In the wake of Hurricane Irma, many Floridians will be searching for contractors to help them rebuild their battered homes. But residents in Pinellas County should be wary of the contractors that are recommended to them. Last week, an editorial by Tampa Bay Times called for the Florida Legislature to abolish the Pinellas County Construction Licensing Board after a recent investigation by the Times revealed “the licensing board was rife with insider dealing under” its former chairman.
According to the Tampa Bay Times:
… the executive director of the licensing board, Rodney Fischer, and other licensing board officials steered inspection work to vice chair Thomas Tafelski at least seven times between 2011 and 2015. Tafelski earned thousands of dollars from the referrals, and homeowners and contractors told the Times they were not told Tafelski was tied to the agency. One homeowner understandably called it a “rip-off.”
According to the Tampa Bay Times, the board operated for decades as an independent entity “with little regard to established government practices” and provided “absolutely no redeeming value.” This lack of oversight by the state of Florida directly impacted the board’s ability to abuse its power.
Although not as blatantly self-dealing as the Pinellas County Construction Licensing Board, other occupational licensing board members in Florida and across the country face conflicts of interest because they enforce and sometime even write regulations controlling who enters their professions and competes against them.
In testimony last week, Law School Professor Rebecca Allensworth of Vanderbilt University told members of the U.S. House of Representatives that 85 percent of the nearly 1,800 state licensing boards in America are “required by state statute to be comprised by currently licensed professions, active in the very profession the board regulates.” This means that states have intentionally set the fox to guard the henhouse.
Fortunately, the possibility of mischief has been noticed elsewhere in D.C. In 2015, the U.S. Supreme Court ruled that when a licensing board is controlled by active members of the profession the board regulates, those members may be sued for antitrust violations, just as if they were colluding privately to limit competition.
The Court’s decision in North Carolina State Board of Dental Examiners v. FTC held that state licensing boards were not immune from liability under federal antitrust laws unless government officials actively supervise” the boards and the board members follow policies established by the state legislature. Since the Court’s decision in early 2015, nearly 50 other federal cases addressed the issue of board members’ using their positions to benefit their professions.
To help reduce the influence of boards controlled by the industry members, IJ published the report Boards Behaving Badly which analyzed the Court’s decision and presented a solution to rein in the power of boards. Specifically, the report included an inverted pyramid of regulatory approaches states could use as alternatives to government-mandated occupational licenses. Each of the alternative increases competition and, in doing so, reduces the exposure to antitrust litigation against state boards and fees and damages, should the state lose its case, which ultimately would be borne by taxpayers.
This pyramid is available to state legislators in IJ’s model Occupational Licensing Board Reform Act. Currently legislators in Minnesota, Nebraska and Wisconsin have introduced legislation based on IJ’s model.
Mississippi already has taken the first step and made it its state law a part of IJ’s model. In July 2017, Mississippi enacted HB 1425 the Occupational Board Compliance Act, which will create an Occupational Licensing Review Commission in order to provide active supervision over the state’s licensing boards. Specifically, the Commission will review new occupational regulations proposed by licensing boards and be required to approve, veto or modify any new occupational regulation. This provides independent “active supervision” to reduce antirust liability. In addition, any occupational regulations must “increase economic opportunities…by promoting competition,” and must use “the least restrictive regulations necessary to protect consumers”—based on IJ”s inverted pyramid—in accordance with new state policy.
Following Mississippi and enacting model legislation based on IJ’s inverted pyramid would help Florida and other state stimulate fairer competition. To provide proper oversight of its state licensing boards, state legislators in Florida and other states ought to consider the model legislation as a means to reduce anticompetitive behavior by board members by including the inverted pyramid in both sunrise reviews of new licensing proposals and sunset reviews of existing licenses.