Vorys on Labor : Labor Relations Lawyer & Attorney: Vorys, Sater, Seymour and Pease Law Firm: National Labor Relations

Last week, Governor Kasich (R) signed Ohio's biennial budget bill.  Among other items contained in the bill were changes to the state's prevailing wage law. 

At the outset of the legislative process, the Ohio House of Representatives proposed substantial changes to the prevailing wage law.  Those were summarized on this blog earlier this year.   While significant changes survived to the final bill, they are not as substantial as originally proposed. 

For example, while the monetary threshold at which prevailing wage applies is increased, it increases far less than the House's version, and then only incrementally.  Thus, the threshold for new construction rises to $125,000 on the effective date of the statute, then to $200,000 one year after the effective date, before reaching $250,000 two years after the effective date.  When first introduced, H.B. 153 called for a $5 million threshold for new construction of public improvements.

Another key area where the bill changed relates to "public/private partnership" projects.  These projects usually involve a private entity building a project of some type, but with the assistance of public funds, typically from government economic development programs.  As proposed, H.B. 153 not only deleted prevailing wage requirements applicable to certain Ohio economic development programs, but it also added language that would have likely excluded many projects supported by these programs from the law's definition of "public improvement."  The final version maintains language that exempts certain economic development programs from the prevailing wage requirement, but does not include the changed definition of public improvement.

The bill Governor Kasich signed last week also, among other things:

• Carves out projects relating to streets, roads, sewers, and the like, and makes them subject to a lower monetary threshold ($78,258, adjusted biennially by the Director of the Department of Commerce) than other public improvements;
• Deletes the requirement for prevailing wage on public improvements undertaken by, or under contract for, a port authority;
• Provides that prevailing wage need not be paid on any portion of a public improvement undertaken by a contractor that donates labor and materials for the construction of that portion of the public improvement;
• Limits liability in certain instances when a contractor exceeds the permitted apprentice-to-skilled worker ratio contained in a prevailing wage determination;
• Requires that, for purposes of establishing the prevailing wage rate, unions must file with the Department of Commerce the "relevant portions" of any union contract;
• Limits the liability of a contractor for the unpaid wages owed by its subcontractor, provided that the contractor made a good faith effort to ensure that its subcontractor paid prevailing wages; and
• Changes the enforcement provisions of the law by, for example, narrowing who may file a complaint and extending the period of time the Department of Commerce has to investigate the complaint.

For the labor professional, the changes to Ohio prevailing wage law will require close examination.  Particularly for those involved in public/private partnership efforts, the law contains material changes that may impact the cost of the project and the assessment of whether to accept offers of certain government incentives.  Contractors, developers, and other interested parties should consult with their counsel on how the new law could impact projects in which they are involved.

• Email This
• Print

By Michael Griffaton

As readers of this blog know, in 770 West Broad AGA v. Zurz, 2011-Ohio-832, ¶ 25 (2011), the Tenth District Court of Appeals “decline[d] ... to address [770 West Broad’s] additional arguments regarding the constitutionality of Ohio’s prevailing wage statutes....”  770 West Broad appealed to the Ohio Supreme Court and asked the Court to determine whether the Prevailing Wage Law is constitutional and, even it is, whether that law applies to an office building that was renovated with private money. 

In a 5-2 decision issued on June 22, 2011, the Ohio Supreme Court declined to hear the appeal involving the constitutionality of the Prevailing Wage Law, and dismissed the appeal “as not involving any substantial constitutional question.” Justices Stratton and Lanzinger dissented.

• Email This
• Print

Ohio's biennial budget bill, Substitute H.B. 153, continues along the legislative path.  It passed the House and is currently pending before the Senate Finance Committee.  As readers of this blog know, the bill proposes some substantial changes to Ohio's prevailing wage law.

Before passing the House, legislators changed a few of the prevailing wage provisions in the bill.  Specifically, legislators:

• reduced the proposed $5 million threshold for certain projects to $3.5 million;
• removed language that would have prohibited a state institution of higher education from requiring prevailing wage on a construction project; and
• added a provision exempting certain projects undertaken by port authorities in Ohio from prevailing wage requirements.

The provisions regarding public/private partnership development projects remained unchanged after the final vote in the House. The same is true for the provisions that alter the enforcement mechanism for prevailing wage complaints.

Currently, as H.B. 153 awaits action by the Senate Finance Committee, the prevailing wage portions of the legislation are the same as they were in the House.  It is possible, however, that the prevailing wage law portions of the bill will be addressed in the days ahead.

The state's fiscal year begins on July 1.  Thus, labor professionals should know this month whether Ohio law on prevailing wage requirements will be relaxed, and if so, what form those changes may take.

• Email This
• Print

By Michael Griffaton

As a result of an appeal filed in Zurz v. 770 West Broad AGA LLC, 2011-Ohio-832, the Ohio Supreme Court may soon have the opportunity to determine whether Ohio’s Prevailing Wage Law is an unconstitutional delegation of the General Assembly’s legislative authority. 

The case dates back to 2008, when the Department of Administrative Services leased an office building from the company 770 West Broad for use by the Department of Rehabilitation and Correction (DRC). The lease required 770 West Broad to make improvements to the building with its own money before the Department would occupy it. No public funds were used in making these improvements, and prevailing wage was not paid on the project.  The Department of Commerce then sued 770 West Broad for failing to pay the prevailing wage. 

The trial court, relying exclusively on the Supreme Court’s decision in Northwestern Ohio Bldg & Constr. Trades Council v. Ottawa County Improvement Corp., 2009-Ohio-2957, found that prevailing wage did not apply because no public funds were spent on the project. The 10^th District Court of Appeals reversed the trial court and found that prevailing wage did apply for two reasons. First, the trial court incorrectly concluded that Northwestern “broadly holds that a public improvement is not subject to prevailing wage unless public funds are spent on construction.” Second, the construction at issue was a “public improvement” as defined in the Prevailing Wage Law and prior Supreme Court precedent because the project was constructed “pursuant to a contract with a public authority (the lease) and the project was “constructed for a public authority” because the DRC “had a possessory interest in the renovated premises under the lease.” Neither the trial court nor the Court of Appeals addressed the constitutional argument. 

In its appeal to the Supreme Court, 770 West Broad argues that the General Assembly is prohibited from delegating its legislative power to others. Despite this, 770 West Broad contends, the Prevailing Wage Law delegates to unions the authority to set the wage rates for public construction projects. The Supreme Court has yet to decide whether it will accept jurisdiction and hear the appeal. If it does, the Court will have the opportunity to strike down the Prevailing Wage Law, as the high courts in Arizona, Illinois, Wisconsin, and Oklahoma have done, on the basis that it represents an unlawful delegation of legislative power. 

• Email This
• Print

Recently, Ohio's biennial "budget bill" was introduced.  Among many other provisions, Substitute House Bill 153, the technical name given to the budget bill, contains some significant changes to the state's prevailing wage law.  Some of the changes to the prevailing wage law that are proposed in the bill are (for ease of reference, line numbers in the bill where these changes are found are noted parenthetically):

• Increasing the "total overall project cost" threshold to $5 million, adjusted biennially for inflation (62897-62913).
• Setting a separate, and substantially lower, cost threshold for public improvement projects related to roads, streets, and the like (62914-62932).
• Providing that some public improvements that are neither constructed by a public authority or for the benefit of a public authority do not trigger prevailing wage requirements, even if the improvement receives certain funding from a public authority (62953-62957).
• Excluding public improvements undertaken by a state institution of higher education from the obligation to pay prevailing wage (63091-63093).
• Altering the enforcement mechanism of the statute (63205-63243).

In addition to these changes, the bill also deletes a provision requiring payment of prevailing wage on projects receiving certain economic development incentives (11108-11128).

For the labor professional, House Bill 153 is yet another public policy development to track as it makes its way through the legislative process.  If the bill passes in its present form, the number of projects to which the prevailing wage might apply will decline.  Indeed, the bill seems particularly focused on excluding from prevailing wage exposure "public/private partnership" projects that are often seen in the economic development arena.

• Email This
• Print

By Nelson Cary and Angela Rapp

On February 24, 2011, the Ohio School Facilities Commission (OSFC) voted to no longer require union-scale wages on job sites in the hopes of saving money on school construction.  The OSFC's action last Thursday returns it to a pre-Strickland administration era when the rules did not allow local districts to require prevailing wages or project labor agreements.

After former Governor Strickland took office in January 2007, the OSFC adopted Resolutions 07-16 and 07-98, which set forth Model Responsible Bidder Requirements and granted school districts authority to determine additional standards.  With the change in governors, the OSFC has reverted back to the policies it held for many years under Republican governors by adopting Resolution 11-16, which rescinded Resolutions 07-16 and 07-98.  The OSFC views Resolution 11-16 as one to encourage free and open competition for all qualified firms to bid.

Resolution 11-16 (pdf) effectively requires the rejection of bids that include prevailing wage requirements or contain provisions commonly found in project labor agreements.  It does so by outlining certain bidding conditions that can no longer be considered.  Resolution 11-16 applies to all contracts that require OSFC approval that have not been advertised for bid as of February 24, 2011.  For any agreements previously approved under Resolution 07-98, OSFC retains discretion to review their terms and determine the applicability of OSFC's new policies.

The OSFC also voted for Richard Hickman, Jr., to fill the Executive Director vacancy, a position he held four years ago. Hickman replaces former Executive Director Richard Murray, who was alleged to have favored (pdf) union contractors over non-union contractors by helping them secure school construction contracts.

• Email This
• Print