Examining the Right to Earn a Living Act, part 8

Having established the whats and the whys of structural reform of occupational licensing, the Right to Earn a Living Act next turns its attention to how. The next two sections would implement the act’s more comprehensive approach to occupational regulation, in order to protect — in the public interest — everyone’s fundamental, inalienable right to earn a living in their chosen profession:

Section 4. {Limitation on Entry Regulations.}
All entry regulations with respect to businesses and professions shall be limited to those demonstrably necessary and carefully tailored to fulfill legitimate public health, safety, or welfare objectives.

Section 5. {Limitation on Public Service Restrictions.}
All public service restrictions shall be limited to those demonstrably necessary and carefully tailored to fulfill legitimate public health, safety, or welfare objectives.

The reason for two separate sections is to have one apiece for the two types of anticompetitive regulations identified in the previous section: entry regulations (restrictions on individual workers) and public service restrictions (restrictions on individual enterprises). The sections otherwise use identical language aimed to guide legislative and ultimately judicial scrutiny of those regulations.

Demonstrably necessary and carefully tailored

As previously explained, “carefully tailored” means the regulation would be subject to strict scrutiny, the most difficult level of judicial review. But it must also be “demonstrably necessary.” That language requires active justification of the regulation. It means the regulation cannot merely be assumed or asserted to be necessary; its necessity must be shown.

“Demonstrably necessary” is a subjective standard that invites judicial review. It would, however, work in concert with “carefully tailored.” The act anticipates legislative and judicial review of occupational licensing’s requirements by having already declared it “in the public interest” to “provide the means for the vindication” of the right to earn a living.

The act would afford only three justifications as potentially legitimate for an occupational license. It must “fulfill legitimate public health, safety, or welfare objectives.” Again, because of “demonstrably necessary” and “carefully tailored,” those objectives cannot be assumed legitimate. Beyond public health, safety, and welfare, however, all other objectives are illegitimate.

The antitrust implications of “demonstrably necessary”

North Carolina policymakers should be familiar with the term “demonstrably necessary” — and its antitrust overtones. It was used in a joint letter in 2016 to the General Assembly (via Sen. Bill Cook) from the U.S. Department of Justice and the Federal Trade Commission regarding a long-running dispute between the North Carolina State Bar and LegalZoom. At issue was whether LegalZoom was engaged in “unauthorized practice of law” by offering “low-cost, self-help, online legal document preparation services.”

The Bar had issued a cease and desist letter to LegalZoom. Similarities between this case and the North Carolina Board of Dental Examiners’ doomed case against teeth whiteners should be obvious at this point. They were soon evident to the Bar, which agreed to settle with LegalZoom.

The DOJ and FTC’s letter provided their comment on subsequent legislation to provide exemption for services like LegalZoom in the state’s definition of the practice of law. Here is a relevant portion of that letter; notice it includes both standards of review that are included in the Right to Earn a Living Act:

The Division and FTC staff believe that “the practice of law” should mean activities for which specialized legal knowledge and training is demonstrably necessary to protect consumers and an attorney-client relationship is present. Overbroad scope-of-practice and unauthorized-practice-of-law policies can restrict competition between licensed attorneys and non-attorney providers of legal services, increasing the prices consumers must pay for legal services, and reducing consumers’ choices.

Accordingly, the Agencies recommend that the North Carolina General Assembly consider the benefits of interactive websites for consumers and competition in evaluating HB 436. Interactive software for generating legal forms may be more cost-effective for some consumers, may exert downward price pressure on licensed lawyer services, and may promote the more efficient and convenient provision of legal services. Such products may also help increase access to legal services by providing consumers additional options for addressing their legal situations.

The Agencies also recognize that such interactive software products may raise legitimate consumer protection issues. The Agencies recommend that any consumer protections, such as requiring disclosures, be narrowly tailored to avoid unnecessarily inhibiting competition and new ways of delivering legal services that may benefit consumers.

Those paragraphs neatly encapsulated many of the problems caught up in occupational licensing: Finding the line between legitimate and arbitrary occupational regulation. Existing providers feeling threatened by disruptive technology and innovative competition. New competition benefitting consumers and discomfiting existing providers by putting downward pressure on service prices. Anticompetitive behavior by licensing boards blocking new entrants and leaving consumers worse off by pricing them out of accessible services. The potential for worse outcomes in the field of labor under such strict licensing than a freer environment would produce.

With those standards in place, the act proceeds into detailing the process for reviewing entry regulations and public service restrictions — and removing the ones that fall short.


Posts examining the Right to Earn a Living Act:

Part 1: A fundamental civil right
Part 2: A well-known path up from poverty
Part 3: Legitimate vs. arbitrary regulation
Part 4: Fewer jobs, higher prices
Part 5: Greater burden for poor workers and consumers
Part 6: Three main objectives
Part 7: Defining the terms
Part 8:
 A very high bar
Part 9: Defending the decision to license
Part 10: Challenging the decision to license
Epilogue: Securing rights on the local level, too

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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