July 27, 2017

Federal legislation takes aim at cronyism

By Larry G. Salzman Senior Attorney

PLF’s Economic Liberty Project sues to protect individuals’ right to earn a living free of needlessly burdensome occupational licensing requirements. As Liberty Blog readers may recall, for instance, our client Arty Vogt was recently freed to compete in West Virginia as a household-goods mover when that state repealed its law requiring a government permission slip to expand his business from Virginia into West Virginia. We had brought a federal lawsuit challenging the constitutionality of the law.

Too often, occupational licensing laws are mere cronyism: they arise when professional groups lobby states to impose daunting, often irrelevant, training, education, or apprenticeship requirements for new workers—thereby protecting their own profits from honest competition. The problem is now out of control with more than one out of four workers in America required to have a government license to do their job. In California, that includes such ordinary occupations as tree trimmers and custom upholsterers.

It is therefore welcome news that federal legislation was introduced today that could reduce the abuse of licensing laws for protectionist purposes by state agencies—and make it easier for individuals to vindicate their economic liberty in court when they are abused.

The legislation arises in response to a 2014 U.S. Supreme Court decision that made it a little easier to sue anticompetitive licensing boards. The Court overturned a North Carolina ban on non-dentists offering teeth whitening services and said that workers shut out of the business could bring antitrust lawsuits against state licensing boards that engage in protectionism.

The “Restoring Board Immunity Act” (RBI), introduced today in the U.S. Senate by Senator Mike Lee (R-UT), co-sponsored by Senators Ted Cruz (R-TX) and Ben Sasse (R-NE), and in the U.S. House of Representatives by Representative Darryl Issa (R-CA), would give limited legal immunity from costly antitrust suits to states that enact laws restraining licensing boards from using their powers for anticompetitive purposes. The bill gives states two ways to do that.

First, states can establish comprehensive periodic reviews of licensing board activities—meaningful reviews of bureaucrats by the executive and legislative branches to detect and end anticompetitive activities.

In the alternative, states can empower their courts to place the legal burden to show that enforcement of the licensing regulations are necessary squarely on the government. This is vitally important to roll back the relentless growth of the administrative state that we have seen in recent decades.

Occupational licensing laws are easy to pass and hard to repeal: incumbent businesses and professionals get a big benefit by having their competition restricted and lobby hard for the laws; consumers, who face fewer choices and higher prices, often aren’t burdened enough to be outraged; and the upstart businesses and young workers who are out of a job rarely have enough of a voice or money to sway the political process. That leaves the courts as the last place to stop the proliferation of red tape.

But courtroom challenges to occupational licensing laws face a serious uphill battle. Since the New Deal, legal precedent instructs courts to presume that all economic regulations are constitutional and to treat dismissively evidence that any given regulation is more about protectionism than a real risk to public health of safety. The deck is stacked against anyone with the courage to protest a violation of economic liberty in a lawsuit against the government.

If states respond to the RBI by heightening standards of judicial review over occupational licensing, however, it would change that outrageous status quo by leveling the field of legal battle. Courts would no longer be tempted to rubber-stamp the actions of even the most abusive licensing boards. This would be a very welcome step in protecting individuals’ constitutional right to earn a living—PLF will be following the progress of the legislation closely.

What to read next