The Ohio Supreme Court recently handed down two important decisions on prevailing wage laws in Ohio that will have a dramatic effect on public construction in Ohio, as well as private construction that is funded in part with public money.

Gene's Refrigeration vs. Sheet Metal Workers

On June 17, 2009, the Ohio Supreme Court issued its decision in Gene's Refrigeration, Heating and Air Conditioning, Inc. vs. Sheet Metal Workers International Ass'n. The issue in this case concerned off-site fabrication and assembly work and whether or not work performed off-site, as opposed to on the property of the public improvement, requires the payment of prevailing wages to those employees who are working off-site.

In this case, Gene's Refrigeration was awarded a contract for the Granger Fire Station project in Medina County. As a public project, prevailing wage laws applied. Gene's Refrigeration paid prevailing wages to its workers who performed work directly on-site, but did not pay prevailing wages to its employees who were fabricating duct work off-site. The Sheet Metal Workers International Association, Local Number 33 filed suit claiming that prevailing wages needed to be paid to all workers, regardless of the location at which they provided work for the project.

In looking at this issue, the Court applied the prevailing wage statute to the circumstances of this case. The relevant statute states that prevailing wage must be paid "for a legal day's work, to laborers, workers, or mechanics, upon any material to be used in or in connection with a public work...."

The Court focused on the italicized words when trying to determine what the statute really meant.There is nothing in the statute that says the work must be done on the project site to qualify for prevailing wage payments. Supporters of the applicability of prevailing wages argued that as long as the material is to be used in connection with the public project, prevailing wages must be paid, regardless of where the work is performed.

In its consideration, the Court looked to the language in other provisions of the prevailing wage law that suggested the Legislature intended the statute to apply only to those who are actually working directly on the projects and read the statutory reference to "materials" to mean materials fabricated or installed on the job site. The Court also looked at the 70 plus year industry practice of paying prevailing wages only to those who actually worked on the job site. The Court reasoned that since the Legislature has known of the industry practice to pay prevailing wages only to on-site workers, if the Legislature felt that was wrong, it could have amended the statute. The absence of such an amendment was compelling to the Court.

Therefore, the import of this case is to limit the payment of prevailing wages to workers who are working on the project site, as opposed to workers who are working off- site for some purpose that contributes to the public construction project.

This case is important for another reason too. The Court also had to decide whether or not the Union bringing the action against Gene's Refrigeration had standing to do so. The Union claimed it had standing to bring the action because one of the off-site employees of Gene's Refrigeration had signed an authorization. Under the law, an "interested party" can initiate a prevailing wage complaint on behalf of others in a representative capacity. Labor unions have been deemed an interested party, and the Court had to decide if they were qualified in this circumstance. The Supreme Court concluded it did not, holding that "one employee's authorization does not extend to all remaining employees," and that "a labor organization that obtains written authorization to represent one employee does not have standing as an 'interested party' under R.C. 4115.03(F) to pursue violations of the prevailing wage law on behalf of any other employee on the project...." Previously, the Court has determined that three employee signatures were sufficient to convey representative status on an Union to authorize the filing of a complaint on behalf of all employees alleging prevailing wage violations. In this case, the Court appeared troubled by the Union's request to accept the premise that one employee could grant the Union representative status on behalf of other employees who had not given the Union authority to act on their behalf. The Court looked directly at the written authorization Gene's Refrigeration employee had given, and focused on the language in the authorization that said it was only being given on behalf of the employee who signed it. Therefore, the Court concluded that the Union did not have standing to pursue a project wide prevailing wage complaint. Rather, it had the authority to sue only on behalf of the single off-site fabricator who had given authority.

Northwestern Ohio Building vs. Ottawa County

In another case, Northwestern Ohio Building and Construction Trades Council vs. Ottawa County Improvement Corporation, the Supreme Court was faced with the question of whether the contribution of public funds to a private construction project implements Ohio's prevailing wage laws for work equipment while Fellhauer used private money only to fund the construction work on the building.

Ohio's prevailing wage laws require contractors and subcontractors to pay prevailing wages on public improvement projects. The Court was faced with determining whether or not the project is a public improvement. In this case, the Court said no. The Court held that the prevailing wage requirements are only triggered when a public institution spends public funds to construct a public improvement. It further stated that in doing so, the work must be undertaken by a public authority or must benefit a public authority. In this case, because the public funds were not used on construction, but for other purposes unrelated to construction, nor were they used on a public improvement, prevailing wage laws did not apply.

The Court stated that public improvements are buildings, roads, streets, alleys, sewers, ditches, sewage disposal plants, waterworks and all other structures or works constructed by a public authority of the State, or any political subdivision thereof, or by any person who, pursuant to a contract with a public authority, constructs any structure for a public authority of the State or political subdivision thereof, R.C. 4115.03(C).

In this case, the project was not constructed by or for a public authority. The construction work was undertaken by Fellhauer using private funds. Further, the project was not destined to be used by or for a public authority. It was being built for Fellhauer alone to use as its business location.

Since no public funds were used to finance any actual construction of a public improvement that benefits a public authority, prevailing wage laws did not apply.

Both of these cases have a major impact on prevailing wage laws in the State of Ohio.