In construction, hiring is everything. Owners want to hire reputable contractors known for good work. Contractors look to hire trusted subcontractors and suppliers in order to minimize defects and payment issues. For these reasons and more, hiring in the construction industry can make or break a project. When contractor hiring requirements are imposed by state or local governments, this hiring process is affected. Recently Ohio passed House Bill 180 banning requirements for contractors to hire local workers for public projects.
The goal of House Bill 180 is to loosen the requirements on contractors, freeing them to hire the most qualified workers for the job regardless of where those workers live. The bill works to “…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.” Both the carrot and the stick are prohibited- award bonuses that reward the employment of local laborers are also prohibited.
The city of Cleveland did not take this news well. The Land is suing the state of Ohio over the new legislation. Nicknames aside, the city has a lot to lose over this new legislation. However, Ohio contractors have much to gain. Here are some of the pros and cons of the new law.
Pros and Cons of Banning Contractor Hiring Requirements
Previously, cities could require that a percentage of the workforce on a municipal project be from the area. This meant that Ohio contractors, had to make sure as much as 20% of their workforce was from the area. For contractors who did not comply, penalties were enforced. These provisions only applied to in-state contractors.
By banning restrictions on who contractors can hire for state and local projects, the state of Ohio is allowing contractors to hire purely on merit. Removing regulations puts them on equal footing with out of state builders. Contractor hiring requirements also worked to the disadvantage of rural construction workers. Because the largest number of state and local projects take place in large cities, Ohio’s construction workers not living in these areas were often overlooked. In a time when the construction workforce needs a boost, laws like these exacerbated the problem. Lastly, this opens up competition on public projects in Ohio. Now contractors may place bids on projects without worrying about meeting hiring requirements. This should result in a higher number of bids for projects, thus lowering the cost to the public.
At the heart of Cleveland’s opposition to the new law is its right to self-governance. The city does not call for statewide contractor hiring requirements, but rather demands that cities be able to pass their own laws on the matter. Constituents believe the law is unconstitutional. They note that a city ordinance would not affect statewide matters.
Practically speaking, Cleveland is worried about the impact this will have on its residents. According to city officials, requiring contractors to man their public projects with at least 20% locally hired workers has put as much as $34M in the pockets of Cleveland construction workers over the last few years. Further, Cleveland’s law on the subject, the Fannie M. Lewis Cleveland Resident Employment Law, requires that a percentage of the workforce be a low-income resident. By blocking this law, the city of Cleveland aims to protect its citizens and keep construction dollars for public projects in the city.
There are both benefits and drawbacks of banning contractor hiring requirements related to local hiring. Cleveland is not wrong for wanting the best for its citizens, and the state of Ohio is certainly not wrong for wanting to create more competition on public construction projects. The court will have an interesting time with this one. Funky things can happen in the Ohio court system. We’ve seen liens revived, wrong decisions, and 12 year waits– and that’s only in lien law! It’s not impossible for Cleveland to block this new legislation, and I’m not sure I’d bet against Believeland right now.
For more on Ohio construction issues, give our other Ohio material a look. Also, check out the Ohio Mechanics Lien FAQs for all of your Ohio lien and construction bond needs.