BREAKING NEWS IN CONSTRUCTION INDUSTRY: Residency Quotas for City Contractors

RESIDENCY QUOTAS FOR CITY CONTRACTORS

OHIO SUPREME COURT TO HEAR ARGUMENTS IN MARCH.

THE CASE: On March 6, 2019, the Supreme Court of Ohio is set to hear oral arguments on City of Cleveland v. State of Ohio, Supreme Court of Ohio Case No. 2018-0097. The main question to be answered is whether a Cleveland Ordinance requiring residency quotas on public construction contracts trumps Ohio law protecting construction workers from residency requirements.

In 2003, the City of Cleveland passed the “Fannie Lewis Law.” The Fannie Lewis Law is an ordinance requiring that 20% of all hours worked by employees from the state of Ohio on a $100,000+ public construction project in the City must be completed by residents of the City of Cleveland. If a contractor fails to meet this quota, they are charged a fine. The City passed this law because, after much study and review, it believed its residences were not receiving adequate opportunities arising from these types of construction projects. Other cities throughout the state have passed similar requirements, with some requiring residency quotas as high as 50%. Notably, however, Ohio Revised Code Section 9.75, which was passed in May of 2016, bars public authorities from requiring workers on public projects to reside in the geographic area of the project. The City of Cleveland sued the State of Ohio over this Revised Code Section one week before it was to take effect. The City argues that the Revised Code Section violates the home-rule, a constitutional provision giving certain cities the ability to govern themselves. The trial court found for the City, as did the 8^th District Court of Appeals. The Supreme Court certified the appeal and is getting ready to hear arguments.

STATE OF OHIO’S POSITION: The State of Ohio argues that barring these geographic requirements, especially for construction contracts, protects workers because it gives them the comfort and choice of where to reside without giving up employment opportunities. The State takes the position that R.C. Section 9.75 improves work quality and safety because the most qualified person can perform the job – not just the person with the right address. The house bill for R.C. 9.75 itself notes that, per the Ohio constitution, individuals have an inalienable and fundamental right to choose where to live. The State notes that this law is well within the State’s discretion to pass laws for the comfort, safety, and welfare of employees. Ultimately, the State believes the Supreme Court should overturn the lower courts and find: 1) that R.C. 9.75 is an appropriate exercise of the State’s employee-welfare power, which trumps the City’s home-rule power; or, in the alternative that 2) R.C. 9.75 satisfies the home-rule and trumps the City’s ordinance because it is a general law, while the City’s ordinance is an exercise of police power.

CITY OF CLEVELAND. The City of Cleveland argues that its authority to make public improvements is included within the powers of local self-government guaranteed by the constitution and R.C. 9.75 directly infringes on that right. The City also argues that construction employees already have the choice to live where they please, so no fundamental right is being infringed by enforcing the residency quotas. Instead, the City argues that the law provides much needed jobs to City residents who are trained and willing to work, but who are otherwise not being offered employment on these types of projects. The City has also provided data that purports to show that the ordinance has had a positive impact on the City’s work force. The City takes the stance that R.C. 9.75 is not a general law of the State and, as such, it infringes on the City’s home-rule power. The City ultimately argues that the Supreme Court should affirm the lower courts because R.C. 9.75 does not arise pursuant to the State’s employee-welfare powers and does not provide for the comfort, health, safety and general welfare of all employees engaged in construction work.

Stay tuned.

John Swansinger is a partner in Buckingham’s real estate and construction practice group. He works with contractors, developers and construction owners on legal issues including construction contracts, commercial agreements, construction litigation, breach of contract and more.

Tara J. Rose is an associate Real Estate & Construction practice group. She practices in the Cleveland office of Buckingham Doolittle & Burroughs, LLC. Tara assists clients ranging from small to mid-size, middle market business owners and executives with land use, zoning, construction contract disputes, eminent domain, real property tax and real estate transaction matters. She can be reached at [email protected] or 216.615.7318.

About Buckingham, Doolittle & Burroughs:

Buckingham is a corporate law firm that counsels Middle Market executives and business leaders all over Ohio and beyond. With offices in Canton, Akron, and Cleveland, Buckingham offers clients Business Law Reimagined through sophisticated and practical legal services. Serving the region for over 100 years with nearly 70 attorneys, Buckingham’s mission is to deliver meaningful experiences through the practice of law, exceed expectations in terms of service, counsel and business sense, and to offer continuous value to the industries, communities and clients they serve. See all of our news and updates by visiting our website.