaining process governed by this chapter involving a public employer of a political subdivision and an association that is the bargaining agent for the fire fighters of the public employer, that public employer and bargaining agent.
(b) Requires a public employer and an association that is a bargaining agent for fire fighters to submit to the impasse resolution mechanism contained in the charter or agreement described by Subsection (a), as applicable, if the parties reach an impasse in collective bargaining or are unable to settle after the 61st day after the date the appropriate lawmaking body fails to approve a contract reached through collective bargaining.
(c) Provides that a provision of this subchapter relating to arbitration does not apply to the impasse resolution mechanism described by Subsection (b), unless the charter or agreement described by Subsection (a), as applicable, specifically provides otherwise. Provides that, to the extent of any conflict, the charter or agreement, as applicable, prevails over any provision of this subchapter.
SECTION 10. Makes application of this Act prospective.
SECTION 11. Effective date: upon passage or September 1, 2025.
Honorable Paul Bettencourt, Chair, Senate Committee on Local Government
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB777 by Hughes (Relating to compensation and employment condition standards by municipal charter or collective bargaining agreement and to impasse resolution in collective bargaining with certain political subdivisions.), As Introduced
No fiscal implication to the State is anticipated.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies:
LBB Staff:
JMc, SZ, BC, CWi
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SB777 mandates binding interest arbitration for fire fighter labor disputes in municipalities with populations between 950,000 and 1,050,000 (currently affecting the City of Austin), effectively removing City Council discretion to reject union contracts upon impasse. Additionally, the bill validates existing impasse resolution procedures found in municipal charters and agreements statewide, protecting them from preemption challenges under general state law. Implementation Timeline Effective Date: September 1, 2025.
Q
Who authored SB777?
SB777 was authored by Texas Senator Bryan Hughes during the Regular Session.
Q
When was SB777 signed into law?
SB777 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce SB777?
SB777 is enforced by Texas District Courts (Judicial Review of Arbitration Awards).
Q
How urgent is compliance with SB777?
The compliance urgency for SB777 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of SB777?
The cost impact of SB777 is estimated as "low". This may vary based on industry and implementation requirements.
Q
What topics does SB777 address?
SB777 addresses topics including city government, city government--employees/officers, county government, county government--employees/officers and fire fighters & police.
Legislative data provided by LegiScanLast updated: November 25, 2025
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