Legislative Wrap-Up: Labor & Employment

The General Assembly has now recessed, and lawmakers have returned to their districts to begin focusing on their fall re-election campaigns. The Senate is scheduled to be back in Columbus for two weeks beginning in late September, while the House won’t return until after the November 8 General Election.

Our Legislative Wrap-Up blog series will recap the accomplishments and also highlight a few things that the Ohio Chamber will continue to push for when the legislature returns later this year. There will be seven blog posts, each focusing on specific policy areas. Part four will cover what has been happening on the labor and employment law front.

Perhaps the most significant victory for Ohio businesses was the successful last minute push to find a way to pay off Ohio’s outstanding federal unemployment compensation debt.The Ohio Chamber, together with leaders in the Senate, House of Representatives and Gov. Kasich’s office, forged a solution that ultimately was added to House Bill 390 and passed the last day the legislature was in town. This action is projected to save Ohio employers over $400 million in 2017.

Under the plan to pay off Ohio’s outstanding federal unemployment compensation debt, the state will repay the loan using money from its unclaimed funds account. Once the federal loan is repaid at the end of September, the federal penalties that would have raised federal unemployment taxes (FUTA) paid by employers to $168 per employee next year will be removed. The removal of these penalties will drop the FUTA back to the base rate of $42 per employee.

In order to reimburse the unclaimed funds account, employers will be assessed a flat rate surcharge, expected to be approximately $45 per employee, which will be due in 2017. The loan repayment surcharge, in addition to the base FUTA of $42, will total approximately $87 per employee. This is nearly 50 percent less than the $168 per employee that employers would have otherwise had to pay if the state still owed money to the federal government in November.

Though this tax relief is a tremendous cost savings to employers and will allow you to redirect these dollars to more productive uses, the loan repayment is just the first step. More still needs to be done this fall to truly fix Ohio’s unemployment compensation system. The system, which has been insolvent and structurally unsound for years, needs comprehensive reforms to both benefit payouts and employer contributions.

House Bill 394, an Ohio Chamber priority bill that was introduced late last year, would make these much needed systemic improvements. Without them, the state and Ohio employers could find themselves in the same situation the next time there is an economic downturn. That is to say, with the state needing to borrow from the federal government to pay benefits and, afterwards, employers facing escalating unemployment compensation tax penalties.

Another positive for businesses that was the direct result of work by the Ohio Chamber came via House Bill 523. HB 523 was the highly publicized bill that legalizes medical marijuana in Ohio.

Though the Ohio Chamber did not advocate for legalizing marijuana for medicinal purposes, we did push for robust protections for Ohio’s businesses – protections that were included in HB 523. These include the ability to terminate, discipline, or refuse to hire individuals who use medical marijuana. Employers will also be able to maintain drug-free workplaces and their drug testing policies. These clear protections will help to cut down on costly litigation and ensure safe work environments.

The Ohio Chamber was also pleased to see this controversial issue handled by the legislature, rather than through yet another ballot initiative, which could have cemented the issue into the Ohio Constitution.

Another top priority for the Ohio Chamber is fixing the state’s confusing and burdensome employment discrimination statutes. Ohio’s laws are an outlier among states and also when compared to similar federal statutes, due primarily to Ohio Supreme Court decisions from the late 1990’s. In order to remedy some of these issues, the Ohio Chamber worked to have Senate Bill 268, the Employment Law Uniformity Act, introduced. This bill would improve Ohio’s employment discrimination statutes by allowing for timely, fair, and efficient resolution of claims for both employers and employees. Increasing uniformity with federal law will allow for greater predictability and consistency while maintaining robust protections for employees. SB 268 is still pending in the Senate Civil Justice Committee, but we are pushing for its passage before the end of the year.

Unfortunately, a bill that would take Ohio law in the wrong direction also required the Ohio Chamber’s engagement. Senate Bill 301, the so called Pregnancy Reasonable Accommodation Act, would require employers to “reasonably” accommodate pregnant women in the workplace. While this bill may be well intentioned, it is redundant of other federal and state laws protecting pregnant workers and its impractical requirements would create a legal quagmire for employers.

The bill would require employers with four or more employees to make “reasonable” accommodations for pregnant employees, including modified work schedules, light duty, time off, equipment changes, and private non-bathroom spaces to express breast milk. SB 301 does not require a medical recommendation or any medical necessity for the accommodation requested. The bill also requires an interactive process similar to what the Americans with Disabilities Act (ADA) requires that allows businesses and workers to discuss and come up with a reasonable accommodation. However, SB 301 upends this traditional interactive process by prohibiting an employer from requiring a pregnant employee to accept an accommodation they choose not to. This essentially gives employees veto power over the process and stacks the deck against employers.

On May 18, the U.S. Department of Labor (DOL) published its final rule updating overtime regulations. The rule more than doubles the salary an employee must be paid before being considered exempt from overtime under the “white-collar” exemptions. Though the Ohio Chamber and the U.S. Chamber submitted comments critical of the draft rule, the DOL published the rule with only minor changes. The current salary threshold to be exempt from overtime pay is $455 per week, or $23,660 annually. Effective December 1, 2016, the new threshold will be $913 per week, or $47,476 annually.

It is projected that this will affect at least 134,000 workers in Ohio and more than 4.2 million workers nationally. Further, the new rule provides for automatic increases every three years. With this significant increase in the minimum threshold, employers will be left with the tough choice of either paying employees more to get their salaries above the threshold, or reclassifying them to nonexempt status. The latter many times also means a reclassification from salary to hourly in order to properly track hours and know when overtime is due.

An Ohio Chamber supported bill that was enacted was House Bill 180. This bill prohibits a public authority from putting residency restrictions on public works projects. In recent years, several municipalities have adopted residency restrictions which inherently discriminate against Ohio-based companies. Many businesses struggle to fulfill such arbitrary residency requirements, leading to less qualified bids and thus driving up taxpayer costs through limiting competition. Further, due to constitutional issues, public authorities cannot place residency restrictions on out-of-state contractors, giving them a competitive advantage over in-state bidders.

 

Part five will cover legislation directly impacting small businesses.

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