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State Licensing Laws Are Mostly Awful; Sen. Mike Lee Might Have a Solution

Licensing laws are mostly a state issue, but a 2014 Supreme Court decision gives the federal government a role to play too. Lee is seizing the opportunity.

State licensing laws are a mess.

They limit the freedom, opportunities, and happiness of American workers—particularly those on the lower end of the economic scale.

These are the laws that say a woman in Louisiana can't earn a living by threading eyebrows unless she takes 750 hours of classes in unrelated beauty skills and passes a state exam. The laws that say it's illegal to get paid to talk about the history of Charleston, South Carolina.

They are the laws that say you can go to jail for massaging a horse in Tennessee unless you've had years of veterinarian schooling, that get state officials to launch investigations of barber school students giving haircuts to the homeless, or, as happened last week, that result in a police officer body-slamming a California woman for the "crime" of selling flowers without a state-issued permission slip.

In some cases, though, these laws themselves might be illegal.

The Supreme Court in 2014 overturned a North Carolina Board of Dental Examiners ban on non-dentists offering teeth whitening services. The ruling opened the door to lawsuits against state-level licensing boards that behave like private-sector monopolies by enforcing anti-competitive rules against their very own potential competitors.

In that case, the court ruled licensing boards are in violation of federal antitrust laws if they engage in openly anti-competitive practices—potentially putting state boards on the hook for huge payouts—but the ruling also created significant questions, including how states could bring their licensing boards to heel and secure immunity from similar lawsuits.

Sen. Mike Lee, R-Utah, on Thursday will introduce a bill that would give states two paths to immunity. The first by bringing state licensing boards under direct supervision by the legislative and executive branches. The second by requiring states to show why a certain licensing requirement is necessary to protect public health and safety.

Lee's "Restoring Board Immunity Act" creates a limited, conditional exemption shielding licensing boards from federal antitrust lawsuits, but only for states that change how their licensing boards operate and how courts handle disputes between those boards and individuals subjected to their rules.

"There is a natural tension between federal antitrust law and state licensing boards," says Lee. "This bill would provide some much needed certainty for states, professionals, and consumers while expanding freedom for all."

The new bill is an attempt to expand on Lee's ALLOW Act, which he introduced last year and re-upped earlier this session. That proposal would apply only to federal enclaves—places like Washington, D.C., military bases, and national parks—and would allow licensing laws "only to those circumstances in which it is the least restrictive means of protecting the public health, safety or welfare."

Like the ALLOW Act before it, the RBI Act is being welcomed by licensing reformers.

Jeff Malet Photography/NewscomJeff Malet Photography/NewscomThe bill "has the potential to really advance cause of occupational licensing reform," Robert Johnson, an attorney with the Institute for Justice, a Virginia-based libertarian law firm that has a long track record of challenging onerous occupational licensing laws, told Reason.

Disputes over licensing laws have attracted more attention in recent years, but the problem is decades old. One out of every five jobs in this country require some form of government permission slip. One in every 20 jobs required one in 1950.

Licensing laws limit economic opportunities for all workers, but vulnerable populations are hit harder. A 2015 report by the Department of Labor and the White House Council of Economic Advisers found immigrants, people with criminal convictions, and low income workers are most likely to be rejected when applying for a state-issued license.

Special interests are the main beneficiaries, since licensing laws can be used to limit competition in a certain professional market. "Empirical work suggests that licensed professions' degree of political influence is one of the most important factors in determining whether states regulate an occupation," the White House report concluded.

Bipartisan consensus on licensing has sparked some state-level reforms that mirror Lee's proposal. Reason in March reported passage of a major occupational licensing reform law in Mississippi driven by concern over antitrust immunity.

The bill, signed by Gov. Phil Bryant in April, navigates the two-part test created by the Supreme Court's North Carolina Board of Dental Examiners ruling by requiring the state's licensing boards to submit new rules to the governor, secretary of state, and state attorney general for approval. In theory, this satisfies the requirement that such boards are "actively supervised" by the state government.

Those reforms could meet the Supreme Court ruling standards, but will state officials truly be supervisors or merely board rubberstamps?

Lee's bill would ensure it was the former. In the case of "active supervision" licensing boards would not only be subject to executive or legislative oversight, but would be subject to periodic review by state officials.

States would have to pass legislation requiring lawmakers to conduct comprehensive reviews of their licensing boards every five years. Those would include a cost/benefit analysis and an assessment of any new licensing rules created since the last review.

States unwilling or unable to pass major reform could still receive immunity from anti-trust rules by creating a statutory affirmative defense placing the burden of proof in license enforcement actions on the state. A licensing board would have to prove why enforcement is necessary.

Most licensing laws are currently given rational basis review—the lowest level of legal scrutiny. A state only has to show a law or rule is "rationally related" to a legitimate government interest. Lee's proposal would push states to impose "intermediate scrutiny" on licensing laws.

This change would make it easier for individuals victimized by unfair licensing laws to challenge them in court.

"The lax rational basis test is the biggest hurdle that plaintiffs face when challenging occupational licensing laws in court," says Anastasia Boden, an attorney with the Pacific Legal Foundation, a nonprofit with a track record of challenging state licensing laws. "If courts were forced to actually evaluate whether a law serves the public interest, rather than turning a blind eye to the facts, victims of government overreach would stand a better chance of vindicating their rights through constitutional lawsuits."

This an element of the bill that might face opposition in Congress, in part because of a long-running conservative legal dispute over how courts should scrutinize government actions accused of violating due process, something that has little, if anything, to do with occupational licensing laws.

Another criticism of the bill could be launched by ardent defenders of states' rights, asking whether Congress should be involved in fixing these state problems. That die has, however, already been cast. The North Carolina Board ruling expressly acknowledges a role for the federal government to challenge licensing boards' anti-competitive behavior. Lee's bill is an attempt to simultaneously address legal uncertainty, lower barriers to work, enhance economic opportunity, and expand consumer choice.

In a hyper-partisan environment, fixing onerous licensing laws is something almost everyone agrees upon.

Research from Morris Kleiner, a labor economist at the University of Minnesota, and the Heritage Foundation, a conservative think tank, shows American households pay between $400 and $1,500 more annually for goods and services because licensing laws distort prices. Licensing laws take more than 3 million jobs out of the economy, according to research from the Brookings Institution, a center-left think tank.

"It's well documented that licensing increases prices for consumers, but we don't have a lot of evidence to show that it increases the quality of service for consumers," says Edward Timmons, a professor of economics and director of the Center for the Study of Occupational Regulation at St. Francis University in Pennsylvania.

The Federal Trade Commission, which successfully challenged the North Carolina Board of Dental Examiners' teeth whitening regulations, is supportive of the bill, acting chairman Maureen Ohlhausen told Reason. The commission recently launched an Economic Liberty Task Force to help states fix problematic licensing laws.

"It furthers the same goals as the FTC's Economic Liberty Task Force: promoting competition, innovation, and economic opportunity," Ohlhausen said. "It also encourages states to pursue occupational licensing reform and preserves the FTC's ability to seek injunctive relief for serious antitrust violations."

Sens. Ben Sasse, R-Nebraska, and Ted Cruz, R-Texas, who worked as an attorney for the FTC prior to running for Congress, have signed onto the bill as cosponsors. Other cosponsors might be added to the bill after it is introduced.

"I'm excited to see members of Congress tackling this issue," says Johnson, the attorney with IJ. "You shouldn't need a government permission slip to earn a living."

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Fist of Etiquette||

    ...requiring states to show why a certain licensing requirement is necessary to protect public health and safety.

    Forcing bureaucracy to justify itself? Do we really want to start down that slippery slope?

  • ThomasD||

    This. I am profoundly sympathetic to the goal. But the path to Statism is paved with good intentions. So I remain very skeptical.

  • JFree||

    I'm not even sure I see the good intentions here. All I see is rationalizing the intrusion of the feds into licensing and that cannot possibly have good intentions.

  • Leo Kovalensky||

    I think it's a step in the right direction to at least force these licensing boards to justify their existence. Many of them probably can through lies and deceit, it will at least be laughable to witness it! One would hope that most of their claims can be refuted and there would at least be a legal way out of the restrictive licensing requirements.

  • Rogers1234||

    If the states won't protect out right to work without government permission, who will?

  • HeteroPatriarch||

    The Consumer Financial Protection Bureau?

  • loveconstitution1789||

    The better solution: Get rid of all mandatory licensing.

    As in the private sector, voluntary certifications would allow consumers to find experts in their field who are certified above their peers.

  • Liberty =><= Equality||

    Better, maybe. Politically possible, no. Licensing regimes for doctors, pilots, pharmacists and other life-or-death professions are not going away and probably shouldn't.

    Lee is smart for offering a palatable compromise that gets closer to that ideal.

  • ||

    When was the last plane crash that was flown by a unlicensed pilot?

  • loveconstitution1789||

    Even the 9/11 hijackers were licensed pilots.

    Marwan al Shehhi and Mohamed Atta took practice flights right here in Georgia.

  • SQRLSY One||

    I hired an unlicensed lawn mower-dude some years ago, and he nicked my brand-new treated-wood walkway, which I then had to repaired.

    CLEARLY we need 10,000 course-hour requirements and board certification and licensing of lawn mowers!!!!

  • Bob K||

    1908 - Orville Wright, Kitty Hawk, NC?

  • ||

  • Brandybuck||

    I have a flying license signed by Ron Swanson.

  • Jickerson||

    and probably shouldn't.

    That's not justifiable from a libertarian standpoint.

  • $park¥ leftist poser||

    The first by bringing state licensing boards under direct supervision by the legislative and executive branches.

    Quite a libertarianish idea.

    The second by requiring states to show why a certain licensing requirement is necessary to protect public health and safety.

    To whom?

  • SQRLSY One||

    "To whom?"

    To their already-licensed competitors, of course! Who else!?!? The already-licensed competitors are the "experts", so of course, THEY should call the shots!

    (I am a licensed advisor on how best so scratch one's own behind, just FYI, so I know ALL about this stuff).

  • ||

    Presumably to a federal judge.
    The rule opens the door to state licensing laws to be challenged in federal court on the grounds that they aren't protecting public health and safety in some way, and aren't doing it in the least restrictive way.

    I.e. if the safety issue could be addressed by requiring liability insurance or through some other less restrictive regulation, then the licensing scheme would be deemed unlawful.

  • JFree||

    The rule opens the door to state licensing laws to be challenged in federal court

    I read it the exact opposite way. State licensing boards now have an exemption from anti-trust law if they follow a teeny bit of bureaucratic nonsense (and you can bet that licensing boards know how bureaucrats can cover their own asses). In effect, that means potential plaintiffs lose their standing in court so it will turn into an exemption that looks like baseball's anti-trust exemption

  • ||

    I agree that's a valid concern, but it looks like supporters of occupational licensing reform are on board with it. I think the language about "least restrictive means" is important. The state licensing boards can't simply cover the licensing regime with a fig leaf excuse, they have to prove that licensing regime is less restrictive than anything else they could have done, which is a much higher barrier. The language mirrors federal SCOTUS precedents wherein restrictions on basic liberties must use the least restrictive means possible, instead of merely the "rational basis" test, which applies to general regulation under the commerce clause. In other words, the "least restrictive means" language essentially classifies freedom to enter an occupation as a fundamental liberty alongside freedom of speech and religion.

  • Robert||

    They already appeared to have such an exemption. This rule limits that exemption.

  • creech||

    Seems like everything could be shoehorned under the interstate commerce clause, as widened by numerous SOTUS cases over the years. Heck, those barber scissors and electric clippers were probably made out of state and by not letting Joe Smith cut hair without a license, you are harming interstate commerce.

  • ||

    I'm thinking equal protection clause personally, or maybe due process. The idea is that the freedom to enter an occupation of one's choice is a liberty interest and a civil rights issue.

  • SQRLSY One||

    Hey you Creechy Creetchure-Feature U,

    Don't cha know, the SCROTUS has already determined that the Interstate Commerce clause can ONLY be used to advance the interests of Government Almighty, and NOT for individual-duh freedom?!??

    For example, nose-blowing affects the Interstate Commerce in booger rags, so therefor, a nose-blowing-regulating Government Almighty agency is totally par for the course!

    Interstate Commerce applied to individual-duh freedom, what kinda talk is THAT!?!? If that happened, the Local Galactic Cluster might implode!!!!

  • Tionico||

    Bull roar. Whether Barber Joe or José has a ticket in his pocket to cut har has naught to do with the price of the clippers that MIGHT have been made with a bit of steel that moved between two states in "commerce". That is a bogus interpretation of the ICC anyway. That is a mandate to FedGov to make sure trade between the states is not restricted.. that it is "made regular", or to function as it ought. Ever since Filburn (1938 or so, I think) FedGov have abused the ICC in many ways, meanwhile failing to take action when stupid states like California restrict interstate commerce by mandating SPECIAL requirements for pollutioin devices on their cars, prohibing certain firearms they've not yet got round to "approving" for ownership in that state, prohibitint any shipments of ammunition into the state, except to certain "special" people, mandating their insane "known to the state of California to cause cancer" labels, special requirements for how egg laying chickens must be kept, mandating emissions controls to be fitted to ALL trucks operating on their roads, and on all statioinary power equipment sold or used in the state, and on and on.

  • Cynical Asshole||

    "It furthers the same goals as the FTC's Economic Liberty Task Force: promoting competition, innovation, and economic opportunity," Ohlhausen said.

    It's kind of sad that the government has to set up a commission to promote those things. Seems like if they really wanted to promote "competition, innovation, and economic opportunity" they could just leave people the fuck alone.

    I know, I know: that's crazy talk.

  • Rhywun||

    Too bad "competition" means "doling out tax breaks to favored corporations", "innovation" means "'free' public broadband that goes out of date in a year", and "economic opportunity" means "quotas for women and minorities".

  • Tionico||

    and an overwhelming government penchant for such overbraring nannyism is precisely WHY we kicked the Brits outta here some 240 years ago.
    That same spirit is alive and well today, and stronger than ever it was under George Three the Kid King.

  • perlchpr||

    "You shouldn't need a government permission slip to earn a living."

    Amen.

  • mashed potatoes||

    Reason posted this on FB and the comments under it there are off -he-wall freaking out.. this will kill people and might as well make 5 year old work in mines, sort of stuff. depressing..

  • ThomasD||

    Well, yeah, but what are the downsides?

  • Tionico||

    downsides? We doan need no steeeeenkeeeeng downsides.

  • EscherEnigma||

    Well let's be honest. Decreased licensing, safety and so-on legislation/regulation probably will result in some deaths, maimings, chemical burns, and so-on.

    So the question shouldn't be "will safety risks increase". It's "will safety risks increase within acceptable limits".

  • Leo Kovalensky||

    The question should be, would you give up a large amount freedom for a very small (probably immeasurable) assurance of safety?

    Sorry for paraphrasing the famous quote into a question...

  • SQRLSY One||

    Decreased licensing does NOT usually lead to better outcomes! There was a study of US Air Force recruits dental health (incoming into the service) that compared dental health of highly regulated v/s lightly regulated states. All that licensing gets us, is higher costs! See https://thinkprogress.org/how-stringent-should- dentist-licensing-be-e6af0e547157 ... for example... (Marry the 2 fragments of the link together please).

  • macsnafu||

    A: Personal liberty
    B: Certification instead of licensing.

    There's no particular or inevitable reason that safety risks should increase. If consumers demand safety, private certification might well be tougher than government licensing, at least in some cases. But shouldn't that decision lie with the individual consumer than with politicians or bureaucrats?

  • Tionico||

    Since WHEN is government's job to 'keep us safe" or "protect us from harm/injury? No, its job is to protect our RIGHTS.... rights like that of free association (I can arrange for anyone I want, to perform any task I need performed, at any price we both agree upon, gummit got nuttin ta say). NOW< if Joe the Barber is careless, does not maintain his equipment as he ought, cuts off my earlobe or gets generous with a previous victim's bad case of head lice, then I have some recourse in the already existing courts. If I hire a deadbeat to put up that two bedroomo addition I've been wanting, my bad.... check out the one I'm wanting to hire. Things like Yelp might help here. Or friends who may have hirred him. The county building inspectors are SUPPOSED to be there to make sure it got built properly. Aren't they? (if not WHY do they exist? Fire them,save the money, and I can hire my own private insepctor who is likely kore intent on my getting a quality job than the county dweeb. And if the roof leaks next winter, and Joe or Johnny the Carpenter can't won't fix it, I can sue for the cost to get it done properly. WHich I still have to do in spite of Joe/Johnny being licensed, bonded, insured, registered, inspected... but NO licensing scheme can determine his character.

  • ||

    Actually 100% of jobs require a government permission slip. See E-Verify and immigration law. You're not allowed to have a job unless you can prove legal residency.

  • Amazed||

    Trying to get rid of state law by making more federal law. From Reason? And you see no irony in that?

  • ThomasD||

    The Reason version of libertarianism is kinder gentler statism,

  • Rogers1234||

    Somebody has to protect our liberties

  • EscherEnigma||

    I've been under the impression that libertarians/Libertarians are less concerned with federalism then they are with overall "liberty"†. So in the context of "federal, state, local", they're fairly consequentialist in that while they have their preferences, they'll accept federal or state legislation if it increases overall liberty via supremacy.

    Unless they're uncompromising purists, in which case you can't make them happy anyway.
    ________
    †However they're defining it in a given context.

  • Longtobefree||

    So here is the enigma - I am a libertarian, what you would call a purist, and happy.

  • JFree||

    Reason is 'Top Man' libertarianism.

  • Jickerson||

    There's nothing inherently good about state law, especially if it conflicts with individual liberties.

  • Longtobefree||

    I notice lots of comments changing the phrase "the public health, safety or welfare." to just health and safety. Be advised that 'public welfare' is the magic key to anything and everything an imaginative bureaucrat can come up with.
    Best that the law drop that phrase.

  • Uncle Jay||

    RE: State Licensing Laws Are Mostly Awful; Sen. Mike Lee Might Have a Solution

    "The Supreme Court in 2014 overturned a North Carolina Board of Dental Examiners ban on non-dentists offering teeth whitening services. The ruling opened the door to lawsuits against state-level licensing boards that behave like private-sector monopolies by enforcing anti-competitive rules against their very own potential competitors."

    Isn't that function of our beloved and judicious elites oppressing us?
    To ensure the little people of this country do not wander off Uncle Sam's plantation and start making money on their own and become independent of The State?
    Plus, if these untermenschen don't pay outrageous fees for needless permits and licenses, how in the world will the bureaucratic machine pay for itself?
    Did anyone stop to think of the horrible consequences of non-licensing?

  • Tionico||

    most likely consequence or non-licensing is for a bunch of unemployed former nannycrats to be holding their hands out for their welfare payments and food stamp cards...... a burden for a while, but that, too, will pass.

  • macsnafu||

    Is this supposed to be one of those "compromise" things that libertarians are supposed to make, on the theory that half a loaf is better than no loaf?

    In short, the intent of the law is great, but can we count on the Feds to do it right and not have unintended consequences? I think not. Still, if it gets more people to think about the unfairness of licensing, then it might indeed prove a stepping stone towards getting rid of licensing in favor of certification.

  • AD-RtR/OS!||

    "You shouldn't need a government permission slip to earn a living."

    In a country dedicated to Liberty & Freedom that may be true, but it seems that ship sailed away long ago in the Progressive States of America.

  • AD-RtR/OS!||

    "You shouldn't need a government permission slip to earn a living."

    In a country dedicated to Liberty & Freedom that may be true, but it seems that ship sailed away long ago in the Progressive States of America.

  • Eman||

    Is this article basically arguing that centralization is just dandy, as long as our intentions are pure? Why couldn't some mass of like-minded morons appoint a few of hemselves to, say, check out all the food that is grown on or imported into any member's property?

  • Eman||

    ...Or am I missing something?

    -A.N.

  • Skipper||

    What would stop the same trade restriction artists from capturing these "new" licensing agencies? Nothing, I bet.

  • klesb||

    Licensing is one way to restrict competition, but uncontrolled "certifications" are another! And, they are becoming more widespread and expensive to those both already in a field of endeavor or who want to enter it!

  • Jimbino||

    Over the past 50 years, I've been in charge of design, testing and documentation for bombers, fighters, ICBMs, doomsday communications and nuclear weapons triggers. I've never been required to be licensed. Licensing requirements are anti-social and need to be eliminated, as both Adam Smith and Milton Friedman pointed out.

  • R. K. Phillips||

    I much prefer that the state prove that I'm not competent if I operate unlicensed.

  • mysmartstuffs||

    Actually 100% of jobs require a government permission slip. See E-Verify and immigration law. You're not allowed to have a job unless you can prove legal residency.
    My recent post: Explaindio ONE Review
    My recent post: Eezygram Review

  • mysmartstuffs||

    "You shouldn't need a government permission slip to earn a living."

    In a country dedicated to Liberty & Freedom that may be true, but it seems that ship sailed away long ago in the Progressive States of America.
    My recent post: Marketers Madness Review

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