The Franklin County Court of Common Pleas recently ruled in Kimberly Zurz, Director, Ohio Department of Commerce v. 770 West Broad AGA, LLC that the prevailing wage requirements, which are codified in Ohio Revised Code Chapter 4115, do not apply to a lease unless public funds are used for improvements to the leased premises. In this case, the Defendant is the owner and lessor of certain property. The Ohio Department of Rehabilitation and Correction entered into a lease agreement with the Defendant. The lease required the landlord to perform certain improvements to the property, at the landlord’s expense. The lease also required the landlord to comply with the prevailing wage laws, if applicable. The Defendant performed the improvement but did not pay prevailing wage. The Ohio Department of Commerce held that the improvements qualified as public improvement and assessed $508,458.75 in prevailing wage penalties against the Defendant, and then filed suit to collect the penalty. However, the Court disagreed with the Ohio Department of Commerce. The Court relied on the recent Ohio Supreme Court case of Northwestern Ohio Building & Construction Trades Council v. Ottawa County Improvement Corporation, which held that the prevailing wage law applies when the improvement is a public improvement and it is paid for with public funds. In Zurz, the Court applied the holding in Northwestern to leases and not just new construction. Because the improvements to the property leased to the Ohio Department of Rehabilitation and Correction were paid for with private funds supplied from the Defendant, a private property owner, the Court held that prevailing wage law did not apply and granted the Defendant summary judgment.

Submitted by Shannah J. Morris.