In a unanimous decision, the Ohio Supreme Court ruled today that prevailing wages are not required on private projects supported with public funds. The Court held that the state’s prevailing wage law applies only to work performed in the construction of a “public improvement” by or for the benefit of a public authority, and does not apply to work performed on private development projects partially supported by public funds.
The case involved the renovation of a retail store in Ottawa County. To fund the project, the private developer applied for and received both public and private funding, including county community improvement loans and a block grant disbursed by the Ohio Department of Development. After the county prosecutor declined to take action to enforce prevailing wages on the project, a local trade union filed suit. Both the trial court and court of appeals held that the project was not subject to prevailing wages, but each court reached that determination on different grounds.
On appeal to the Supreme Court, the trade union argued that prevailing wages are triggered merely upon a developer’s expenditure of public funds to finance a project, regardless of whether the project involves actual construction of a “public improvement” as defined by Ohio Revised Code Chapter 4115. The Supreme Court disagreed, holding that the union’s argument that any spending of public funds triggers prevailing wages “would unjustifiably expand the scope of prevailing wage to include projects that are not public improvements, that are not constructed by a public authority, or that do not benefit a public authority.” Therefore, the Court held that a developer’s expenditure of public funds triggers the prevailing-wage requirement only when a public authority using public funds contracts to construct a public improvement.
This holding directly contradicts the Ohio Department of Commerce’s prevailing wage guidelines for public investment in private projects, issued in October, 2008. In those guidelines, the Department of Commerce interpreted the prevailing wage law to apply any time public funds are used to finance a construction project in whole or in part. As such, the guidelines attempted to expand the scope of Ohio’s prevailing wage law to subject all construction projects that are in any way financed by public funds or public support, including loans, grants, remediation of environmental hazards, or equipment, to prevailing wages where the project meets the monetary threshold, regardless of whether the project was for a public improvement or solely for a private development. Today’s Supreme Court decision trumps these guidelines, making private construction projects immune from prevailing wage law requirements even if they are supported with public funds. Because of today’s ruling, prevailing wage law applies only when a public authority spends public funds to construct a “public improvement.”
Though this decision limits the application of prevailing wages on private construction projects, it does not fully eliminate the requirement that some private projects will be subject to prevailing wages depending upon the source of the public funds. Because the Court did not specifically address Section 4115.032 of the Ohio Revised Code and preclude its application, the Court's decision seemingly does not eliminate the requirement that private construction projects meeting the monetary threshold, which obtain public funds from the sources outlined in Section 4115.032, are subject to prevailing wages. These sources include industrial development bonds, minority business enterprise loan funds, Ohio Department of Development loans and grants, urban redevelopment loans and grants, funds from certain economic development programs, and funds from the Ohio air quality development authority.
The case is Northwestern Ohio Building & Construction Trades Council et al. v. Ottawa County Improvement Corp. et al., 2009-Ohio-2957.