Note: Economic Protectionism and Occupational Licensing Reform

By Gerald S. Kerska. Full text here.

State-mandated occupational licensing laws are prevalent in the United States. Indeed, one-quarter of all Americans need a license to engage in their professions. Over the past decade, the most onerous of these regulations have come under attack in federal court for violating the Due Process and Equal Protection Clauses of the Fourteenth Amendment. State officials, in defending licensing requirements, have argued that pure economic protectionism, i.e., protecting one’s favorite constituents from competition in the marketplace, provides a legitimate state interest for occupational licensing requirements. This argument gained traction in some circuits but not others, leaving the courts of appeals deeply divided.

In light of this circuit split, a substantial number of commenters have urged federal courts to aggressively review occupational licensing laws under the rational basis with bite or intermediate scrutiny standards. Breaking from that trend, this Note argues that neither the lower federal courts nor the Supreme Court should take up the heady task of reforming occupational licensing laws through judicial review.

This Note begins by arguing that every occupational licensing law survives judicial review under existing Fourteenth Amendment jurisprudence for two reasons. First, occupational licensing laws are subject to the highly deferential rational basis standard, and non-protectionist justifications will almost always support a challenged law. Second, economic protectionism is not a form of group-based targeting, like animus, that supports rational basis with bite.

After finding existing law to be inadequate for striking down licensing requirements, this Note then asks whether heightened judicial review should be extended to such challenges. The answer is no. Adopting a robust anti-economic protectionism principle would push beyond the limits of the judiciary’s institutional competency, threaten to hale much state economic policy into federal court, and stunt the development of other doctrines that can be used to challenge unfair licensing laws, i.e., state constitutional and administrative law and federal antitrust law.

Instead, this Note contends that Congress must lead reform efforts. State governments have tried and failed to reform licensing requirements. One such effort from Indiana provides an example of an aggressive and cost-effective method of reducing occupational licensing requirements through a sunset committee. By taking the Indiana plan national, Congress can reduce occupational licensing requirements and thereby break down unnecessary barriers to the American Dream.