RBS Attorneys Score Two Major Victories for Ohio Employers and Taxpayers before the Supreme Court of Ohio
By Nick A. Nykulak
On June 17 and June 30, the Supreme Court of Ohio rendered two major decisions limiting the reach of Ohio’s antiquated prevailing wage law. These decisions, secured by RBS attorneys, will benefit Ohio’s ailing economy, employers and taxpayers.
Ohio’s prevailing wage law requires employers working on public improvement projects to pay their employees the equivalent of union scale wages and fringe benefits, which the State arbitrarily labels as the “prevailing wage.”
This law, which has been in place in Ohio since 1931, is outdated and should be repealed. 86% of all construction industry employers doing work in the State of Ohio do not pay union scale wages or fringe benefits; however, Ohio taxpayers are required to foot the bill for the increased costs of construction this law imposes to benefit a minority of construction workers.
In Sheetmetal Workers Local Union 33 v. Gene’s Refrigeration, a case funded by Associated Builders and Contractors (ABC), a construction industry labor union brought suit against Gene’s Refrigeration, an ABC member, arguing that employees of the contractor who were fabricating duct work in an offsite sheet metal shop for a public project must be paid construction industry prevailing wages for the work performed. RBS Attorneys successfully argued that the State’s prevailing wage laws should be limited to work directly performed on the site of the public improvement project. The Supreme Court of Ohio agreed and rendered a 6-1 decision in favor of Gene’s Refrigeration, holding that Ohio’s prevailing wage law did not apply to offsite workers supplying any “materials” to a public improvement project.
If the labor union would have prevailed in this case, all “materials” used in or in connection with a public project in Ohio (including, but not limited to, doors, cabinets, windows, HVAC equipment and duct work) would have been subject to prevailing wage law, including the payment of construction industry prevailing wages, thereby drastically increasing construction costs to Ohio’s taxpayers.
Moreover, an adverse ruling on this issue from the Supreme Court of Ohio would likely have driven fabrication shops and manufacturers of materials to be installed on public projects out of Ohio to adjoining states to avoid the reach of Ohio’s prevailing wage law. Such an adverse ruling would have spurred more job losses for Ohio workers and accelerated the erosion of Ohio’s manufacturing tax base, at a time when Ohio’s economy is at risk.
In the second decision rendered by the Supreme Court of Ohio two weeks later, RBS Attorneys, again representing ABC and another one of its member contractors, successfully argued that the State’s prevailing wage law only applies to public improvement projects that are constructed by and for a public entity. In Northwestern Ohio Building Trades Council v. Fellhauer Mechanical, a consortium of labor unions brought suit against a contractor who obtained public loans and grants to purchase a building and equipment and to renovate the building to expand its business operations and create jobs in Ottawa County. The labor unions filed suit arguing that the public money loaned to Fellhauer Mechanical triggered the application of prevailing wage law to any renovation that would occur to the building. The labor unions’ position, in line with a recent position taken by the Governor’s Office, sought to apply Ohio’s prevailing wage law to any private construction project that received any loans, grants or in-kind support from a public entity. The Supreme Court of Ohio, in a 7-0 decision, rejected the argument that prevailing wage laws applied to private construction projects and held that prevailing wage laws only apply when there is a construction of a public improvement that is by or for a public entity.
Given the state of Ohio’s economy, and reluctance on the part of banks to fully fund new construction projects, public entities have become a very important additional source of funding for private developers. However, the Governor’s mandate, requiring the payment of prevailing wage when a private developer receives any loan, grant or in-kind support from the State or local government, resulted in hundred of millions of dollars of new construction in the State being put on hold or abandoned because mandating that the employees working on the project receive union scale wages has proven to be cost prohibitive. With these obstacles cleared by the Supreme Court of Ohio, private construction projects that have been abandoned or stalled by the Governor’s mandate may now proceed. These are vital wins needed to jump-start Ohio’s economy and create jobs for Ohio workers.
If you have any questions regarding the effect of either of these decisions rendered by the Supreme Court of Ohio, feel free to contact Alan Ross or Nick Nykulak at RBS.