Peter W. Hahn | Benesch | September 25, 2019
In a close 4 to 3 decision, the Ohio Supreme Court has affirmed the constitutionality of a state statute enacted in 2016 prohibiting public authorities, including municipalities and school districts, from requiring a certain percentage of construction workers on local public construction projects to be residents of the public authority.
The state law, Revised Code Section 9.75, was enacted in response to a City of Cleveland ordinance, called the Fannie Lewis Law, which required public-construction contracts in excess of $100,000 to include a provision mandating that city residents perform 20 percent of the construction work. That ordinance also imposed penalties for a contractor’s failure to comply with this contractual requirement, including a fine and the possibility of disqualification from future bids.
In response to this ordinance, the General Assembly enacted a statute that prohibits public authorities from requiring contractors to employ a certain number or percentage of local resident laborers. The statute also prohibits public authorities from awarding bonuses or preferences to contractors as an incentive to employ local laborers. The City of Cleveland filed a lawsuit to have the statute determined to be an unconstitutional invasion of the City’s “home rule” power. Both the trial court and the appellate court in Cuyahoga County agreed with the City and found the statute unconstitutional.
The Ohio Supreme Court reversed the lower courts, relying on an Ohio constitutional provision that gives the General Assembly power to enact laws that advance employees’ comfort and general welfare and provide for the assistance, support, well-being, and prosperity of Ohio’s working people. This power, according to the Supreme Court, trumps another provision in the Ohio Constitution that grants municipalities authority to exercise all powers of local self-government (the so-called “home rule” power). The Supreme Court further concluded that “[p]rotectionist city-residency regulations [like Cleveland’s] affect all Ohio construction workers, because every resident of a political subdivision is disfavored by the residency restrictions imposed by another political subdivision. … By 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 trade.”
As a result of this decision, any local ordinance and any public construction contract provision requiring a certain percentage or number of construction workers employed for a public construction project, or offering an incentive to contractors to employ only local workers, are void and unenforceable. Public authorities can no longer dictate where workers on local projects must live, nor can they provide incentives to contractors to employ only local labor.
The case is Cleveland vs. State, Slip Opinion No. 2019-Ohio-3820.