AIA Bulletin

Ohio General Assembly

Amended Substitute House Bill 153 (Budget):

Prevailing Wage in Public Construction

A Legal Update

by

Luther L. Liggett, Jr.

Luper Neidenthal & Logan

Attorneys at Law

July, 2011

Luper Neidenthal & Logan

50 West Broad Street, 12^th Floor

Columbus OH 43215-3374

614-221-7663

www.lnlattorneys.com

Ohio General Assembly

Amended Substitute House Bill 153 (Budget):

Prevailing Wage in Public Construction

INTRODUCTION

The State of Ohio once again has amended its historic Prevailing Wage law for Public Construction, particularly applicable to construction bidders on public works projects.  Responding to continued concerns regarding particular applications, the law generally remains applicable for most construction.

PRIOR  LAW

Prevailing Wage first became Ohio law during the Great Depression, April 23, 1931, House Bill 3, enacted by the Republican-led 89^th General Assembly,^[1] to prevent out-of-state incursions against local, small businesses.  Similarly, on the federal level (“Davis-Bacon”,) the purpose is to protect construction employers when bidding, including union-signatory and non-union companies:

The Act was “designed to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area.”  House Committee on Education and Labor, Legislative History of the Davis-Bacon Act, 87th Cong., 2d Sess. 1 (Comm. Print 1962) (Legislative History).  Passage of the Act was spurred by the economic conditions of the early 1930’s which gave rise to an oversupply of labor and increased the importance of federal building programs, since private construction was limited….  In the words of Representative Bacon, the Act was intended to combat the practice of “certain itinerant, irresponsible contractors, with itinerant, cheap, bootleg labor, [who] have been going around throughout the country ‘picking’ off a contract here and a contract there.”  The purpose of the bill was “simply to give local labor and the local contractor a fair opportunity to participate in this building program.”  74 Cong. Rec. 6510 (1931).

Universities Research Ass’n, Inc. v. Coutu (1981), 450 U.S. 754, 733-74.

Ohio’s statute has undergone numerous legislative amendments and judicial interpretations since original enactment 80 years ago.  Debate continues today on the viability of the provisions.  With the latest amendments, Prevailing Wage still applies generally to bidding of public works in Ohio, as in approximately 32 other states.

THE  NEW  LAW

Effective Date:  The amendments to Ohio’s Prevailing Wage law are effective 90 days after enactment (September 28, 2011,) with the exception of returning excess funds from the Prevailing Wage Custodial Fund, O.R.C. §4115.101, §512.70.  The Department of Commerce Penalty Enforcement Fund is abolished, creating instead the Labor Operating Fund, O.R.C. §4115.10.

Exemptions to Applicability:  The law generally applies to all “public improvements” the same as before, but with increased thresholds, at-or-below which Prevailing Wage does not apply, O.R.C.  §4115.03:

New Vertical Construction:

(a) greater than $125,000.00 beginning 9/28/2011 through 9/27/2012;

(b) greater than $200,000.00 beginning 9/28/2012 through 9/27/2013;

(c) greater than $250,000.00 beginning 9/28/2013 through 9/27/2014.

Renovation, Vertical Construction:

(a) greater than $38,000.00 beginning 9/28/2011 through 9/27/2012;

(b) greater than $60,000.00 beginning 9/28/2012 through 9/27/2013;

(c) greater than $75,000.00 beginning 9/28/2013 through 9/27/2014.

Highway Construction Thresholds remain the same:

New Road (Horizontal) Construction:  $78,258.00.

ori

Renovation, Road (Horizontal) Construction:  $23,447.00.

Road thresholds shall be adjusted for inflation using the United States Department of Commerce, Bureau of the Census implicit price deflator for construction, provided that no increase or decrease for any year shall exceed three per cent (3%) of the threshold level in existence at the time of the adjustment.  O.R.C. §4115.034.

In addition, newly exempt from Prevailing Wage are the following projects:

• Port Authority Projects (O.R.C. §§4582.01, 4582.12(D), 4582.21, 4582.37,) O.R.C. §4115.04(B)(6).
• Department of Development Loans, Guarantees, Mortgage Insurance, Job Ready Site Program; O.R.C. §122.452, §122.0818, §166.02(E), §4115.032 repealed.
• Minority Business Enterprise Loans, O.R.C. §122.80, O.R.C. 4115.032 repealed.
• Industrial Development Bonds, O.R.C. §165.031, O.R.C.  4115.032 repealed.
• Energy Resource Development Facility, O.R.C. §1551.13, O.R.C. 4115.032 repealed.
• Community Urban Redevelopment Corporation Projects, O.R.C. §1728.07(K), O.R.C. 4115.032 repealed.
• Air Quality Development Authority Loans and Grants, O.R.C. §3706.042, O.R.C. 4115.032 repealed.
• Ohio Rail Development Commission Bonds, O.R.C. §4981.23 repealed.
• Any portion of a public improvement undertaken and completed solely with Labor Donated by the individuals performing the labor, by a labor organization and its members, or by a contractor or subcontractor that donates all labor and materials for that portion of the public improvement project.  O.R.C. §4115.04(B)(7).

Reacting to the prior administration’s Ohio School Facilities Commission interpretation that exempt Schools might choose to include a Prevailing Wage requirement, the law now provides that, “Under no circumstances shall a public authority apply the prevailing wage requirements of this chapter” to an exempt public improvement by a board of education of any School District or the governing board of any Educational Service Center.  O.R.C. §4115.04(C).

Enforcement Safe Harbors:  Of significance to Construction Employers, the new law adds minimal exemptions from compliance enforcement, as a direct result of numerous vague or de minimis complaints filed with the State.  While an employer remains liable for compliance, enforcement will not proceed in the following instances:

• Apprentice Ratio:  A contractor that exceeds the permissible ratio of apprentices to skilled workers by two (2) or fewer apprentices for not more than two (2) days in any thirty-day (30-day) period.  O.R.C. §4115.05.
• Underpayment:  For underpayment to an employee of less than $1,000.00, the contractor is not subject to any further proceedings if the contractor or subcontractor makes full restitution to the affected employee.  O.R.C. §4115.13(C).
• Penalties:  No contractor or subcontractor shall be responsible for the payment of the penalties resulting from a violation by its subcontractor, provided that the contractor or subcontractor has made a good faith effort to ensure that its subcontractor complied with the requirements. O.R.C. §4115.10(G).

Standing to Sue:  Recognizing that the Prevailing Wage law prohibits obtaining a public contract by under-bidding on local wages, prior law intended to allow an unsuccessful contractor to sue the low bidder if that low bid might be based on a Prevailing Wage violation. 

Several Courts of Appeals recently ruled that a contractor may sue a competitor merely by bidding on a particular project, even though not bidding unsuccessfully against the low bidder of a particular trade.  This broad interpretation encouraged litigation by going beyond the original intent of the law.

The new law restricts complaints only by unsuccessful bidders “with respect to a particular contract for construction of a public improvement.”  O.R.C. §4115.03(F).

In addition, any complaint filed with the State must allege a specific violation, accompanied by sufficient evidence, not merely alleging a general violation of the Prevailing Wage law.  The State must reject any complaint lacking a specific violation or sufficient evidence to justify a complaint.  O.R.C. §4115.16(A).

The State may take 120 days, plus 90 days with notice, or longer with agreement by the parties, to investigate a complaint.  No contractor may file a private law suit prior to this investigation period.  O.R.C. §4115.16(B).

Filing of Collective Bargaining Agreements:  Ohio’s Prevailing Wage remains set by reference to the collective bargaining agreements of each local jurisdiction and trade.  Past concerns included a lack of timely notice when a re-negotiated agreement changed a wage rate. 

New law requires that the labor union of each agreement, “shall file with the director of commerce all relevant portions of any such agreement,” and within 90 days after executing the agreement. “The labor organization shall certify under penalty of law that the portion of the agreement, contract, or understanding filed under this section contains, in full, all provisions of the agreement, contract, or understanding concerning wages paid to persons and the apprentice to skilled worker ratio under the agreement, contract, or understanding.”  O.R.C. §4115.05.

When the State receives a revised agreement, the new wage rate “shall take effect two weeks after the director receives the relevant portions of the agreement,” thus allowing time for the State to transmit the new rate to the local public authority, which has 7 days to transmit the new rate to contractors.  O.R.C. §4115.05.

CONCLUSION

Every legislative session brings a new debate on Prevailing Wage for Public Construction.  The latest revision generally preserves the concept, while providing new exemptions to minimize applications of particular concern. 

For more information, contact:

Luther L. Liggett, Jr.

Luper Neidenthal & Logan

50 West Broad Street, Suite 1200

Columbus, OH 43215-3374

(614) 229-4423, telephone

lliggett@lnlattorneys.com

(866) 345-4948, facsimile

^[1]     Curtin, The Ohio Politics Almanac, 2d Ed., 2006, Kent State University.

UT Establishes School for Green Chemistry/Engineering
 
Representatives of the U.S. Environmental Protection Agency (USEPA) and National Science Foundation (NSF) joined the University of Toledo (UT) this week to announce the creation of a new School for Green Chemistry and Engineering. The new school will focus on the need for sustainability with the design of products and processes from origin through end of life that use renewable raw materials and environmentally safe processes.

“Green chemistry and biomimicry, which is green chemistry and engineering that uses natural raw materials and processes that mimic nature and produce zero waste, are the future of science and UT is positioning itself to be a leader in teaching, researching and applying this science,” UT President Lloyd A. Jacobs said in a statement.
 
“What we do now and in the future will have serious consequences to our health and environment and it is important that we look at our current processes to reconfigure them to be more efficient or create new ones all together that are more sustainable and less harmful,” he said.
 
Paul Anastas, Ph.D., USEPA’s assistant administrator for the Office of Research and Development and Science Advisor; Matthew Platz, Ph.D., director of the NSF’s Division of Chemistry; and Robert Peoples, Ph.D., director of the Green Chemistry Institute headquartered at the American Chemical Society

A South Carolina company said Wednesday an agreement with the Ohio Department of Administrative Services would make it more efficient and less costly for public agencies across the state to contract services for repair, renovation, and minor construction projects on public buildings, schools, parks, and roads.

 The Gordian Group, Inc. said the system is available to about 2,000 state, county, and municipal agencies, as well as public school districts and universities.

 The company said Ohio is among a group of states that have chosen Gordian Group Jobs Order Contracting services to help governments control spending in the delivery of facility repair services. Arizona, Connecticut, Georgia, Pennsylvania and Utah have implemented similar programs.

 Ohio is implementing a Gordian Group version of job order contracting through a national buying cooperative.

 Job order contracting is a competitively bid procurement system that agencies use to accomplish a large number of small to medium-sized repair and alteration projects based on a set of locally priced construction tasks and competitively awarded contracts.

OSFC Awards $247 Million in School Facilities Funding

The Ohio School Facilities Commission (OSFC) awarded $247 million for classroom construction in 13 school districts around the state Thursday, with local matching funds of nearly $300 million. 

“This is a critical step in addressing the facilities needs within these districts,” OSFC Executive Director Richard Hickman said. “This agency is committed to assisting these districts in educating children, by providing buildings that are student-centered learning environments that enhance our children’s future.

Hickman said the awards also pose larger benefits to local communities. “There is also a significant economic impact attached to today’s commission action — the construction work generate by this project could translate into both job opportunities for local residents and increased purchases of goods and services from local businesses.”

Following are the school facility projects approved Thursday:

Ayersville Local Schools, Defiance County; Classroom Facilities; State Share – $8,724,698; Local Share – $8,053,568; First Segment – Build middle/high school section of new P-12 facility.

Botkins Local Schools, Shelby County; Classroom Facilities; State Share – $17,473,917; Local Share – $5,824,639; Build new combination elementary/middle/high school for grades P-12.

Carlisle Local Schools, Warren County; Classroom Facilities; State Share – $29,839,940;  Local Share – $23,445,667; Build new combination elementary/middle/high school for grades P-12.

Dover City Schools, Tuscarawas County; Exceptional Needs; State Share – $9,484,059; Local Share – $24,387,581; Build new high school for grades 9 thru 12.

Elyria City Schools, Lorain County; Classroom Facilities; State Share – $37,962,240; Local Share –  $50,322,038; First Segment – Build five new elementary schools for grades P-5.

Greenville City Schools, Darke County; Classroom Facilities; State Share – $18,192,750; Local Share – $27,289,125; First Segment – Build one new elementary/middle school for grades K-8.

Indian Creek Local Schools, Jefferson County; Exceptional Needs; State Share – $7,109,983; Local Share – $15,825,447; Build new high school for grades 9-12.

Napoleon Area City Schools, Henry County; Classroom Facilities; State Share – $17,456,733; Local Share – $28,482,039; Build new elementary school for grades P-6; renovation and expand to Napoleon High School for grades 7-12.

New Bremen Local Schools, Auglaize County; Classroom Facilities; State Share – $6,845,203; Local Share – $6,845,203; Build new elementary school for grades K-6.

Northmont City Schools, Montgomery County; Classroom Facilities; State Share – $34,764,870; Local Share – $39,202,939; First Segment – Build new elementary school for grades P-1 and new high school for grades 9-12.

Piqua City Schools, Miami County; Classroom Facilities; State Share – $25,793,854; Local Share – $29,086,686; First Segment – Build two new elementary schools for grades P-3 and a new elementary/middle school for grades 4-6.

Willard City Schools, Huron County; Classroom Facilities; State Share – $32,538,753; Local Share – $19,110,062; Build new combination elementary/middle/high school for grades P-12.

Wynford Local Schools, Crawford County; Classroom Facilities; State Share – $10,659,559; Local Share – $8,375,367; First Segment Build one new middle/high school for grades 7-12.

Funding awards still require Controlling Board approval. Districts must also secure the local share of the projected budget within a one-year period before OSFC dollars are released.

Ohio School Facilities Commission Director Richard Hickman announced several new staff appointments, including David Chovan as chief financial officer and Jon Walden as Manager of Contracts and Compliance.

Mr. Chovan, of Canal Winchester, has 26 years in public service, including 10 years as business operations administrator for the Department of Administrative Services and six years as fiscal manager for the City of Columbus.

Director Hickman called him “a fiscal expert with extensive experience in public policy – a perfect fit for this agency.”

Mr. Walden has 16 years in combined public and private legal experience, including a position as associate assistant attorney general, and had previously served as OSFC’s senior contracts manager.

Director Hickman said Mr. Walden “will serve as the focal point of OSFC’s continuing commitment to ensuring quality work on the buildings we are building and renovating across Ohio.”

The director also promoted Rob Slagle, senior project administrator, to deputy chief of projects and Keith VanDeusen as a project administrator for the agency.

                 In a unanimous decision today the Ohio Supreme Court dismissed the lawsuit brought by the Surety and Fidelity Association of America and the American Subcontractors Association, against the Ohio State University, holding that the non-bid “Pilot Project” of $1 billion authorized by the prior General Assembly did not require a performance bond.

             The Court found that, while House Bill 318 authorizing the non-competitive award of the project did include an express requirement of a bond for bid work, the language did not apply to non-bid work. 

             The Court further dismissed the Subcontractors for lack of standing, finding that no subcontractor actually suffered any damages from lack of payment and therefore could not complain.

             This is a final decision from which no appeal can be taken.

Newly updated Ohio Architects Board rules incorporate recent change to 4703-2-04, Training Requirements. The change eliminates the foreign-trained architects exemption from IDP and brings Ohio into alignment with NCARB Model Law. It is effective June 16, 2011.

The Ohio School Facilities Commission (OSFC) approved four school districts for participation in an energy conservation program during its Thursday meeting.

The commission was also updated on the 21st Century School Design Symposium 2.0 held Tuesday at the Columbus Museum of Art. The symposium addressed school districts planning new classrooms and provided ideas on how to design those projects.

Participants were shown innovative designs from five Ohio districts — Clyde-Green Springs Local (Sandusky County), Akron City, Dayton City, Hamilton City, and Highland Local (Morrow). The symposium also featured keynote speakers Bob Sommers, director of Gov. John Kasich’s Office of 21st Century Education, Christian Long of Be Playful Design, and Zac Chase & Chris Lehman of the Science Leadership Academy in Philadelphia. The academy is often considered a national role model for student-centered, project-based learning environments.

OSFC Executive Director Richard Hickman told commission members the symposium was aimed at districts that eventually will be in the building program.

Among the commission’s actions was the approval of projects under OSFC’s energy conservation program. The districts — Manchester Local (Adams County), Columbia Local (Lorain County), Bright Local (Highland County), and Boardman Local (Mahoning County) — are expected to see $706,000 in annual savings through planned improvements.

The Manchester Local School District project includes the installation of a new boiler system, along with insulation for the system’s piping, and upgrades to lighting and building automation controls. The district anticipates $46,450 in annual energy and operational savings.

The Columbia Local School District project will involved work in five separate buildings, including the installation of three new heating boilers, and upgrades to the lighting, mechanical systems, and building automation controls. The district anticipates $78,701 in annual energy and operational savings.

The Bright Local School District project includes lighting, boiler plant and building automation upgrades in two buildings and the installation of a new energy-efficient kitchen steamer. The district anticipates $53,078 in annual energy and operational savings.

The Boardman Local School District project is the largest of the projects, involving work in 10 buildings. In addition to lighting and building automation upgrades, the district will install a new boiler along with window, door and roof replacements. The district anticipates $528,447 in annual energy and operational savings.

The Ohio Supreme Court reversed itself Tuesday in a prevailing wage dispute on Ohio School Facilities Commission (OSFC) projects, ruling without explanation that it had previously accepted an appeal on the case “improvidently” and dismissing the matter.

The case dealt with a school construction project in the Barberton district, which was sued by Associated Builders and Contractors of Northern Ohio, an unsuccessful bidder on the project and several local taxpayers. They argued that Barberton had exceeded its legal authority by requiring bids to specify prevailing wage.

A trial court dismissed the case, finding the plaintiffs had no standing to file a common law “taxpayer” challenge because they hadn’t suffered damages different than those sustained by every other Barberton resident and property owner. The Ninth District Court of Appeals concurred in the finding of lack of standing. 

The Supreme Court originally ruled in September to accept the case on plaintiffs’ first proposition of law, in which they argued they had proper standing. Oral arguments in the case took place in April.

The dismissal follows emergency motions filed in March by Barberton and OSFC, which argued that the case was moot because of OSFC’s Feb. 24 action to rescind bidding policies in place under the Strickland administration and specifically prohibit acceptance of any contracts that mandated wage levels.

Ohio School Facilities Commission (OSFC) Director Richard Hickman Jr. said Thursday that the commission is continuing to implement a resolution that generally bans the use of project labor agreements (PLA) and will be informing at least seven districts that their construction projects should go forward without use of the agreements.

Updating members on efforts to implement Resolution 11-16, Hickman said his office is moving forward in a way that reflects the intent of the commission.

PLAs were one of the first items that a reconfigured OSFC changed from the policies of the Strickland Administration 

Some districts, however, will be able to continue their PLAs, Hickman said. Seven districts have received OSFC approval to continue with the agreements. Those projects are already in construction or have advertised construction bids before the Feb. 24 date of the resolution. Those that are in the advertising stage will be allowed to continue with a PLA as long as the project is not in construction and bids come in under budget for the project, he said.

Hickman cited projects in the Akron City Schools, saying most of the PLAs were individually negotiated, and that a number of buildings under construction with a PLA will continue. But he said three building projects have not been bid, and that the OSFC intends to ask the district to go forward without a PLA.

Each year Ohio employers have the opportunity to participate in BWC’s Group-Experience-Rating Program or Group-Retrospective-Rating Program. While these programs are not required, they do provide you with an opportunity to significantly reduce your workers’ compensation premiums, while increasing your awareness of safety and risk-management strategies.

Workplace safety is an important component of these programs. To succeed in accident prevention, we encourage you to use the many resources available to you. We believe a group-rating program is a partnership that includes you and your employees, your sponsoring organization or third-party administrator (TPA) and BWC. Each has specific roles and responsibilities, all designed to assist in preventing workplace accidents. This letter outlines the safety services expectations you should have as an employer enrolled in a group-rating program.

The employer will:

• Maintain a safe workplace;
• Attend safety training to enhance workplace safety;
• Implement BWC’s 10-Step Business Plan for Safety and use available safety services as needed;
• Attend the required two-hour training and provide proof of attendance to sponsor for claim(s)

occurring within the last two years.

The certified primary and affiliated sponsoring organizations will:

• Communicate, educate and verify  BWC’s 10-Step Business Plan for Safety to group members;
• Sponsor eight hours of safety training (this may be done at one time or may be provided incrementally as long as the total is at least eight hours);
• Provide information regarding safety resources to group members;
• Possibly assist an employer in achieving its safety needs;
• Manage employer fulfillment of the two-hour training requirement, where applicable;
• Publish this letter to group members.

The TPA may:

• Assist sponsoring organizations with fulfilling the group-rating safety requirements;
• Assist an employer with its safety needs;
• Work in conjunction with sponsors to develop safety training and deliver safety resources;
• Provide resources for claims handling.

BWC will:

• Monitor all group-rating safety activities to confirm requirements are met;
• Meet at least annually with sponsoring organizations to provide recommendations for fulfilling safety requirements;
• Provide safety training through Ohio’s Center for Occupational Safety & Health;
• Offer on-site safety consultation (hazard assessments, air and noise monitoring, ergonomics evaluation, training) by a BWC safety professional;
• Offer publications and videos for safety program support;
• Conduct employer visits to confirm the employer is meeting group-rating requirements, when appropriate.

The goal of this collaborative effort is to make sure all your safety needs are met. Using these resources will assist you in preventing accidents, reducing claims costs and achieving the highest discounts possible. Below you’ll find contact information for various resources.

Group sponsor: AIA Ohio

TPA:

BWC: http://www.ohiobwc.com/employer/services/safetyhygiene.asp, groupratingsafety@bwc.state.oh.us