A divided Montgomery County Court of Appeals has determined that the Ohio minimum wage statute unconstitutionally restricted the definition of “employee” in the Ohio constitution and declared the law invalid, thereby eliminating exemptions to Ohio’s minimum wage laws.

John Haight and Christopher Pence were employed as advertising salespeople for Cheap Escape Company dba JB Dollar Stretcher, which published a coupon magazine and website for electronic coupons, and were paid mostly through commissions. In 2012, Haight and Pence sued Cheap Escape alleging they were employees of Cheap Escape and that the company failed to pay them minimum wages each week. Cheap Escape denied Haight and Pence allegations and claimed that as outside sales representatives, Haight and Pence were exempt from Ohio’s minimum wage law and had been paid properly. Haight v. Cheap Escape Co., 2014-Ohio-2447.

The Ohio Fair Minimum Wage Amendment to the Ohio Constitution, approved by voters in November, 2006, states in part that every employer is required to pay their employees a wage of not less than six dollars and eighty-five cents per hour beginning January 1, 2007 with the amount to be adjusted annually. In addition, the amendment provides that future laws may be passed to increase the minimum wage rate and extend coverage of the section, but no laws could restrict any provision of the law. The Amendment defines an employee to have the same meaning as under the Fair Labor Standards Act (“FLSA”). Haight and Pence asserted that they were Cheap Escape’s employees as defined by the Ohio constitutional amendment as well as the FLSA.

After voter approval of the amendment, the Ohio General Assembly enacted a statute which acknowledged that the amendment defined “employee” to have the same meaning as under the FLSA, but also added its own definition of “employee” which included “individuals employed in Ohio, but does not mean individuals who are excluded from the definition of ‘employee’ under the FLSA.” The FLSA specifically excludes outside salespeople from the minimum wage requirements. Hence, the statute excluded outside salespeople from being considered employees of an Ohio employer for purposes of minimum wage laws.

Haight and Pence’s appeal stemmed from their allegation that they were entitled to be paid the Ohio minimum wage even though they were outside salespeople. They alleged that the exemptions for outside sales representatives from the minimum wage requirements set forth in the statute and in the FLSA did not apply under the Ohio constitution. They argued that the definition of “employee” as contained in the amendment to the Ohio constitution was broad and did not exclude employees who are exempt from the federal minimum wage laws. They argued that the statute, by excluding outside sales representatives from minimum wage protection, was unconstitutional. In essence, they argued that by including its own definition of employee in the statute, the Ohio legislature impermissibly narrowed the definition of employee as laid out in the amendment.

The Court of Appeals determined that even if individuals such as salespeople are exempt from the FLSA’s minimum wage provisions, they remained “employees” as defined by the FLSA. The court concluded that the definition of employee is “any individual employed by an employer,” which includes outside salespeople. Hence, the court held that the Ohio legislature impermissibly narrowed the definition of employee in the statute when it excluded outside salespeople from the definition of an employee. Consequently, the court found that the statute was invalid and the judgment of the trial court was reversed. Now, the case will return to the trial court for a determination as to whether or not Haight and Pence should have received minimum wages while employed by Cheap Escape as outside sales representatives.

One judge dissented from the court’s decision, concluding that the statute did not conflict with the constitution because the meaning of employee included the FLSA exemptions. This split among the judges indicates that it is likely that Cheap Escape will appeal to the Ohio Supreme Court for a final decision.

If Cheap Escape does not appeal this decision to the Supreme Court and this decision stands, this case may have far-reaching implications. Ohio employers could lose any minimum wage exemptions for all employees and would be subject to recordkeeping and reporting procedures that currently apply to non-exempt, hourly employees. Some employees may be considered exempt employees for federal wage purposes, but would not be considered exempt employees in Ohio. As a result, employers will need to change their payroll practices and recordkeeping and reporting procedures to include all employees, not only non-exempt employees.