Ohio Gov. John Kasich signed SB 255 on Friday which puts an expiration date of 6 years on all state licensing boards unless they are renewed by the legislature. Prior to a board’s end date, the board must present to standing committees so that lawmakers can evaluate the usefulness, performance, and effectiveness of the board. Each board will have the burden of proof to demonstrate there is a public need for its continued existence. The Legislature will determine whether a board is necessary to protect the health, safety, or welfare of the public and whether its regulations are the least restrictive form that adequately protects the public interest.
This sunset review will also analyze a board’s staff, its budget and its enforcement actions and conclude whether the board has inhibited economic growth, reduced efficiency, or increased the cost of government. One-third of the state’s licensing boards will be reviewed every two years.
Any proposed occupational regulations will have to undergo a similar sunrise review process. The Ohio Legislative Service Commission will analyze the extent to which the requirement for the occupational license stimulates or restricts competition, affects consumer choice, and affects the cost of services.
Boards who present to the legislature to introduce new regulations are expected to provide evidence of present, significant, and substantiated harms to consumers in the state and explain why current laws are insufficient. The goal of the sunrise and sunset reviews in SB 255 are to prohibit new and existing regulations that restrict entrants into the occupation with no clear public protection need identified.
The law also allows an individual who has been convicted of a criminal offense to request a licensing authority to determine whether the individual is disqualified from receiving or holding a license based on conviction. This is particularly impactful for people with criminal convictions who are considering occupations with extensive amount of training or education required. Previously an applicant might go through years of training and spend thousands of dollars only to find out when they apply for a license that their criminal conviction disqualifies them from licensure. Under this new provision, licensing boards must tell a potential application whether or not they have a conviction that would ban them from receiving a licensure which will spare practitioners a significant amount of resources. Licensing boards must also publish all offenses that could disqualify applicants online.
Ohio is following in the footsteps of Nebraska who was the first state to pass legislation mandating this type of sunrise/sunset review process. Nebraska’s LB299 has the same twostep process for review where first, there must be “present, significant, and substantiated harms” that warrant government intervention. Second, if such a problem exists, the legislators must first consider a regulation that is the “least restrictive” and imposes the lowest burdens and costs while still protecting consumers from the harm. A similar bill was also passed last legislative session in Louisiana.
As states continue to think about the way they regulate occupations, more states may follow this sunrise/sunset model as a way to thoughtfully consider if government intervention is needed to protect the health and safety of the public.
On November 28-30, the states a part of the occupational licensing policy learning consortium convened for the second annual meeting in Clearwater, Florida. The state teams had the opportunity to focus on four population groups who are disproportionately affected by licensure—individuals with criminal records, veterans and military spouses, dislocated workers and immigrants with work authorization. License portability, reciprocity, and interstate compacts were also major topics. States had the opportunity to connect with and learn from fellow consortium states, as well as hear from states outside of the consortium that have taken action on occupational licensure including Nebraska and Michigan.
New funding allowed for four new states to participate in this year’s consortium meeting. Idaho, New Hampshire, North Dakota, and Vermont formed state teams made up of legislators, regulatory agencies, and governor’s staff and joined the original 11 states in Clearwater to begin action planning their licensure reform. These states who recently came aboard the project will be part of the consortium going forward.
CSG was also able to expand existing state teams to include more regulatory board members. Licensure reform is a challenging policy area with many competing interests. Bringing together all stakeholders is something CSG wanted to accomplish as a part of this effort. Pursuing licensure reform without input from the licensure boards is not something states have had much success with. In order to engage more regulatory agencies, CSG used additional funding to expand state teams to include these key stakeholders.
The focus on particular reforms from the consortium states as discussed at the meeting ranges widely from sunrise/sunset review, interstate compacts, communications/marketing plans, board consolidation, data collection/standardization, and laws for military families.
One additional point of discussion for the state teams was developing a transition plan for states with outgoing governors and legislators. With state teams being made up heavily of legislators and governor staff, some teams are needing to come up with a plan maintain momentum once these new state leaders take office. The partners at CSG, NCSL, and NGA have committed to developing a transitional memo that states can request which will explain the project and ask for support from the newly elected official.
The consortium will formally meet one more time in the summer of 2019, but the project partners hope this is just the beginning of state occupational licensing reform.
Vermont Deputy Secretary of State Chris Winters said, “This was the best conference I’ve ever been a part of. I was so glad to be able to contribute, and was also really proud of my Vermont team and their focus. This conference has energized them.”
Each consortium state has accomplished things throughout this project, but the latest consortium meeting in Clearwater was a great time for states to reset focus, refine vision, and energize to pursue common sense licensure reform.
The consortium of states participating in the U.S. Department of Labor’s Occupational Licensing: Assessing State Policy and Practice project recently began their second round of project meetings to discuss occupational license reform. The 11 states–Arkansas, Colorado, Connecticut, Delaware, Illinois, Indiana, Kentucky, Maryland, Nevada, Utah and Wisconsin–are individually meeting to further review their licensure process, engage with policy experts and develop action plans. The state team meetings will culminate this year in the project’s second multistate learning consortium summit to be held Nov. 28-30 in Clearwater, Florida.
The following is an update on the progress some of the states have made during the second round of meetings.
The Kentucky team’s meeting on Sept. 19 provided the group an opportunity to learn about the differences in state regulatory board structures as well as discuss opportunities for further research including sunrise/sunset review legislation.
“Occupational licensure is a topic that really encompasses a multitude of policy areas including workforce and economic development and veterans’ affairs,” said Brian Houillion, chief of staff and executive director of financial management and administration for the Kentucky Department for Local Government. “The goal is to take a look at what regulatory framework will best serve the needs of the state. For example, during the meeting we explored the different types of state regulatory board structures as part of our ongoing conversation on finding ways to improve our licensure board system.”
Kentucky was also recently awarded an additional $450,000 Department of Labor grant to further help improve the licensure process in the state.
“The grant allowed us to bring on a grant and project administrator to better facilitate the process of licensing reform,” said Houillion. “The additional staff will assist the state’s project team to complete the smaller steps that occur between meetings and stay on objective.”
During Utah’s Sept. 21 project meeting, the team learned from policy experts about competency-based testing, improving the processes of sunrise/sunset provisions, and licensure burdens specific to immigrants.
Utah state Sen. Todd Weiler, who is a member the state’s Occupational and Professional Licensure Review Committee, said the meeting was a continuation of the team “doing its due diligence by taking deep dives into policy areas and learning from the experts.” He added that one of the team’s primary purposes was to “do the laboring work before the Legislature considers additional reform.”
“Utah is in a transition state as it moves from an older model to a more up to date approach,” he added. “The project team is answering the questions about the health and safety objectives to be achieved through licensure and how to step away from the turf battle of professions and focus on how the customer is best served. The pendulum has swung to decrease regulation wherever it makes sense.”
Utah enacted a number of occupational licensure reform legislation last year that focused on improving licensure mobility, reducing regulation and assisting relocating military families.
Maryland’s Sept. 25 project team meeting centered on ways to expand licensure portability and improve stakeholder messaging. Victoria Wilkins, commissioner of the Division of Occupational and Professional Licensing at the Maryland Department of Labor, Licensing and Regulation commented on the importance of improving the state’s licensure process through the project.
“Anything that decreases regulations to get more people employed while still maintaining public health and safety is something we want to explore,” she said. “The project allows us to hold cross sectional learning meetings with a variety of stakeholders to improve the conversation about licensure.”
The state team is organized in a committee-based structure, which divides the group’s focus areas into the categories: identifying barriers, business needs, community relations, data and research, and addressing the “low hanging fruit” of licensure reform. Wilkins said the “low-hanging fruit” committee could, for example, address some licensure issues outside of the state’s legislative sessions.
“The Legislature only meets once a year, so the committee was established to identify what are some of the simpler changes that could be made in the meantime,” she said. “For instance, the passing score thresholds for plumber licensing exams were recently revised to bring them into uniformity with Maryland’s other licenses.”
The meeting’s guest speaker was Karen Goldman, attorney advisor for the Office of Policy Planning at the Federal Trade Commission, who presented her recently completed FTC policy report on licensure mobility. In the report, Goldman highlighted the important role that CSG’s National Center for Interstate Compacts serves when it comes to how states deal with structuring reciprocity.
CSG National Conference
The Council of State Governments is providing additional opportunities for states to engage with policy experts and advance the conversation on occupational licensure reform during its annual National Conference, to be held in Greater Cincinnati-Northern Kentucky, Dec. 5-8. The conference will include multiple sessions to foster learning about licensure reciprocity through state compacts, lessons from military members and spouses state licensing policies, and specific case studies of how certain professions have handled reciprocity.
States continue to take significant actions in attempts to lessen barriers to workforce entry caused by occupational licensing. CSG currently facilitates a consortium of 11 states looking at occupational licensing reform as a part of the Occupational Licensing Assessing State Policy and Practice project in partnership with NCSL and NGA, funded by the US Department of Labor. However, the examples below come from states not currently participating in this project’s consortium, signifying that occupational licensing reform is a priority for states nationwide, and not just the 11 states participating in this CSG project.
In December 2016, Oklahoma Governor Mary Fallin called for the formation of the Occupational Licensing Task Force to study the issue of occupational licensing in Oklahoma and to provide recommendations by December 2017. In January 2018, the Task Force released their final report with a draft blueprint for analyzing occupational licensing. This blueprint can be used to evaluate whether government licensing is necessary in a particular occupation. It takes factors such as public health and safety risks, means to protect public interest, and board member participation into consideration to determine if licensing is appropriate or if a less restrictive means of regulation could be used.
The blueprint starts by asking the question: “Is there a compelling public interest that needs to be protected?” From there, the blueprint calls for using the “least restrictive means that would sufficiently protect the public interest.” The blueprint lists 13 possible ways to protect the public interest, ranked from the least restrictive (market competition) to the most restrictive (occupational licensing). The Task Force is also suggesting that state laws mandating licenses be subject to legislative review periodically — a sunset provision — and that this standard blueprint be used to make sure licensing is the least restrictive way to meet the state’s interest.
Sponsored by Rep. Julie Emerson, Louisiana House Bill 748 establishes a review process within the office of the governor. This occupational analysis would use a two-step process to review both proposed and existing regulations. First, there should be credible empirical evidence of a systematic problem that warrants government intervention. Second, if such a problem exists, the regulation must be the least restrictive form that imposes the lowest burdens and costs while still protecting consumers from harm. Every year, the office will examine one-fifth of the state’s occupational regulations to identify any rules or laws that should be repealed or modified so that they are the least restrictive. HB 748 gives Louisiana one of the most robust licensing review process in the nation.
Arizona Governor Doug Ducey issued an executive order to all state licensing boards in March 2017 mandating a full review of all existing licensing requirements. It also requires the licensing boards to provide economic justifications for any standard that is more burdensome than the national average and for any license that is not required by at least 25 other states. The Arizona State Legislature followed suit by passing SB 1437, or the Right to Earn a Living Act, which bars licensing boards from writing regulations that restrict entry into a profession if a public health or safety benefit cannot be proven. The new law also empowers individuals to petition a board for further review of a licensing requirement.
Similar to Louisiana’s sunset review process, Nebraska passed an Occupational Board Reform Act (LB 299) which requires state lawmakers to undertake a review of Nebraska’s occupational licensing laws in order to loosen or eliminate requirements that serve as barriers to employment without benefiting public safety. The bill requires that licensing laws “respect the fundamental right of an individual to pursue an occupation” and requires lawmakers to favor less restrictive forms of regulation in circumstances where licensing rules violate that right.
Another important aspect of the bill is a change how state licensing boards will review criminal histories. As a result of LB 299, before applicants complete any required training, they will be able to petition an agency to see if their criminal history would be disqualifying. If denied, applicants will then be able to appeal that disqualification. In some cases, an aspiring worker will go through the entire credentialing process only to find out that a previous conviction disqualifies them from practicing the profession. LB 299 eliminates that possibility by telling the applicant up front whether or not they possess a disqualifying conviction.
The themes from these state examples are similar. States are trying to determine whether legitimate health and safety concerns exist for licensed professions, and if so pursue solutions to licensing problems by finding least restrictive form of regulation while continuing to ensure the health and safety of the consumer.
A commonly cited argument for occupational licensing reform states that licensing results in restricted employment growth and higher wages for licensed workers, which in turn increases consumer costs. Higher wages benefit licensed workers, but wage disparity leads to inefficiency and unfairness, including reducing employment opportunities and depressing wages for excluded workers.
However, CSG’s analysis of data from the Bureau of Labor Statistics (BLS) finds no evidence that licensing has any effect at all on wages and employment growth for electricians and massage therapists. Using original CSG time-series licensing data along with occupational employment data from BLS’ Occupational Employment Statistics (OES) program, this analysis compares wage trends before and after licensure, to a control state that does not license the occupation at all. Plotting wages for the licensed state and the control state, with hourly median wages on the vertical axis and year on the horizontal axis, while drawing a vertical line at the year of initial licensure shows any potential licensing effect. Deviations from wage trends prior to licensure can be attributed to licensing if the effect is similar across several state comparisons.
(SEE ATTACHMENT FOR PLOTTED DATA)
When comparing the time series data plotted for licensed and non-licensed states, there is no evidence that these occupations becoming licensed has an effect on wages and employment. The result is most convincing for electricians. When looking at the plotted time series data, the trend lines barely changes at all upon initial licensure. If a licensing effect did exist, we would expect the line to trend upward for wages and downward for employment after a state licenses electricians. However, when comparing with the control states that do not license, the trend lines hardly deviates at all upon initial licensure. This result is consistent across all three sets of state comparisons.
The result seems to hold even for an occupation within an entirely different industry. The trend lines for massage therapists are more erratic, but still do not seem to support a possible licensing effect. There must be other effects at work causing the wage and employment lines to shift, but these shifts do not occur in sync with the treatment state adopting a license requirement.
If most economists agree with the assumption that occupational licensing increases wages for licensed workers and decreases what are some possible explanations for this result? It may be the case that a licensing effect takes many years to be seen. The increase in wages and decrease in employment growth could be a slow, gradual process over the course of many years that eventually restricts entrants into the profession, but does not do so initially.
Secondly perhaps the licensing requirements adopted are not severe enough to deter an aspiring practitioner from entering the occupation.
The above tables from CSG, NCSL, and NGA’s Occupational Licensing Database outline the licensing requirements for electricians and massage therapist in each treatment state where a license was adopted. Based on previous literature, if a licensing effect did exist for these occupations, you would expect the effect to be even more noticeable in the graphs for Nebraska and Iowa. The training and experience requirements for these two states are double the requirements for the other states who also recently adopted a license, yet the trend lines do not suggest that a more severe licensing effect exists.
This result is important to policy makers who are looking for new ways to grow their state’s economy. Occupational licensing reform has been a workforce priority of the two most recent presidential administrations with President Obama’s administration releasing a 76-page policy framework for state officials, and the Trump administration awarding large grants to enhance state occupational licensing portability of which CSG was a co-recipient.
Enhancing portability of state licensing and creating more a more equitable system for vulnerable populations like veterans and military families, people with criminal records, immigrants, and long-term unemployed workers is a crucial need. However, it is not clear from this evidence that deregulation will have the economic impacts that some believe.
If the result of a state adopting a license for certain occupations is negligible for these economic indicators, perhaps policymakers should focus their efforts on things other than deregulation when figuring out how to grow their state economies. Some argue that removing these licensing barriers will result in an influx of new practitioners into the occupation which will stimulate job growth. The evidence from CSG’s analysis does not show that this would be the case. If an occupation becoming licensed does not affect wages or employment, then deregulating an occupation likely won’t affect these outcomes either.
The Council of State Governments Justice Center is providing in-depth analysis to help 11 states achieve their occupational licensure goals. CSG launched the occupational licensure project in partnership with the Department of Labor, or DOL, the National Conference of State Legislatures and the National Governors Association. The DOL scope includes assessing potential barriers to obtaining specific occupational licenses for target populations in 11 consortium states, including military spouses and children, immigrants with work authorizations, people with criminal records, and unemployed and displaced workers.
The initial data included occupational licensing requirements for all 50 states relative to education and training requirements, exam requirements, renewal processes, associated fees, reciprocity agreements and ex-offender restrictions. The consortium states are now requesting more information so they can analyze underlying cause and effect relationships within their current regulations and statues, as well as conduct comparative analysis of other states. CSG Justice Center is providing enhanced reports to the consortium, with additional information on background check requirements and restrictions, through the National Inventory of Collateral Consequences of Conviction project.
The National Inventory of Collateral Consequences, or NICCC, is supported by a grant from the Department of Justice, or DOJ, Office of Justice Programs, and currently catalogs over 45,000 statutory and regulatory provisions that limit the rights, benefits and opportunities available to individuals with criminal records. Among those, 15,000 provisions limit an individual’s ability to obtain occupational licensure or impair licenses already held through suspension, revocation or other means. That data is used to analyze and distinguish the collateral consequences affecting current and prospective licensees, particularly relationships between types of offenses, and the scope and duration of license ineligibility or impairment. Broad restrictions that offer little chance for employment after conviction can often discourage rehabilitation and increase recidivism.
“Of those 15,000 licensing consequences, over 6,000 are mandatory, meaning boards have no discretion to grant a license or forgo suspension, revocation or other impairments when an individual has a disqualifying conviction,” Josh Gaines, a CSG Justice Center senior policy analyst said.
The enhanced reports provided through the NICCC include data on background checks for occupational licenses, linking all 50 states to their applicable laws, statutes and regulations. The database provides enhanced search features for collateral consequence and offense type, allowing the consortium states to examine specific statutes and their collateral consequence on occupational licensing. This data allows states to compare current provisions of law and their potential outcome on licensing barriers.
Additionally, the DOJ and DOL have partnered with CSG Justice Center to fund the Clean Slate Clearinghouse, or CSC. The CSC links individuals with criminal records to legal resources and support services for record clearance, and provides states with record clearing policies for comparative best practice methods. Criminal record clearance is a process in which individuals can have their records expunged, sealed, restricted or closed, aiding in both employment and housing opportunities.
Most occupational licensing restrictions are in place to protect public safety and provide a legitimate regulatory function. The NICCC further examines these restrictions that apply to any crime without regard to the type of crime, the lapse of time after conviction, or the rehabilitation efforts. The NICCC project provides data for legislatures and licensing boards.
The NICCC data is focused on one of the DOL’s target populations and is a vital tool for consortium states as they continue to examine occupational licensing barriers.
Connecticut held a meeting on March 2, 2018 on occupational licensure with assistance from The Council of State Governments, or CSG, the National Conference of State Legislatures, or NCSL and the National Governor’s Association, or NGA.
CSG launched an occupation licensing technical assistance project in August 2017 in partnership NCSL and NGA, through a $7.5 million grant from the U.S. Department of Labor, or DOL. The 11 state consortium includes Arkansas, Colorado, Connecticut, Delaware, Illinois, Indiana, Kentucky, Maryland, Nevada, Utah and Wisconsin. Each state focused on specific occupations and target populations in an attempt to identify known and unknown barriers of occupational licensing.
The DOL project scope identified the key populations for each state as military spouses and children, immigrants with work authorization, people with criminal records and unemployed and dislocated workers. The DOL identified 34 occupations for evaluation, allowing each state to select specific occupations based on their individual needs. The overall objective of the project is to examine occupational licensing requirements, identifying potential barriers and to improve portability across state lines.
The consortium met last November in Tucson Arizona, giving state leaders an opportunity to work on action planning with licensing stakeholders, while collaboratively collecting data. Since the November meeting, 7 states have held in state meetings including Arkansas, Colorado, Connecticut, Delaware, Illinois, Maryland and Nevada. The remaining 4 states, including Indiana, Kentucky, Utah and Wisconsin have in state meetings planned in the coming weeks.
Throughout these meetings, reciprocity is one of the emerging themes and states are looking to neighboring states, as well as consortium states, to ease occupational licensing portability between state lines.
Connecticut’s Department of Public Health Section Chief Christian Anderson said during the 2017 consortium meeting, “We have always assumed that Connecticut’s reciprocity agreements have been a selling point for the state but we really didn’t know until we met with consortium states.”
During Connecticut’s in-state meeting, April 2018, Director of Policy Bill Wlez said, “it is imperative that Connecticut review and expand reciprocity agreenents with consortium states, as well as neighboring states, to stay competitive and continuing to protect public safety.”
Over the course of the project, consortium states are relying on current and active interstate compacts as a means to solve problems that span state boundaries. CSG’s National Center for Interstate Compacts, or NCIC, is a policy program developed by CSG to assist states in developing interstate compacts, which are contracts between states. Currently, the NCIC manages more than 200 active interstate compacts helping states facilitate consensus on national issues.
CSG, NCSL and NGA provided a throughout review of state requirements and reciprocity agreements on occupational licenses. The collected data will allow all states to ensure consistency throughout testing procedures, education requirements and any necessary training requirements across all 50 states and 5 territories.
In addition to reciprocity agreements, consortium states are also using shared data to examine best practice methods for background check requirements, apprenticeship programs, transferability of military skills, overcoming legislative obstacles and lessons learned approaches to occupational licensing barriers.”It is an opportunity for all states to learn from one another, as well as hopefully ease barriers in portability, all while advancing economic development,” Connecticut’s DOL Executive Director Kathleen Marioni said during a status meeting.
For the remainder of 2018, CSG, NGA and NCSL will visit each consortium state, providing technical assistance and best practice methodologies from other states. All 11 consortium states will meet in November of 2018 to review and share their progress with stakeholders.
CSG, in partnership with the National Conference of State Legislatures and the National Governor’s Association, released the National Occupational Licensing Database to help state leaders better understand the national licensing landscape. This database contains information on the criteria required to attain a license in 34 occupations with 18 requirements being assessed. Some of the data points include initial and continuing education requirements, training, experience, exams and fees. Additionally, if a certain occupation is selected, a map of the states that require licensure will be produced (See top image below for map produced when searching the database for information on electricians). The database also allows for the user to make comparisons between states and occupations (See bottom image below for an excerpt of search results from the database when selecting to show information on cosmetologists).
The database gives the user the ability to see all the requirements across 50 states and shows the disparities between each state. These differences can create barriers for those moving across state lines as well as those attempting to gain initial licensure.
The licensing process is designed to ensure the safety of workers and the public by requiring a certain level of competency to practice a profession. However, some licenses can have excessive requirements and fees, which may be insurmountable for some. For example, home inspectors in New Jersey face an initial licensure fee of $850 along with a $500 fee every two years to renew. Whereas, those in Pennsylvania pay $225 initially and the license doesn’t expire. Four groups who are particularly vulnerable when it comes to gaining licensure are immigrants with work authorization, those with criminal records, military families, and unemployed and dislocated workers.
This database is the first step in a project aimed at understanding and reducing these barriers to licensure as well as learn best practices for licensing certain occupations. The three-year project, entitled Occupational Licensing: Assessing State Policy and Practice, is a joint effort by The Council of State Governments, the National Conference of State Legislatures, and the National Governors Association Center for Best Practices, and is funded by a grant from the U.S. Department of Labor.
The project also selected a consortium of 11 states that will meet with licensure experts to discuss each state’s current licensure practices, and develop and implement action plans that aim to remove excessive barriers created by some licenses. The states in the consortium are Arkansas, Colorado, Connecticut, Delaware, Illinois, Indiana, Kentucky, Maryland, Nevada, Utah, and Wisconsin.
The first consortium meeting was held in December of last year in Tucson, Arizona, with two more meetings slated for fall 2018 and summer 2019. In addition to these meetings, the project will produce continuing resources, namely a webinar series, blogs, newsletters and magazine article on occupational licensure policy.
The current economic cost of professional and occupational regulation directly impacts one quarter1 of the working population in the U.S. The number of professions or occupations requiring a government license is nearly one quarter2 of the current working population. The majority3 of this increase has been the result of the increasing number of professions or occupations requiring a license. Recent domestic evidence also shows that states vary dramatically in their rates of licensure, ranging from 12 percent to 33 percent.
About the Author Adam Parfitt is executive director of the Council on Licensure, Enforcement and Regulation (CLEAR), a position he has held for the last ten years. Previously he served as the organization’s Director of International Relations. Prior to his time with CLEAR. Adam worked with several associations of state government officials.
Professional and occupational regulation is predominantly a state function, undertaken and protected under Article X of the U.S. Constitution. Article X grants states the authority to regulate activities affecting the health, safety and welfare of their citizens. Practitioner disciplinary matters follow each state’s administrative procedures act. Exceptions to this state oversight are the growing numbers of municipal-level licensing and professionals employed by the federal government to work within state borders.
Recent Scrutiny Research suggests that nearly one quarter4 of the working population in the U.S. requires a government license for their profession or occupation, a number that has risen from 5 percent in the 1950s. The vast majority5of this increase has been the result of the increasing number of professions or occupations requiring a license. Meanwhile, economists suggest that the wage effect of professional and occupational licensing can be as high as 15 percent.6 Little wonder, then, that close attention is being paid to this policy lever, its implications and implementation.
Indicative of the higher profile enjoyed by professional and occupational regulation, a recent White House press release7 called for reforms to the existing system, stating:
“While licensing can offer important health and safety protections to consumers, as well as benefits to workers, the current system often requires unnecessary training, lengthy delays, or high fees. This can in turn artificially create higher costs for consumers and prohibit skilled American workers like florists or hairdressers from entering jobs in which they could otherwise excel.”
Recent developments have focused upon the following perceived shortcomings within the system:
The scale and growth in the number of professions and occupations affected by professional or occupational regulation, in addition to the disparity in approaches across the states;
Perceived attendant restrictions on professional mobility, affecting both civilian populations and military families (the latter disproportionately affected by deployments to military bases in different jurisdictions);
Applicability related to new working patterns (including telework and telepractice);
Issues of fairness, related particularly to those with qualifications from foreign institutions, as well as those with a criminal record;
The availability of consumer information about providers and practitioners; and
Issues related to oversight and broader governance.
Scale and Growth of Professional and Occupational Regulation A recently published list of licensing best practices8provides a guide to the focus of future reforms in the field:
Ensure that Licensing Restrictions are Closely Targeted to Protecting Public Health and Safety, and are Not Overly Broad or Burdensome
1. In cases where public health and safety concerns are mild, consider using alternative systems that are less restrictive than licensing, such as voluntary state certification (“right-to-title”) or registration (filing basic information with a state registry).
2. Make sure that substantive requirements of licensing (e.g., education and experience requirements) are closely tied to public health and safety concerns.
3. Minimize procedural burdens of acquiring a license, in terms of fees, complexity of requirements, processing time and paperwork.
4. Where licensure is deemed appropriate, allow all licensed professionals to provide services fully of their current competency, even if this means that multiple professions provide overlapping services.
5. Review licensing requirements for the formerly incarcerated, immigrants and veterans to ensure that licensing laws do not prevent qualified individuals from securing employment opportunities, while still providing appropriate protections for consumers.
The desire to ensure that regulation is proportionate and reflective of the risk to the public is echoed elsewhere, notably in a recent report9 from the Professional Standards Authority in the U.K., which developed a “continuum of assurance” as part of efforts to provide “a methodology for assessing and assuring occupational risk of harm.”10
The Professional Standards Authority’s model contains two stages: profiling the risk of harm that results from the practice of a profession; and determining the external risk factors that may exist. The latter includes the numbers of practitioners and potential clients, methods by which the risk can be managed (including through the use of technology), the economic cost (including effects on cost and supply), innovation, perceived risk and unintended consequences.
Having been encouraged to consider alternative policy levers, some states have attempted to deregulate, or de-license, existing professions and occupations. Research suggests11 however, that such initiatives are rarely successful. A recent Bureau of Labor Statistics report commented that “In nearly every instance that we analyzed, de-licensing and de-licensing attempts have been met not only with stiff resistance but also usually (when successful) with a movement to reinstitute licensing. Clearly, these results reflect the lobbying power of the occupations in question and their professional associations.”12 The report goes on to suggest additional reasons for such resistance, including the likelihood that the costs (of delicensing) to members of licensed practitioners is high, at the same time as the benefits to the public are arguably widespread, but limited. Other possibilities include the unwillingness of state legislatures to deny the states a source of revenue, given that most regulatory boards are, at a minimum, self-sustaining. While sunset laws exist in a variety of states, historically many appear reluctant to recommend de-licensure, or find legislatures reluctant to act upon such recommendations.
Concerns about the economic cost of professional and occupational regulation are not confined to domestic governments and think tanks. Recent years have seen the Organization for Economic Cooperation and Development, or OECD, produce significant work related to this topic. Among the initiatives has been the development of a Services Trade Restrictiveness Index,13 which “provides policy makers and negotiators with information and measurement tools to open up international trade in services and negotiate international trade agreements. The STRI indices take the value from 0 to 1, where 0 is completely open and 1 is completely closed.”
State Variations in Regulatory Practice Recent domestic evidence also shows that states vary dramatically in their rates of licensure, ranging from a low of 12 percent of workers in South Carolina to 33 percent in Iowa. Such significant differences in licensing prevalence are frequently cited by opponents of licensure, who suggest that jurisdictions are not treating occupations equivalently, to the detriment of both market participants and consumers. A Reason Foundation report14 from 2007 tabulated each state’s licensing requirements by occupation. The report found that on average, states require licenses for 92 occupations. A separate report by Institute for Justice compared licensing requirements for low and moderate-income occupations that are licensed in at least one state. This report found that 15 occupations were licensed in 40 states or more, with the average occupation being licensed in only 22 states.15
This variation is further demonstrated in Table A, indicating the percentage of workers licensed in each state. While a large number of states fall within the 20 to 25 percent range, three states license in excess of 30 percent of their workforce, while five states license fewer than 15 percent.
Supreme Court Case: North Carolina State Board of Dental Examiners v. Federal Trade Commission The implications of a recent Supreme Court case16are slowly becoming evident with occupational regulators considering the potential need to make likely significant changes to their regulatory arrangements, such as:
Requiring public member majorities on regulatory boards
Multi-party board membership
Providing umbrella boards with policy oversight
Establishing an independent review board to oversee rulemaking
Creating majority public review bodies for scope of practice actions
Making boards advisory only
Expanding the powers of sunrise/sunset review
Giving attorneys general additional oversight powers.17
Former California Attorney General Kamala Harris summarized the Supreme Court case as follows:
The North Carolina Board of Dental Examiners was established under North Carolina law and charged with administering a licensing system for dentists. A majority of the members of the board are themselves practicing dentists. North Carolina statutes delegate authority to the dental board to regulate the practice of dentistry, but did not expressly provide that teeth whitening was within the scope of the practice of dentistry. Following complaints by dentists that non-dentists were performing teeth-whitening services for low prices, the dental board conducted an investigation. The board subsequently issued cease and desist letters to dozens of teeth-whitening outfits, as well as to some owners of shopping malls where teeth-whiteners operated. The effect on the teeth-whitening market in North Carolina was dramatic, and the Federal Trade Commission took action. In defense to antitrust charges, the dental board argues that, as a state agency, it was immune from liability under the federal anti-trust laws. The Supreme Court rejected that argument, holding that a state board on which a controlling number of decision-makers are active market participants must show that it is subject to “active supervision” in order to claim immunity.”18
In response, states have taken a variety of steps:
California’s attorney general provided guidance19 about what should be considered “active supervision” for the purposes of the state action immunity doctrine, and identified measures that could be taken to guard against antitrust liability for board members. The opinion identified possible steps, including changing the composition of boards, adding additional supervision by state officials, reducing exposure for damages claims, and ensuring board members receive legal indemnification and antitrust training.
In Oklahoma, an executive order was issued20 which required those state boards with a majority of members who are active market participants in the occupation or profession directly or indirectly controlled by the board, to submit each non-rulemaking action to the Office of the Attorney General for review and analysis. Where the attorney general concludes the board action may violate law, the board must defer or reconsider the proposed action.21
In North Carolina, the General Assembly’s Program Evaluation Division, or PED, reviewed both structure and operation of the 55 independent occupational licensing boards. The ensuing report22stated that there was insufficient state-level oversight to ensure efficient and effective public protection, recommending a legislative review of several occupational licensing boards’ authority and the consolidation of several others.
Massachusetts Gov. Charlie Baker issued an executive order23 directing the review of any acts, rules, regulations or policies (proposed by independent licensing boards) with the potential to limit competition in a relevant market for professional services. The review evaluates whether the proposed act, rules, regulations or policies advance the goal of ensuring the health, safety and welfare of the public sufficiently, so that it should be permitted regardless of any potential anticompetitive impact. Several types of acts warrant particular attention, including scope-of-practice rules, and territorial restrictions.
Activity has also been recorded in Iowa, Maine and West Virginia, in addition to other jurisdictions.
The Supreme Court decision has also raised concerns that individual board members may be liable for damages for antitrust liability related to their service. Indeed, some organizations have called for legislation that “indemnifies state boards and members from any damages or litigation fees related to claims against them to which the immunity applies.”24
Some states, such as Massachusetts and Rhode Island, clearly provide immunity and indemnification to at least some of their boards via statutory language. Other states, such as Illinois, Michigan, New Jersey, New York, Oklahoma and Texas, have indemnification statutes that may protect state agencies, but legislation here offers less clarity about whether indemnification extends to professional board members.
Private litigation has followed the Supreme Court ruling, most notably in the cases of Teladoc Inc. v. Texas Medical Board25, and Henry v. North Carolina Acupuncture Licensing Board.26In the former case, Teladoc, a provider of telehealth services, filed suit after the Texas Medical Board enacted a 2015 rule requiring face-to-face contact between an individual and a doctor before a prescription is issued. Teladoc claimed that rules placing limits on video consultations violate the Sherman Act. A district court ruling denied the medical board’s motion to dismiss the complaint, finding that the board was not actively supervised by the state.
The latter case saw several licensed physical therapists and patients sue the North Carolina Acupuncture Licensing Board for sending cease-and-desist letters to physical therapists who offered “dry needling” services. The physical therapists in receipt of the letter were accused of engaging in the illegal practice of acupuncture. The plaintiffs maintain that the board’s efforts violate federal antitrust law and a bid to dismiss the lawsuit against the board has been unsuccessful to date.
Conclusion The recent award of a substantial U.S. Department of Labor grant27 to “Identify licensing criteria to ensure that existing and new licensing requirements are not overly broad or burdensome and don’t create unnecessary barriers to labor market entry; and improve portability for selected occupational licenses across state lines,” should ensure that interesting developments follow in this fascinating, and often under-reported field.
According to a study produced by the National Employment Law Project (NELP), the majority of states are creating barriers for people with criminal records to access occupational licensure opportunities. NELP estimates between 70 and 100 million American (nearly 1 in 3) have a criminal record. Additionally, people with records are on average only half as likely to get a callback after submitting an application compared to those without a record. The structure of current state laws is a major barrier to participation in the labor force.
The study produced by NELP examined existing laws in 40 states, and graded each state based on the effectiveness of their laws at creating licensing opportunities for people with criminal records (see chart attached). The researchers grouped the grades into 5 nominal categories ranging from most effective to unsatisfactory, and developed grades based on these four criteria:
Does the law prohibit the blanket rejection of applicants with conviction histories?
Does the law incorporate EEOC Factors which include consideration of whether a conviction is occupation-related and how much time has passed since the conviction?
Does the law limit the scope of record inquiry or the consideration of certain types of record information?
Does the law require consideration of rehabilitation?
The study’s primary criticism of the laws was their inconsistent, vague, and unnecessarily restrictive nature. The laws sometimes only applied to certain convictions or jobs, and often gave licensing boards the discretion to decide with little or no guidance.
Some examples of the vagueness:
New Mexico: “Behavior that gravely violates the accepted moral standards of the community”
Utah: “A crime that involves actions done knowingly contrary to justice, honestly or good morals”
Idaho: “An individual can become a certified public accountant only if he/she are of ‘good moral character’, which means lack of a history of dishonest dealings.”
Twenty-five of the forty states examined received “minimal” or “unsatisfactory” rating. The study gave only Minnesota its “most effective” grade. Minnesota’s law prohibits a blanket ban based on conviction, meaning just because someone has a criminal record that does not automatically disqualify them for licensure. Minnesota also prohibits denial based on a conviction unrelated to the position, requires consideration of the time elapsed since conviction, and lists clear standards for considering rehabilitation. Minnesota forbids licensing boards from rejecting licensure based on a conviction when the individual has been released for over a year and shows “sufficient rehabilitation”.
Plenty of research exists that focuses on the difficulties people with criminal records face when attempting to find employment. However, with the percentage of American jobs that require licensure growing, policy needs to shift its focus on examining licensure practices. The Brookings Institute estimates nearly 30 percent of American workers need a license to perform their job. Maybe the problem is not a poor job market, but inability to acquire jobs based on state laws that broadly reject applicants with certain records regardless of their qualifications or evidence of their rehabilitation.
The National Inventory of Collateral Consequences of Conviction (NICCC), administered by the CSG Justice Center, reports that licensing boards impose over 25,000 licensing restrictions nationwide. Over 10,000 of these restrictions apply automatically regardless of a crime’s relationship to a particular license, evidence of rehabilitation, or the time since conviction.
Responsible policymaking should address these barriers embedded into licensing laws, and develop opportunities for people with criminal records. Nearly one third of the population are willing workforce participants, but are being denied entry based on their criminal past, and not their current qualifications.