Occupational Licensure Boards: On the Defense after SCOTUS Ruling?

Around the country, states have imposed licensure requirements on a large number of professions, effectively requiring workers to seek government permission—and pass through a number of bureaucratic hurdles—in order to practice their chosen profession. Whereas in the 1950s only one in 20 U.S. workers were required to obtain a license, that figure today stands at almost one in every three workers.

For each licensed profession, state legislatures usually authorize and empower a governing board, comprised in most cases of members of that same profession. For example, in Utah, the licensure of chiropractors is regulated by a board made up of four chiropractors and a token “public member” who is not a member of the industry. Nurses are regulated by a board comprised of nine fellow nurses and two public members. Direct-entry midwives are overseen by four licensed people from the profession and one “public member.” The trend holds constant for the other several dozen licensed professions in Utah.

That trend may soon change in light of a U.S. Supreme Court opinion issued in February that may put these boards on the defense. The case at hand, North Carolina State Board of Dental Examiners v. FTC, arose due to the dental board—comprised primarily of dentists—engaging in non-competitive behavior and being sued by the Federal Trade Commission. Specifically, the board attempted to prohibit non-dentists from providing teeth whitening services, presumably because this competition undermined their monopolistic hold on the market.

The board argued that it was immune from prosecution as an arm of the state government, but the Supreme Court justices disagreed. While state legislatures have been permitted under federal law to engage in anticompetitive activities, non-state actors have only been afforded the same immunity if the state authorizes the policy and provides (a vaguely defined) “active supervision.” As the opinion states:

When a State empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest.

This ruling exposes licensure boards in Utah and elsewhere to legal action, including potential criminal penalties.

The operative question in light of the Supreme Court cases is what amount of supervision is “active” and therefore would shield such boards from the legal exposure they might otherwise face. This remains unclear, suggesting the importance of being proactive and thorough in ensuring that the Utah legislature has provided adequate and substantive oversight of authorities granted to licensure boards and their professional counterparts such as the Real Estate Commission.

Licensure should be repealed—or at least moved to voluntary certification—for professions that do not substantially impact public health or safety. This would immediately reduce the overall legal exposure taxpayers might face, being on the hook for challenges to licensure boards. For those that are deemed to merit ongoing licensure, the following steps might be taken to provide “active supervision” to members of such boards:

• Expand licensing boards to include a greater percentage of non-industry “public members.”
• Have all public members be appointed by the Occupational and Professional Licensure Review Committee (OPLRC).
• Require boards to produce a detailed annual report regarding the board’s activities, and have the board chairperson present the report to the OPLRC and respond to committee questions.
• Empower the OPLRC with veto authority over any action performed by a licensure board.
• Create the office of Occupational and Professional Licensure Ombudsman and task this person to: 1) operate with a presumption of economic competition; 2) conduct ongoing and thorough reviews of the actions of state licensing and professional boards; and 3) analyze state licensure laws and provide recommendations to the OPLRC regarding how licensure burdens can be reduced.

While licensing boards in Utah generally deal with disciplinary matters for industry members alleged to have engaged in unprofessional conduct or other activity which violates the terms of their license, their actions at times have the effect of interpreting and setting policy. One example which received significant attention is that of Jestina Clayton, who was brought before the cosmetology board for offering African hair braiding services without obtaining a license—despite the fact that the law did not actually require this, and that cosmetology schools in Utah (that Clayton would have been required to attend for 2,000 hours) don’t even teach African hair braiding.

Clayton, represented by the Institute for Justice, sued the state and won, leading to legislative changes in the following session that fully exempted hair braiders like Clayton from needing licensure.

That lawsuit cost Utah taxpayers some $200,000 between paying Institute for Justice attorney fees and costs incurred by state attorneys defending the licensing board’s actions. Especially in light of the U.S. Supreme Court’s ruling in the Dental Examiners case, taxpayers should feel some anxiety towards the potential liability they collectively face in having to pay for similar litigation in the near future. As such, the legislature should proactively implement “active supervision” to ensure boards are acting within the scope of their authority and only making decisions in legitimate furtherance of public health and safety.