Disclaimer: I was lead counsel representing the employees in this case. I won’t pretend to be objective in my analysis of the decision.
This is a two-part post about the recent Ohio Supreme Court’s 5-2 decision holding that “The meaning of the term ‘employee’ under R.C. 4111.14(B)(1) is constitutionally valid because it does not clearly conflict with or restrict the meaning of that same term under Article II, Section 34a of the Ohio Constitution.” This is an important decision that substantially changes the landscape of Ohio wage and hour law.
Part 1 will deal with the background of the laws. Part 2 will deal with the Ohio Supreme Court’s decision.
Part 1: Background
The federal Fair Labor Standards Act sets the floor for minimum wage rights.
The FLSA sets the minimum requirements employers must meet with respect to their employees when it comes to paying a minimum and overtime wages, ensuring gender pay equality, protecting employees from retaliation, and, more recently, providing breastfeeding accommodations.
Like any law, there are “exemptions” to the FLSA’s requirements. The Exemptions section (29 U.S.C. 213) is basically a laundry list of types of employees who are exempt from some of the FLSA’s requirements. Some of the exemptions may be familiar, like for “executive, administrative, or professional” employees. Some are less familiar, like wreath-makers and maple syrup processors (yes, those are real exemptions). If you guessed that the exemptions were put in as a result of lobbying efforts by various business interests, you are correct.
Ohio approves a constitutional amendment to increase minimum wage rights.
Fast-forward to 2006. Ohioans voted to approve a constitutional amendment (Article II, Section 34a) that granted increased minimum wage rights. Compared to the FLSA, the Amendment included not just a higher minimum wage, but also stronger enforcement mechanisms, longer time limits for filing claims, greater damages provisions, stronger anti-retaliation protections, and recordkeeping requirements that allow individual employees to obtain their own records. In other words, every part of the Amendment was aimed at increasing workers’ rights.
With regard to minimum wage, the Amendment states “every employer shall pay their employees at a wage rate of not less than [the new state minimum wage].” So who is an employee?
Under the Amendment, “As used in this section: ‘employer,’ ‘employee,’ ‘employ,’ ‘person,’ and independent contractor’ have the same meanings as under the federal Fair Labor Standards Act…”
In turn, the Fair Labor Standards Act states that “As used in this chapter [chapter means the FLSA]—Except as provided in paragraphs (2), (3), and (4), the term ‘employee’ means any individual employed by an employer.” 29 U.S.C. 203(e). (Paragraphs 2, 3, and 4 contain some exceptions to the definition that are not relevant here.) Federal courts, including the U.S. Supreme Court, have interpreted the FLSA’s meaning of “employee” to be exactly that meaning. No more, no less.
Thus, under the Amendment, every person within the FLSA’s broad meaning of “employee” is entitled to minimum wage. The only exemptions are listed in the Amendment itself (there are five). The Amendment makes it clear that the FLSA’s exemptions do not apply to the Amendment: “Only the exemptions set forth in this section shall apply to this section.”
Politicians try to gut the Amendment with “implementing legislation.”
Twenty-one days after the Ohioans approved the Amendment, the General Assembly introduced a bill to “implement” the Amendment. It was passed less than a month later and became Revised Code 4111.14 (“the Code”). The obvious intent of the legislation was to try to gut the Amendment.
If you recall, the Amendment defines “employee” to have the same meaning as under the FLSA. The Code has a very different definition for the same term:
“‘Employee’ means individuals employed in Ohio, but does not mean individuals who are excluded from the definition of ‘employee’ under 29 U.S.C. 203(e) or individuals who are exempted from the minimum wage requirements in 29 U.S.C. 213 and from the definition of ‘employee’ in this chapter.” (Emphasis added.) R.C. 4111.14(B)(1).
The bold-faced text takes all of the FLSA’s exemptions and not just incorporates them as exemptions but actually excludes those employees from the very definition of “employee.” The result is that they are stripped of all rights under the Amendment.
The Code section attempts to restrict the Amendment’s protections.
Why does this matter? It matters because if FLSA-exempt employees are not “employees” under the Amendment, then a whole swath of people will no longer get the protections they voted for: no minimum wage, no retaliation protections, and no recordkeeping protections.
In addition, if the Code is able to change the meaning of “employee,” then a number of problems could arise. For example:
- Imagine if a company was cheating workers out of minimum wage. Perhaps a store manager (who is FLSA-exempt) wants to stick up for his workers. He expects that the Amendment will protect him with its strong anti-retaliation protections. But, under the Code, he is not an employee at all and, therefore, not entitled to the Amendment’s protections.
- Or maybe that same manager wants to get his pay records from the company to make sure he is being paid properly. The company could refuse to give the manager his own records because, under the Code, he is not an “employee.”
- There is also a potentially problematic burden of proof issue. Under the FLSA, it is the employer’s responsibility to prove, with “clear and convincing evidence” that someone is exempt from the FLSA’s protections. This is consistent with the FLSA’s goal of protecting workers. Accordingly, the exemptions are narrowly construed against the employer. But, if an FLSA-exempt employee is not an “employee” under the Code, then it might end up being the employee’s responsibility to prove they are not exempt. Shifting the burden of proof in this way makes a big difference.
In summary, the FLSA provides a base-line level of employee protections, but limits its coverage by exempting many types of employees. Ohio’s Minimum Wage Amendment expanded worker protections by applying the protections to everyone who is an “employee” under the FLSA. The General Assembly then passed “implementing legislation” to roll back the Amendment’s protections by defining “employee” to exclude FLSA-exempt employees. This seems to be a clear case of a law restricting rights granted under Ohio’s constitution. Part 2 will discuss how the Ohio Supreme Court decided this question.