The Ohio Supreme Court today issued a knockout punch to public authorities seeking to enforce local-hiring requirements on public-construction projects.
In 2003, the Cleveland City Council enacted what is generally known as the “Fannie Lewis Law.” The much-disputed law required public-construction contracts valued at $100,000 or more to include a provision mandating that Cleveland residents perform 20 percent of total construction labor hours on the contract. Contractors awarded projects but who failed to comply would be subject to monetary penalties and, potentially, contract termination and disqualification from future public work.
In 2016, the Ohio General Assembly enacted Ohio Revised Code § 9.49 (later renumbered O.R.C. § 9.75) prohibiting public authorities from requiring contractors to employ a certain percentage of regional or local residents, or providing bid incentives or preferences to contractors who do.
The City of Cleveland challenged the state law, arguing that it violated home-rule authority (essentially, the city’s right to govern local matters). The Cuyahoga County Court of Common Pleas sided with the City of Cleveland, and Ohio’s 8th District Court of Appeals (covering Cuyahoga County) affirmed the Common Pleas Court’s injunction against state law – this set up the fight in the Ohio Supreme Court.
This dispute over the Fannie Lewis Law and local-hiring requirements pitted Article XVIII, Section 3 of the Ohio Constitution (the “Home Rule Amendment”) against Article II, Section 34 of the Ohio Constitution (allowing the Ohio General Assembly to pass laws for employees’ comfort and general welfare). The City of Cleveland, among other local governments, take the position that the Fannie Lewis Law (and the like) do not provide for residency requirements but rather address the terms on which local governments may contract for public improvements in the exercise of self-governments and how local governments spend their money. Proponents argue that the Home Rule Amendment authorizes local governments—not the State—to dictate such contractual terms. The Ohio General Assembly, on the other hand, recognizes the “inalienable and fundamental right of an individual to choose where to live.” The State argues that “it is a matter of statewide concern to generally allow the employees working on Ohio’s public improvement projects to choose where to live, and that it is necessary in order to provide for the comfort, health, safety, and general welfare of those employees to generally prohibit public authorities from requiring contractors, as a condition of accepting contracts for public improvement projects, to employ a certain number or percentage of individuals who reside in any specific area of the state.”
Ultimately, the Ohio Supreme Court held the broad constitutional authority granted the State to legislate for the general welfare trumps home-rule authority. The Court wrote, “Because every resident of a political subdivision is affected by the residency restrictions imposed by another political subdivision, the statute [R.C. § 9.75] provides for the comfort and general welfare of all Ohio construction employees and therefore supersedes conflicting local ordinances.”
Various justices joined in concurring and dissenting opinions raising concern over the breadth of the Court’s majority opinion and its reasoning. Unless the General Assembly changes the law or a future Ohio Supreme Court opinion reverses course, however, local-hiring requirements have seen their end in public contracts throughout Ohio.