Please see the article from our attorney, Pat DeVine, which provides further details and clarification on the recent Supreme Court ruling regarding local hiring preferences. If you have any questions, please let us know.
Supreme Court Rules State Law Protects All Construction Trades Employees From Ordinances Favoring Local Residents
On September 24, 2019, the Supreme Court of Ohio held that Ohio’s residency choice law is a valid and constitutional exercise of the General Assembly’s authority to pass laws protecting workers’ freedom to choose where to live. The law in question, Ohio Revised Code §9.75, prohibits cities and other governmental entities from requiring contractors to employ a certain number or percentage of persons who reside in that city or political subdivision.
The genesis for R.C. 9.75 was the increasing number of cities in Ohio imposing requirements on contractors to hire local residents to meet workforce quotas for public construction projects. The City of Cleveland, for example, has the Fannie M. Lewis Cleveland Resident Employment Law that established a twenty-percent residency quota for private employees on public projects. Cincinnati, Akron, and Columbus have similar requirements, but at larger percentages. Construction workers seeking to work in such cities either had to live in that city or else give up the ability to compete on a level field for employment. As each project is completed by a contractor, the location of the next job is constantly changing. With the patchwork of residency quotas increasing across the state, compliance is burdensome and the employment status for the contractors' employees becomes dependent on a project's location.
To address the situation, the Ohio Contractors Association initially filed an action in federal court in 2014. The OCA sought to enjoin Akron's Local Hire and Workforce Participation Policy on the basis the hiring policy violated the equal protection rights of the members and their employees. When the federal judge declined to issue a preliminary injunction in the case, and given the reaction by Akron officials to the litigation (statements that the City would create its own construction company to render it unnecessary to contract with OCA members), it became obvious a different approach was needed.
The Ohio Contractors Association and others went to work to ask the Ohio legislature to address the threat to the choice of residence of its members' workforce.
In response, on May 11, 2016, the Ohio General Assembly passed H.B. 180 creating R.C. 9.75 to prohibit a public authority from requiring a contractor to employ a certain percentage of individuals from the geographic area of the public authority. The legislation expressly recognized "that it is a matter of statewide concern to generally allow employees working on Ohio's public improvement projects to choose where to live.” The General Assembly declared in the legislation its recognition of Article II, Section 34 of the Ohio Constitution which empowers the General Assembly to enact laws "providing for the comfort, health, safety, and general welfare of all employees; and no other provision of the constitution shall impair or limit this power.”
The Governor signed the bill into law and it was scheduled to take effect on August 31, 2016. The City of Cleveland filed a lawsuit on August 23, 2016, in the Cuyahoga County Court of Common Pleas to stop the law. Cleveland argued that R.C. 9.75 was improperly enacted under Article II, Section 34, Ohio Constitution, and that the statute violates the city's Home Rule authority. On January 31, 2017, the Court of Common Pleas agreed with the City's arguments and issued an injunction permanently enjoining the enforcement of the statute. The Ohio Attorney General's Office, which was defending the legality of the statute, appealed to the Cuyahoga County Court of Appeals. The Ohio Contractors Association joined in the defense of the statute as an amicus party. The Association's arguments to both the Court of Appeals and ultimately to the Ohio Supreme Court focused on the practical impacts to the industry and the disparate treatment imposed on construction workers if the statute was not upheld. When the Court of Appeals affirmed the trial court, it became necessary to take the fight to the Supreme Court.
The case was argued to the Supreme Court on March 6, 2019. The Court's 4-3 split decision was issued September 24, 2019. Justice Kennedy, writing for the majority opinion upholding the law, said that R.C. 9.75 “protects all employees engaged in the construction trades from public improvement contracts that impose conditions on employment that favor the public authority’s own residents to the detriment of other workers in the state.”
Significantly, Justice Kennedy noted in her opinion that “[b]y providing an equal opportunity for Ohioans to compete for work on public improvement projects both inside and outside of the political subdivisions in which they reside, R.C. 9.75 provides for the comfort and general welfare of all citizens working in the construction trades.”
The decision holds that the City of Cleveland’s Fannie Lewis Law is not enforceable against contractors on the City’s public improvement projects. The Supreme Court remanded the matter back to the trial court to dissolve the injunction and to enter judgment in favor of the State of Ohio. City of Cleveland officials have indicated they will ask the Supreme Court to reconsider its decision. If the Supreme Court declines to change its decision, R.C. 9.75 will be enforceable across the state of Ohio, and public projects to be bid or not yet under contract will not be subject to a local hire requirement. Projects currently underway are probably not affected, except for enforcement of penalties or sanctions for noncompliance with a local residency requirement.
The case is reported as City of Cleveland v. State of Ohio, 2019-Ohio-3820.
Patrick A. Devine, Sr. Counsel, Ice Miller, (614) 462-2238; Patrick.Devine@icemiller.com