Ohio Supreme Court Holds Restrictive Minimum Wage Law Is Constitutional (Part 2)

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 deals with the background of the laws. You should read Part 1 first. Part 2 deals with the Ohio Supreme Court’s decision.

 

Part 1: The Decision

Background of the Case

The case facts are straightforward. The two plaintiffs worked as sales representatives for a coupon magazine. The magazine paid the sales representatives on a commissions-plus-a-draw or a commissions-only basis. Either way, if a sales representative did not earn enough in commissions, then they were paid less than minimum wage. The plaintiffs brought the case to recover the unpaid minimum wages.

Under the Fair Labor Standards Act, the plaintiffs are “outside salespeople” who are exempt from the FLSA’s minimum wage requirements under 29 U.S.C. 213. Thus, the question for this case is (or should have been) “Are outside salespeople ‘employees’ under the FLSA?”

Because of the conflicting laws described in Part 1, the plaintiffs asked the trial court to declare that either Revised Code 4111.14(B)(1)’s definition of “employee” does not apply to an action brought under the Minimum Wage Constitutional Amendment or, if the Code does apply, then it is unconstitutional because the Code’s definition is more restrictive than that of the Amendment. The employer argued that the Code was consistent with the Amendment.

The trial court agreed with the employer and held that the Code applies to cases brought under the Amendment and the Code is constitutional. By doing so, the trial held that the plaintiffs were not “employees.”

The Second District Court of Appeals reversed the trial court’s decision. The Second District held:

[The Amendment’s] statement that “employee” and other terms have “the same meanings as under the federal Fair Labor Standards Act,” coupled with its statement that “[o]nly the exemptions set forth in this section shall apply to this section,” preclude interpreting [the Amendment] in the manner advocated by the owners of Cheap Escape. The exemptions from minimum wage requirements set forth in 29 U.S.C. 213 do not alter the definition of “employee” set forth in 29 U.S.C. 203. Rather, the exemptions provide that minimum wage (and maximum hour) requirements do not apply to certain categories of employees. In other words, the exemptions remove certain categories of employees from the minimum wage requirements set forth in other parts of the Fair Labor Standards Act, but they do not remove persons in those categories from the definition of an employee. Thus, the definition or “meaning” of an employee under the Fair Labor Standards Act is the broad definition contained in 29 U.S.C. 203(e)—“any individual employed by an employer”—rather than any narrower classification that applies for the provision of particular federal protections, such as wage and hour rules.

The employer then appealed to the Supreme Court of Ohio.

The Decision

The Decision can really be broken up into two parts: (1) the Court’s interpretation of Ohio law, and (2) the Court’s interpretation of federal law.

Ohio Law

The Court’s holdings regarding Ohio law are pretty limited.

First, the Court held that “employee” under the amendment “shall have the same ‘meanings’ as provided in the FLSA.” ¶12. It further held that the Amendment “incorporates the FLSA without any limitation.” Id. This is consistent with the employees’ position and the Amendment’s plain language.

Next, however, the Court’s reasoning veers off the path of reasonable interpretation.

The Amendment states that “As used in this section: ‘employer,’ ‘employee,’ ‘employ,’ ‘person,’ and independent contractor’ have the same meanings as under the federal Fair Labor Standards Act…” The plural word “meanings” is used because the sentence references multiple words, each with its own meaning. If the singular “meaning” was used, it would tend to indicate that all of the words share the same meaning.

Part of the Revised Code section at issue exemplifies this. R.C. § 4111.14(M) states “As used in division (M) of this section, ‘such information,’ ‘acting on behalf of an employee,’ and ‘request’ have the same meanings as in division (G) of this section.” The plural “meanings” is used because each term has its own meaning. Division (G) confirms that each of the three terms has its own single meaning, just like the five terms in §34a. Conversely, the singular “meaning” is used when a single term is being defined. See, e.g., R.C. 4111.14(B)(2) and (H)(2).

Instead of interpreting “meanings” this way, the Ohio Supreme Court held that “‘Meanings’ is plural, indicating more than one definition applies [to the term ‘employee’].” ¶13. Putting aside that this interpretation does not make sense in the context of the sentence, how would that play out? If the Court was right (that “employee” has multiple meanings under the FLSA), then there would be an enormous amount of case law devoted to figuring out which of these multiple meanings applies to which situation. There would be a question of how to apply the FLSA at all if a basic term had multiple and conflicting meanings. Of course, there is no body of case law addressing this issue because the term “employee” has a single meaning under the FLSA. Thus, it has a single meaning under the Amendment.

Federal Law

If the Court got only its interpretation of “meanings” wrong, it still could have gotten the case right by correctly interpreting federal law (the Fair Labor Standards Act). After all, even if the Court thought that the Amendment borrowed every meaning of “employee” from the FLSA, it would not make a difference because the FLSA only uses one meaning for the word.

But, the Court did not correctly interpret the FLSA.

The FLSA states “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). That is the only meaning of “employee” in the FLSA. Case law, including that from the U.S. Supreme Court, uniformly uses this meaning of “employee” when interpreting that term under the FLSA. Accordingly, any person that falls within this meaning, even those employees who are exempt from some of the FLSA’s requirements, are employees. The plaintiffs wrote a motion for reconsideration on this issue that is worth reading. The motion details the uniformity of case law interpreting “employee” in the context of the FLSA.

The question the Court should have answered but never did is “Is an FLSA-exempt employee an ‘employee’ under the FLSA?” If yes, then they are also an “employee” under the Amendment—that’s the only way to give the word the “same” meaning.

Instead, the Court held that FLSA-exempt employees are not “employees” at all. No federal court to my knowledge has held anything similar. Again, the plaintiff’s motion for reconsideration addresses this point.

Because the Ohio Supreme Court held that FLSA-exempt employees are not “employees” under the FLSA, they are not under the Amendment. As a result, Court held that the Code is consistent with the Amendment.

The Dissent

Justice O’Neill wrote a dissent in which Justice Pfeifer concurred. Both Justices seemed to understand what the majority did not:

There is no possible stretch of the English language that can disguise the fact that the statute has the effect of restricting a provision in the constitutional amendment, which had been recently approved by more than two million voters.

The Second District Court of Appeals got this case right. The exemption found in the federal minimum-wage law for outside salespersons, and other exemptions, were not included in Ohio’s constitutional amendment and cannot be reasonably interpreted as such. By incorporating into Ohio law the exemptions set forth in federal law, the General Assembly modified the decision of the voters of the state of Ohio and impermissibly narrowed and restricted the meaning of the word “employee” in the amendment. * * * Simply stated, the Ohio General Assembly cannot surreptitiously override the will of the people of Ohio. The voters have spoken, and the General Assembly and this court must listen.

What more could the voters have done?

This blog entry focused on the Amendment’s language that borrows the FLSA’s meaning of “employee.” As described above, that alone should have resolved this case in favor of the employees.

But, the Amendment goes even further. It states that “Only the exemptions set forth in this section shall apply to this section.” If the Court had a question as to whether FLSA exemptions should be implicitly read into the Amendment, the Amendment’s language regarding exemptions answers the question. The Court essentially ignored this language and held that the exemptions were not set forth because “it is logical to conclude that the drafters did not need to restate the FLSA exemptions within [the Amendment] because those exemptions had already been included.” ¶14. The Court missed that the drafters did not restate the exemptions because the exemptions were never meant to be included in Ohio’s minimum wage law.

This case raises a question—What more could the voters have done to express their intent to include all employees within the Amendment’s coverage? The Amendment uses an established definition of “employee” and then states that exemptions not “set forth” in the Amendment cannot apply to the Amendment. If that is not enough, what would have been?

For more information, contact Andy Biller, Of Counsel to Markovits, Stock & DeMarco and author of Wage and Hour Information Resource; (614) 604-8759.

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