Update: On September 24, 2019, the Supreme Court of Ohio handed down a merit decision in this case.  Read the analysis here.

Read an analysis of the oral argument here.

On March 6, 2019, the Supreme Court of Ohio will hear oral argument in City of Cleveland v. State of Ohio, 2018-0097. At issue in this case is whether the State has the power under Article II, Section 34 of the Ohio Constitution to prohibit public authorities from requiring contractors who work on public improvement projects to employ a certain percentage of laborers who reside in defined geographic areas.  If the State does not have such power, then the question becomes whether such a prohibition violates home-rule authority.

Case Background

In 2003, the City of Cleveland (“Cleveland”) enacted Cleveland City Ordinances (C.C.O.) Chapter 188, also known as the Fannie Lewis Law. The Fannie Lewis Law mandates that all construction contracts over $100,000 with the city shall require at least 20% of the construction hours to be performed by Cleveland city residents. If a contractor fails to comply with this requirement, a penalty is imposed.  Other Ohio cities such as Cincinnati, Columbus, and Akron have similar laws. In 2014, the Ohio Contractor’s Association  challenged the Akron law on equal protection grounds in federal court, but that court rejected the argument and upheld the law.

In 2016, following the federal court’s ruling, the State enacted what is now R.C. 9.75, which prohibits public authorities from requiring contractors who work on public improvement projects to employ certain percentages of laborers who reside in defined geographic areas. R.C. 9.75 effectively proscribes the mandates of the Fannie Lewis Law. The legislature found this to be a matter of statewide concern, affecting the general welfare of all employees, and the right to live wherever one wishes.

After R.C. 9.75’s enactment, Cleveland filed a complaint challenging the constitutionality of the statute. Cleveland claimed the State improperly invoked Article II, Section 34 of the Ohio Constitution to enact R.C. 9.75 and that the law unconstitutionally infringes upon the city’s home-rule authority. Cuyahoga County Court of Common Pleas Judge Michael J. Russo agreed with the Cleveland and enjoined the State from enforcing the law.

The Appeal

In unanimous decision authored by Judge Sean C. Gallagher, joined by Judges Kathleen Ann Keough and Frank Celebrezze, Jr.,the Eighth District Court of Appeals affirmed the trial court’s ruling. The Eighth District held that Article II, Section 34 of the Ohio Constitution did not give the General Assembly power to enact R.C. 9.75 and that the statute infringed upon the municipal home-rule authority granted in Article XVIII, Section 3. The Eighth District reasoned that R.C. 9.75 was not related to the general welfare of employees, so it was not covered by Article II, Section 34 and was thus subject to home-rule analysis. The Eight District found that R.C. 9.75 did not pass the home-rule test because the Fannie Lewis Law was an exercise of local self- government, not an exercise of police power, and R.C. 9.75 was not a general law.

Votes to Accept the Case

Yes: Chief Justice O’Connor, Justices Kennedy, French, Fischer, DeWine, O’Donnell, and DeGenaro.

Key Statutes and Precedent

Article II, Section 34 of the Ohio Constitution (Employee Welfare Amendment — “Laws may be passed fixing and regulating the hours of labor, establishing a minimum wage, and 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.)

Article XVIII, Section 3 of the Ohio Constitution (Home-Rule Amendment — “Municipalities shall have authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.)

R.C. 9.75 (B)(1) (Residency-Choice Law) (“No public authority shall require a contractor… for the construction of a specific public improvement…to employ as laborers a certain number or percentage of individuals who reside within the defined geographic area or service area of the public authority.”)

C.C.O. Chapter 188 (The Fannie Lewis Law) (“[E]very Construction Contract shall…Require that one (1) or more Residents perform twenty percent (20%) of the total Construction Worker Hours…performed under the Construction Contract.”)

Dies Elec. Co. v. City of Akron, 62 Ohio St.2d 322 (1980) (A City’s authority to contract arises as a power of local self-government under the Home Rule Amendment.)

Rocky River v. State Emp. Relations Bd., 43 Ohio St. 3d 1 (1989) (Upheld a statute that mandated binding arbitration between a city and its safety forces in the event of a collective-bargaining impasse.)

Canton v. State, 2002-Ohio-2005 (Home-Rule authority test: an Ohio statute overrides a local ordinance when (1) a conflict exists, (2) the ordinance is an exercise of police power, not local self-government, and (3) the statute is a general law. General law test: a general law must (1) be a part of a comprehensive enactment, (2) apply uniformly throughout Ohio, (3) do more than just grant or limit municipal power, and (4) prescribe a rule of conduct.)

Lima v. State, 2009-Ohio-2597 (Upheld an Ohio law barring residency requirements for city employees, finding that the law provided for the comfort and general welfare of employees because it allowed “employees more freedom of choice of residency”; no home-rule analysis was needed.)

State’s Argument

Article II, Section 34 of the Ohio Constitution gives the State broad power to regulate employment and to make laws concerning the comfort, safety, and general welfare of its employees. This broad power cannot be limited by any other provision in the Ohio Constitution. Thus, if a statute provides for the general welfare of its employees, it trumps any conflicting local ordinance, and no home rule analysis is needed. The Eighth District’s decision should be reversed because R.C. 9.75 relates to employee welfare and was thus properly enacted pursuant to the State’s Article II, Section 34 powers.

R.C. 9.75 is a residency-choice law similar to the law upheld in Lima. R.C. 9.75 provides for the general welfare of employees because an employee’s comfort and welfare necessarily includes the choice of where to live as held in Lima. Moreover, the statute provides for the general welfare of employees because it gives construction workers the chance to compete for available work hours and helps promote safe working conditions by allowing contractors to hire the most qualified employees.  Because the statute was properly enacted pursuant to Article II, Section 34, which has long been interpreted as being a broad grant of legislative authority to pass employment-related laws, the statute is not subject to home-rule analysis and automatically prevails over the Fannie Lewis Law.

Even if the Court finds that R.C. 9.75 does not relate to the general welfare of employees and is subject to a home-rule analysis, it passes this test. R.C. 9.75 does not infringe on Cleveland’s home-rule authority granted to it by Article XIII, Section 3 of the Ohio Constitution. That amendment grants local authorities the freedom to enact ordinances concerning local self-government and police, sanitary, or other similar regulations. Under Canton’s home rule test, R.C. 9.75 should prevail over the Fannie Lewis Law because the two laws are in conflict, the Fannie Lewis Law is an exercise of police power, and R.C. 9.75 is a general law.

The Fannie Lewis law is an exercise of police power because it goes beyond Cleveland’s internal administrative affairs and not only attempts to improve the economic welfare of Cleveland residents, but also has significant extraterritorial effects and imposes penalties on contractors for noncompliance. Finally, R.C. 9.75 meets the requirements for a general law because it is part of a comprehensive scheme covering public construction and contracting, it serves Ohio’s overriding state interests in protecting construction workers from the disadvantages of residency quotas, and it regulates citizen conduct by permitting employees to freely choose where to live. Therefore, R.C. 9.75 also passes the home-rule authority test and should prevail over the Fannie Lewis Law.

Cleveland’s Argument

The Eighth District’s decision should be affirmed because R.C. 9.75 does not provide for the comfort, health, safety, or general welfare of employees. Therefore, it was not properly enacted pursuant to Article II, Section 34. Additionally, R.C. 9.75 infringes on the home-rule authority granted to local municipalities by Article XVIII, Section 3.

R.C. 9.75 does not provide for the general welfare of employees because it does not concern a direct employer-employee relationship. Instead, R.C. 9.75 concerns “the arms-length relationship between municipalities and contractors in negotiating public contracts.” The State’s emphasis on Lima is misplaced because Lima involved a direct employer-employee relationship and city residency was a direct condition of employment with the city. Furthermore, R.C. 9.75 does not protect employees’ residency freedom because such freedom already exists. The Fannie Lewis Law does not regulate the residence of any construction workers in Ohio, who can live wherever they want. Nor does the city have any control over who contractors hire. As R.C. 9.75 does not provide for the general welfare of employees, it is subject to home-rule analysis.

R.C. 9.75 fails the home-rule test because the Fannie Lewis Law is not an exercise of police power and R.C. 9.75 is not a general law. The Fannie Lewis Law is not an exercise of police power, but rather a proper exercise of local self-government power because it involves the city’s power to contract. Under Dies, a city’s authority to contract arises as a power of local self-government under the Home Rule Amendment. Also, R.C. 9.75 is not a general law because it is not part of statewide approach governing public construction and contracting. Additionally, R.C. 9.75 does not set forth police, sanitary or similar regulations. Lastly, the statute is not a general law because it regulates the city’s authority to contract, not the conduct of citizens generally.

State’s Proposed Proposition of Law No. 1

R.C. 9.75 is a valid exercise of authority under Article II, Section 34, because it provides for the general welfare of employees by protecting them from local preferences. Thus, no home-rule analysis is needed.

State’s Proposed Proposition of Law No. 2

R.C. 9.75 satisfies home rule. Cleveland’s ordinance is an exercise of police power designed to serve general-welfare interests by shifting work to local residents. The challenged law is a general law that counteracts the significant extraterritorial effects residency quotas have on Ohioans living outside the relevant local jurisdiction.

Amici in Support of the State

AIA Ohio (American Institute of Architects Ohio) is a membership organization for professional registered architects that seeks to produce positive legislative and governmental agency rule changes for the architectural profession. AIA Ohio argues the Eighth District erred by narrowly interpreting the Fannie Lewis Law as a job creation tool. Furthermore, the Fannie Lewis Law’s stated purpose of employing local residents is undermined by the law’s exception for out-of-state contractors. If this law were to spread to the design profession, then no architectural firm could design public works except in the arbitrary location where an architect might happen to live.

Ohio Contractor’s Association (OCA), Associated General Contractors of Ohio (AGC), the National Federation of Independent Business (NFIB), and Ohio Chamber of Commerce filed a joint brief in support of the state. The OCA and the AGC are made up of contractors who engage in heavy construction and public improvement projects throughout the state. The freedom of residency is of great importance to the workers employed by OCA and AGC members,  The Ohio Chamber of Commerce works to promote and protect the interests of its numerous business members while building a more favorable Ohio business climate. The NFIB serves the interest of small and independent business owners and is concerned for its members’ ability to bid and work on any public improvement projects and not be excluded because where their employees reside. These amici argue that the Fannie Lewis law is an exercise of police power because it seeks to alleviate the City’s unemployment and poverty problems. They further argue that R.C. 9.75 meets the requirements of a general law.

International Union of Operating Engineers, Local 18 (Local 18) is a labor organization for operating engineers. Local 18 is concerned that if R.C. 9.75 is not upheld, then it will have to consider residency as an element of its referral practices. Local 18 believes this will penalize its members who would otherwise be qualified for work under the hiring hall’s existing policy. Local 18 argues that R.C. 9.75 provides for the general welfare of employees because it permits thousands of operating engineers represented by Local 18 to receive work on public improvement projects based on skill and seniority, not where they live.

Amici in Support of Cleveland

Campaign to Defend Local Solutions, Legal Scholars, and the International Municipal Lawyer’s Association filed a joint brief in support of Cleveland. The Campaign to Defend Local Solutions is a nonpartisan organization dedicated to raising awareness of the spread of state preemption of local laws. The Legal Scholars consist of several law professors who are familiar with the historical background and development of home rule. The International Municipal Lawyer’s Association (IMLA) is a non-profit, nonpartisan professional organization whose mission is to advance the responsible development of municipal law. These Amici largely echo the City’s arguments that R.C. 9.75 does not concern the general welfare of employees and is thus subject to a home-rule analysis which it fails for the same reasons described in the City’s brief. They argue that the Fannie Lewis Law is not a regulation that imposes residency requirements, but rather a modest set of contract requirements over certain city funding. Additionally, these Amici emphasize the importance of home rule, noting that the authority that Charter Cities in Ohio retain over their own contracting is a central aspect of local self-government. The Amici highlight the increasing problem of home-rule erosion across the country.

The City of Akron filed an Amicus Brief which argues many of the same points from Cleveland’s brief. Here, Akron explains that R.C. 9.75 does not concern the relationship between an employer and an employee, but rather “regulates the relationship between a customer and a service provider.” Because R.C. 9.75 does not regulate general working conditions of employees, it was not properly enacted under Article II, Section 34. Furthermore, because R.C. 9.75 interferes with the Cleveland’s power to contract, it unconstitutionally infringes on Cleveland’s home-rule authority.

Columbus City Attorney, Zach Klein filed an Amicus Brief stating that the City of Columbus “concurs with the well-reasoned arguments of Appellee, City of Cleveland” and that the City of Columbus, “fully adopts Appellee’s arguments…as set out in Appellee’s Merit Brief.” Amicus warns that “[l]egislation that peripherally or remotely affects employees cannot be said to pertain to the ‘general welfare of all employees’ as such a ‘plausible’ argument could be made tying most any enactment to a potential impact on employees.” Klein argues that the passage of this bill was to protect the contractors’ lobby, not to provide for the general welfare of employees.

Ohio Municipal League (OML) is a state-wide association that serves the interests of Ohio municipal government. OML represents Ohio cities and villages before the Ohio General Assembly and the state elected and administrative offices. OML argues that R.C. 9.75 does not establish a residency requirement and does not provide for the general welfare of employees, but instead protects independent contractors who contract with municipalities. OML also argues that R.C. 9.75 clearly violates the home-rule amendment because it infringes on the city’s right to contract, which is a well-established power of local self-government.

Student Contributor: Ivy Charneski