As a Small Business with a Home Office that Services Residential Customers, Is There Any Way to Avoid the Three-Day Cancellation Requirement of the Ohio Home Solicitation Sales Act?
January 24, 2020 | Bryan K. Penick and Ilya L. Polyakov
The Home Solicitation Sales Act (HSSA) governs the sale of consumer goods or services taking place at, or involving a visit to, a consumer’s residence even where the seller is responding to the consumer’s invitation. Any company bound by the HSSA (R.C. 1345.21), can thus be exposed to significant penalties for any violations of the act. Those penalties can include an award of triple damages under the Ohio Consumer Sales Practices Act (“OCSPA”). One common concern among business owners is the three-day right of recission (i.e. the consumer’s “right to cancel”) detailed in section 1345.22 of the HSSA. In light of that statutory requirement, Ohio businesses are of course well advised to provide their solicited residential customers with a written statutory right to cancel until midnight of the third business day (R.C. 1345.23), regardless of what services the business offers.
In practice though, this right to cancel may be impractical, causing small business owners serious concerns. These concerns could include delaying providing services to a customer or otherwise exposing their businesses to risks for jobs that need immediate attention. This constraint exposes numerous small businesses to choosing between losing customers, who are unable or unwilling to wait three days for a service or to continuously run the risk of having their sales canceled after some or all of the work was performed but before payment is made. This reality turns what had been meant as a “shield” for consumers, into a sword undermining various servicers from mold remediation to debris removal, all the way to same-day movers or installers.
There is some protection in the law however, that can help small business owners. Out of the seven exceptions to the HSSA provided under R.C. 1345.21(A), only four bear highlighting for most small business owners. Two of those exceptions can be understood without much fanfare, namely one which relates to sales “conducted and consummated entirely by mail or by telephone if initiated by the buyer” (R.C. 1345.21(A)(2)), or having the consumer “handwrite” any orders requiring “emergency” services (R.C. 1345.21(A)(5)). Both of these exceptions can of course come into play under the right factual circumstances, but more likely than not, if your business involves meeting or negotiating with a consumer at their residence, these scenarios are unlikely to be applicable.
In contrast, the remaining two exceptions relating to having a “business establishment” with “a fixed permanent location”, where “goods or services involved in the transaction are regularly offered or exhibited for sale” may be very useful to a small business owner. While the term business establishment seems very formal and out of the reach for a business run out of a home office or garage, that is not necessarily the case. Under R.C. 1345.21(A)(3) and (4), “the term ‘business establishment’ [is treated as] a flexible concept … determined on a case-by-case basis.” Professional Designs Inc. v Clark, No. 13CV005702, 2014 WL 7368642, ¶¶5–6 (Franklin Com. Pl. May 30, 2014). Thus, while the burden of proving an entitlement to these exceptions is on the seller of goods and services to a residential customer, there is no reason why a home office under the right circumstances cannot be a fixed location under the HSSA.
In distinguishing between these two related exceptions, an owner need only remember that R.C. 1345.21(A)(3) requires that the consumer negotiate at seller’s business establishment; whereas, R.C. 1345.21(A)(4), requires a business to “prove 1) that [the consumer] initiated the contact between the parties for the purpose of negotiating a purchase, 2) that [the seller] had a business establishment at a fixed location in Ohio, and 3) that the goods or services involved in the transaction were regularly offered or exhibited for sale at the fixed location.” (New Phila, Inc. v. Sagrilla, 5th Dist. Tuscarawas No. 2001 AP 040033, 2002-Ohio-3485).
Put together, this means a knowledgeable small business owner can take steps to overcome some Courts presumption that as a business establishment “should be … open to the general public[, that this necessarily means that they] must be more than a home office” (Patterson v. Stockert, 5th Dist. Tuscarawas No. 2000AP 01 0002, 2000 WL 1862842, ¶4 (Dec. 13, 2000)). In practice, that means checking off the most significant factors that Ohio Courts have used when evaluating whether a company had a business establishment at a fixed location. These three factors focus on whether the home office maintains: (i) exterior signage, (ii) is open to the public, and (iii) that any residential customer is provided with actual knowledge that they may complete the proposed sale at the seller’s fixed address. While still a factual issue likely not to be resolved on motions, by encompassing many of the arbitrary factors noted with approval by Ohio Courts, a small business is better insulated and able to demonstrate that its home office is a qualified business establishment. Indeed, if a business cannot justify the risk of three-day right to cancel, this might be the only protection from sanctions before what would otherwise be damning facts even before the same Court. (In fact, you only need to compare two decisions from the Second Appellate District in: Gallagher v. O’Connor, 2nd Dist. Montgomery No. 19702, 2003-Ohio-5095, ¶4 vs. R. Bauer & Sons Roofing & Siding, Inc. v. Kinderman, 2nd Dist. No. 13239, 83 Ohio App. 3d 53, 613 N.E.2d 1083 (Nov. 24, 1992), in order to see how much these “formalities” can radically alter the outcome of any suit against a small business owner).
There are some things a small business owner can do to protect themselves. Accordingly, a checklist for entrepreneurs with a home office should thus begin with avoiding cold call solicitations, and instead keeping a record of any initiated contact by residential customers. From there, whether it’s a basement, garage, or attached showroom, insofar as it’s possible, that portion of your home dedicated to the business should have a separate entrance through which potential customers can enter. That business area should also contain samples for the public to review, and more than a de minimus amount of supplies used in the services provided by the business. The business should have exterior facing signage, even if that relies upon stationary vehicles with the company’s emblem and contact information prominently displayed. The business should have a separate dedicated phone number and line, with the residential office address listed on the company’s website, local yellow pages, and any other advertising. All of the business’s stationery, contracts, billing statements, and promotional materials should also expressly identify the residential office address, with potential customers made aware that they may visit the office to view equipment, photos of previous work, or to execute contracts. Finally, keeping records of subcontractors, employees, vendors, and customers: (i) who visit the residential office, (ii) drop off supplies, or (iii) turn in paperwork, also serves to show your right to rely on R.C. 1345.21(A)(4) as an exception to the HSSA.
For more information, please contact Bryan Penick at 937.434.5300 or by email at firstname.lastname@example.org.