Significant Wins for Employers Highlight Busy and Productive Six Months (June 2012)
A year ago at this time, the Ohio Chamber of Commerce was celebrating the real, significant and positive solutions to many long-ignored problems in state government that the passage of the Jobs Budget (HB 153) represented. The reforms contained in the state budget not only plugged an $8 billion budget deficit without raising taxes, but also pushed state government towards operating in a more business-like fashion with greater accountability to taxpayers. The Ohio Chamber organized a successful grassroots effort, called Ohio’s Campaign for Jobs, to advocate for the major changes contained in HB 153.
During the first six months of 2012, the Ohio General Assembly and Gov. John Kasich continued their push for more major policy changes. The legislative year started slowly, owing to the early March primary and the corresponding need for lawmakers seeking reelection to be back in their districts to actively campaign. However, the pace intensified immediately thereafter, as the governor put forward his mid-biennium budget review (MBR) plan in late March, delivering on his January pledge to propose a host of reforms designed to make the delivery of state services more manageable and efficient.
As introduced, the MBR bill (HB 487), was a comprehensive package of policy reforms in the areas of taxes, human services, local government services sharing, and veterans’ initiatives. Because of the large number and variety of issues raised, however, HB 487 was eventually divided into ten separate House bills, allowing lawmakers to undertake a more thorough review and analysis of the potential implications of the proposed reforms in each policy area.
Two other components of the MBR were initially introduced in the Senate. SB 316 contained initiatives to improve Ohio’s education system and streamline workforce training programs, while the focus of SB 315 was modernizing the regulatory framework for oil and gas operations and revising the state’s energy portfolio.
Here are a few highlights some of the successes the Ohio Chamber helped achieve for Ohio businesses, and provides a glimpse of what else of interest to employers the legislature might tackle when it returns following the November General Election.
Budget & Taxes
Four separate bills dealing with tax reform were split off from the original MBR. The first, HB 505, would offer residential taxpayers a “small claims” option to obtain a quicker ruling on the disputed value of their property and thereby avoid the current five to seven year backlog at the state Board of Tax Appeals. Under the bill, taxpayers choosing that option must waive their right to appeal a Board of Tax Appeals or state tax commissioner decision. The Ohio Chamber supports the bill, which is currently in the House Ways & Means Committee and expected to see action after the election.
The second is HB 510, a proposal to reform the tax structure of companies that provide banking, lending and other financing or credit-related services. HB 510 would eliminate the dealers-in-intangibles and bank net worth taxes and replace them with a new financial institutions tax with a three-tier rate structure. The bill passed the House, is currently in the Senate Ways & Means & Economic Development Committee, and will likely be the focus of intense legislative debate during the lame-duck session.
The last two MBR tax bills are HB 508, which enacts numerous tax administration and simplification provisions, and HB 511, which reforms the technology investment, new market and venture capital loss tax credit programs. After successfully advocating for the deletion of two provisions – one that would have increased the commercial activity tax on some Ohio businesses and another that would have denied some business owners the interest owed to them on refunds of personal income tax overpayments – the Ohio Chamber now supports HB 508. It passed the House and Senate and was signed by the governor, while HB 511 passed the House and is pending in the Senate Ways & Means & Economic Development Committee. There was not enough time for the committee to analyze HB 511 before the summer break, but there is a better than even chance an amended version of the bill will pass by the end of 2012.
A central component of the governor’s original MBR package was his proposal to modernize and increase oil and gas severance taxes, with the revenue generated earmarked to pay for a five percent personal income tax reduction. However, the proposal was removed by House Republicans from the as introduced version of HB 487, and the plan has not yet received legislative consideration.
Finally, the Ohio Chamber is a strong supporter of the legislative effort, being led by Rep. Cheryl Grossman, for municipal income tax uniformity. Both the Ohio Chamber and the Ohio Chamber’s Ohio Small Business Council (OSBC) have testified before the House Ways & Means Committee, which has held two hearings on the issue. OSBC’s presentation underscored the administrative burden and financial costs small businesses must unnecessarily incur in complying with the different withholding and taxation requirements of the many cities where they do business. It is expected that the House Ways & Means Committee will hold several additional hearings on municipal income tax uniformity over the summer, and that legislation addressing this issue will be introduced later this year.
A major element of the Ohio Chamber’s ambitious public policy agenda for this legislative session was the restructuring of economic development in order to grow existing Ohio companies and attract new business investment. That’s why the Ohio Chamber supported the first step in Gov. Kasich’s effort to restructure the state’s economic development functions and programs, HB 1, which was enacted in 2011 and created the public/private economic development entity known as JobsOhio.
The Ohio Chamber also supported the second step, SB 314, which passed in June and redirects to the new Development Services Agency the responsibility for managing many of the programs administered by the former Ohio Department of Development. These programs include the Minority Business Enterprise Loan Fund and the Capital Access Loan Fund.
Two measures supported by the Ohio Chamber grant specific tax credits or grants to help businesses locate and invest in Ohio and were passed into law this spring. HB 18 authorizes a state grant of $500 per employee for companies that lease or purchase vacant commercial space and increase their payroll by hiring new workers or hiking the pay of current ones. HB 327 allows companies that employ at least 200 home-based employees who are paid at least 131 percent of the federal minimum wage to be eligible for the state’s job creation tax credit.
Included in the substantially leaner version of HB 487 was a one-year extension of the enterprise zone property tax exemption program. The Ohio Enterprise Zone program is an economic development tool that provides real and personal property tax exemptions to businesses making investments in Ohio. The extension, through October 15, 2013, was supported by the Ohio Chamber.
Energy & Environment
Early June saw a major victory for Ohio businesses with the passage of HB 473, legislation implementing the Great Lakes Basin Compact. HB 473 was the second attempt at enacting such a bill; the first attempt was vetoed by Gov. Kasich last year. The bill establishes the first-ever permitting program – necessary to bring Ohio into compliance with the Compact – for water withdrawals from the Lake Erie basin.
The Ohio Chamber led the push for HB 473, overcoming a campaign of misinformation from environmentalists seeking to use the bill as a venue to pursue regulations beyond what is required under the Compact. HB 473 is a common sense approach to water conservation, which strikes a reasonable balance between safeguarding Ohio’s water resources and ensuring businesses can continue to have access to water necessary to foster job growth and economic development.
Two years ago, the Ohio Chamber partnered with the Ohio Oil and Gas Association to support legislation (SB 165) that addressed health, safety and social issues related to oil and gas development. With Ohio now potentially on the threshold of an economic renaissance due to the opportunities associated with the exploration and development of the Utica shale formation, the energy MBR (SB 315) builds on this previous effort, making further updates and revisions to oil and gas regulations. The bill provides the oil and gas industry with regulatory certainty and predictability while also protecting public health and safety and the environment. It does so by creating some of the most stringent regulations in the country. SB 315 also makes changes that will help utilities meet Ohio’s renewable energy standards and expands opportunities for waste energy recovery and cogeneration. These two technologies capture waste heat produced during manufacturing processes and recycle it to generate electricity, offering the potential for clean power, energy cost savings, and new jobs.
An Ohio Environmental Protection Agency (Ohio EPA) bill, SB 294, contained comprehensive statutory updates designed to make the agency more efficient and effective. One particular provision that expands confidentiality protections for small businesses seeking compliance assistance was enthusiastically supported by the Ohio Chamber. Businesses that need help in navigating the myriad of environmental regulations and voluntarily go to Ohio EPA’s Office of Compliance Assistance and Pollution Prevention (OCAPP) are now ensured of protection from liability for non-compliance with all regulatory programs. Also included in SB 294 is an in-lieu wetland mitigation bank program that will allow businesses to mitigate their wetland impacts by buying into a wetland bank rather than doing mitigation themselves.
Another Ohio Chamber-backed bill enacted this year was SB 302, which updates and expedites the procedures solid, hazardous and infectious waste industries utilize to conduct mandatory employee background checks.
In March, the U.S. Supreme Court dedicated three days for oral arguments concerning challenges to the constitutionality of the Patient Protection and Affordable Care Act (ACA), the comprehensive federal health care reform legislation passed by Congress in 2010.
Along with 14 other state chambers and business organizations, the Ohio Chamber filed an amicus brief in the case, arguing that the U.S. Anti-Injunction Act does not bar the Supreme Court from ruling on the constitutionality of the health care law. The Anti-Injunction Act bars pre-enforcement challenges to tax law and, due to the fact that the penalty faced by individuals who fail to obtain health insurance isn’t first assessed until 2015, the Ohio Chamber is concerned the Court could determine that the Act precludes it from issuing a ruling until a penalty has actually been levied. In its amicus brief, the Ohio Chamber argues that leaving the legal status of the law in limbo for several more years will “affect the ability of businesses to hire and retain new workers” and that employers “will bear tremendous administrative and economic costs from the uncertainty that will be created” should the Court delay its ruling. The Court is expected to release its ruling on the ACA the last week of June.
Whatever the Court decides, the Ohio Chamber is preparing to work with state policymakers, either on implementing provisions required by the law if it is fully or partially upheld, or on coming up with an Ohio solution to the rising cost of health care should the law be found unconstitutional.
Legal & Business Regulation
Establishing a predictable and fair civil justice system is always an Ohio Chamber priority, as it is a key aspect of a competitive business climate. Several positive developments occurred in 2012 that contributed to building or maintaining such a system for Ohio businesses.
Employers now have a useful new tool for quickly resolving Consumer Sales Practices Act (CSPA) lawsuits filed against them, thanks to a bill the Ohio Chamber strongly supported, HB 275. The new law gives businesses the opportunity to offer a reasonable settlement, known as a “right to cure”, to a person who has filed a lawsuit alleging a violation of the CSPA. It encourages the suing party to accept a cure offer, and also incentivizes plaintiffs’ attorneys to more realistically value their cases.
The company’s cure offer to the allegedly aggrieved consumer must be financial compensation and an offer to pay attorney fees, up to $2,500. If the consumer does not accept, proceeds with litigation and is awarded damages less than the cure offer, then the company will not be liable for the consumer’s court costs and attorney fees after the date he or she received the cure offer. The company will also not be liable for triple damages.
Also becoming law was SB 202, legislation that will protect businesses and other private landowners from lawsuits from trespassers. SB 202 codifies Ohio’s current common law that landowners owe no duty of care to trespassers, except for certain narrow exceptions.
The bill was necessary because the American Legal Institute’s (ALI) Third Restatement of Torts would have drastically broadened the duty landowners owe to trespassers, opening up more lawsuit-generating possibilities for the plaintiffs’ bar. Restatements are intended to reflect existing principles of law and, while they do not have the force of law by themselves, attorneys often cite them when arguing a case. Courts also often look to these restatements when developing case law.
Seeking to protect commercial and residential property owners and to prevent judges from giving trespassers unwarranted protections, the Ohio Chamber actively advocated for SB 202.
A third piece of legislation updates Ohio’s previously uncompetitive statute of limitations for written contracts, which was long overdue for modernization. Ohio was one of just two states that had a 15-year long statute of limitations. Originally enacted in 1803, this timeframe put employers at a great disadvantage when sued. SB 224 reduces down to eight years the time frame in which an individual can sue based on a written contract, meaning businesses will no longer be burdened with keeping all relevant records of written contracts going back as far as 15 years.
One other legal reform issue is still pending in the legislature. Back in 2004, Chamber-backed legislation (HB 292) was enacted that reformed the way asbestos claims are litigated in Ohio. Now, additional reforms are being sought that will bring further transparency and efficiency to the process of resolving asbestos claims. HB 380 requires asbestos plaintiffs to file their claims against asbestos trusts before seeking additional compensation against businesses in court. It will ensure business defendants have access to exposure information contained in the plaintiffs’ asbestos trust claim and minimize the likelihood of double recovery.
It wasn’t just in the legislative arena, however, where Ohio’s civil justice system was strengthened. In February, the Ohio Supreme Court in Havel v. Villa St. Joseph upheld an important piece of the comprehensive Ohio Chamber-backed tort reform bill (SB 80) enacted in 2005.
The challenged portion of the law allows any party in a civil action that contains a claim for both compensatory and punitive damages to request the court to split, or bifurcate, the trial so the issue of compensatory damages is tried separately from the issue of punitive damages. Because of the Havel holding, the decision whether or not to award compensatory damages at trial will continue to be untainted by evidence as to why a jury should also penalize a defendant with punitive damages, thus keeping jury awards from being unjustly inflated.
HB 484, short-time compensation legislation supported by the Ohio Chamber, was passed by the House and awaits consideration in the Senate. The bill allows employers, instead of resorting to full layoffs, to reduce the hours of employees on a temporary basis. Participating employees can continue to work and receive wages while also drawing pro-rated unemployment compensation. Participating employers will benefit because they will be able to retain their skilled workers, instead of losing them during a slowdown and having to hire and retrain new employees once business picks up. Federal funding is available to cover the program’s start-up costs and operational expenses for three years.
One of Bureau of Workers’ Compensation (BWC) Administrator Steve Buehrer’s stated goals is for the BWC to provide quicker medical treatment to injured workers, in order to enable them to return to work sooner. Earlier this year, the BWC rolled out a new “cafeteria” style program for employers, aimed at incentivizing workplace safety, accident prevention and return-to-work opportunities. Called “Destination: Excellence”, the new plan, effective July 1, should expedite injured workers’ return to employment while providing rate discounts to employers.
While the BWC is pursuing Administrator Buehrer’s goal by making as many administrative improvements as possible, some statutory changes are also needed. To this end, three workers’ comp reform bills, HB 516, HB 517, and HB 518, were introduced in April. HB 516 and HB 518 primarily address administrative procedures, while HB 517 expedites medical treatment for injured workers to help them return to work faster and healthier. Such an outcome would also benefit employers by allowing them to better manage their workers’ comp costs. Unfortunately, the trio of bills was scuttled, at least temporarily, by hysterical cries from labor and plaintiff attorneys claiming that HB 517 is “an attack on workers” – despite the fact the legislation would provide help to injured workers. The Ohio Chamber will continue to advocate for the passage of these common sense bills.
The Ohio Chamber was successful in getting an amendment added to HB 487 reversing a rule change made under the prior BWC administrator. The rule had been changed so an injured worker who lost a body part through amputation or loss of use would be paid the full amount of compensation in one lump sum, instead of in weekly installments according to a schedule set forth in statute.
The amendment to HB 487 clarifies that loss of use payments are to be made in installments, not as a lump sum. Its impact is that employers won’t be required to pay an entire award upfront, thus preventing potential cash-flow issues. Plaintiff attorneys who benefitted from the previous rule change and get paid on a contingency fee basis on any lump sum payout opposed the Ohio Chamber’s amendment.
SB 316, yet another MBR bill, makes changes to the composition and operation of the State Workforce Policy Board. Under the bill, the board would be comprised of only nine voting members, the majority of which must be business members, and the responsibility for administering the state’s workforce development system would be transferred from the director of the Department of Job & Family Services to the Workforce Policy Board. In addition, Gov. Kasich created via executive order an Office of Workforce Transformation and charged it with making the state workforce development system more efficient and responsive to employer needs.