Divided Ohio Appellate Court Rejects Incorporation of FLSA Exemptions into Ohio Minimum Wage Constitutional Amendment

On Friday, a divided Montgomery County Court of Appeals held that Ohio Revised Code §4111.14(B)(1) was – beyond a reasonable doubt --  an unconstitutional attempt by the General Assembly to restrict §34a of the Ohio Constitution and declared it “invalid.”  Haight v. Cheap Escape Co., No. 2014-Ohio-2447.  In that case, the plaintiffs were employed as outside salesmen by the employer and claimed that they were not properly paid the minimum wage as required by 2006’s Voter Initiative 2, which was incorporated into the Ohio constitution at §2.34a.  In that constitutional provision, the “meaning” of “employee” is the same as in Fair Labor Standards Act.  The employer raised as a defense that ORC §4111.14 incorporated the FLSA minimum wage exemptions, which includes exemptions for professional, managerial, and administrative employees and outside salesmen like the plaintiffs.  The plaintiffs then successfully challenged the constitutionality of §4111.14 on the grounds that §203 of the FLSA defines “employee” as – with certain exceptions -- “any individual employed by an employer” and could not include the FLSA exemptions because §34a restricted exemptions  to those exemptions contained in its own provisions (for family members and disabled employees) and the General Assembly from narrowing the reach of its provisions.

The Court recognized that §213 (and other provisions) of the FLSA contained certain exemptions from the FLSA’s minimum wage.  However, even if individuals are exempt from the FLSA’s minimum wage provisions, they remain “employees” as defined by the FLSA.  The Court’s majority found that the intent of §34a was to use the FLSA’s broad definition of “employee” without the FLSA’s many exemptions and that it created its own, very narrow exemptions to the state minimum wage requirements:

As used in this section: "employer," "employee," "employ," "person" and "independent contractor" have the same meanings as under the federal Fair Labor Standards Act or its successor law, except that "employer" shall also include the state and every political subdivision and "employee" shall not include an individual employed in or about the property of the employer or individual's residence on a casual basis. Only the exemptions set forth in this section shall apply to this section.

             . . . .

This section shall be liberally construed in favor of its purposes. Laws may be passed to implement its provisions and create additional remedies, increase the minimum wage rate and extend the coverage of the section, but in no manner restricting any provision of the section or the power of municipalities under Article XVIII of this constitution with respect to the same.

Section 4111.14 acknowledges that “employee” has the same meaning as in the FLSA, but then specifically states:

“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) [the Fair Labor Standards Act] 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.

The Court rejected the employer’s argument that the “meaning” of employee is broader than the “definition” of employee under §203 of the FLSA and, therefore, the statute does not conflict impermissibly with the constitution:

Section 34a’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 Section 34a 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.

This conclusion is bolstered by the statement in Section 34a that “[o]nly the exemptions set forth in this section shall apply to this section.” This provision refutes the owner-employers’ argument that the legislature was permitted to graft exemptions to minimum wage requirements set forth in 29 U.S.C. 213 of the Fair Labor Practices Act onto the definition of an employee contained in 29 U.S.C. 203.

The dissent did not believe it was beyond a reasonable doubt that the legislation conflicted with the constitution because the meaning of employee should include the FLSA exemptions.  Nothing in §34a limits consideration of the “meaning” of “employee” to a particular section of the FLSA.   Moreover, the exemptions contained in §34a are not similarly included in the FLSA.  “Logically, the drafters of Ohio’s constitutional amendment would have specifically mentioned the existing exemptions and exclusions in the FLSA if they believed that these categories were not already excluded from the meaning of “employees” for purposes of Section 34a. Exempting one specific category of employees from Ohio’s coverage, while failing to exempt other previously-excluded categories, makes no sense.”

Unless this decision is reversed, Ohio employers could lose the minimum wage exemption for all employees and will be subject to the recordkeeping and reporting procedures that now apply to non-exempt employees.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.