When Unsuccessful Applicants Sue, Part IPDF
Professional-licensing boards protect the public by ensuring that only competent and honest people work in certain fields. This duty requires boards to be selective in whom they admit to practice. That selection process often leads to disputes. This article discusses common claims and defenses in those disputes.
This is the first article in a two-part series that will explore disappointed applicants’ common claims against professional-licensing boards. The second article will explore common claims and defenses for private organizations — such as standard-setting bodies and testing organizations — that play a role in professional licensing.
Courts often treat state-created licensing boards as parts of a state government. This status can give these boards unique government immunities. On the other hand, government status can also expose licensing boards to claims that apply only to government actors.
Disappointed license applicants often pursue antitrust claims under section 1 of the federal Sherman Act or parallel state antitrust statutes. Many of these applicants claim that their exclusion from practice reflects a “group boycott”: an agreement by competitors to exclude a potential competitor.
These claims are possible because of the unique structure of professional-licensing boards. Many of the members of these boards — often a board majority — are licensees in the field at issue. Indeed, state statutes often require that licensing boards have this composition. Boards have this composition because regulating specialized fields requires deep expertise in those fields. But from the perspective of a disappointed applicant, the expert members of a board are incumbent members of a profession — incumbents who might be eager to exclude future competitors.
Some lawsuits by disappointed applicants allege that licensing examinations arbitrarily favor some applicants over others. That was the claim in 2015 when Beltone, a hearing-aid company, sued the Tennessee Council for Hearing Aid Specialists. Beltone alleged that its employees were being denied licenses a higher rate than employees of the board members were.
These and other claims have a common theme — a claim that a board’s admission criteria or procedures unnecessarily exclude applicants from entry into a profession.
Defenses to Antitrust Claims
State-created licensing boards often defend themselves under state-action immunity. That doctrine bars antitrust claims against certain bodies that act on behalf of a state. The immunity exists because the federal antitrust laws are not intended to condemn state governments that act in ways that affect competition. A version of the state-action immunity doctrine also exists under the antitrust laws of some states.
For years, state-action immunity protected state-created licensing boards against nearly all antitrust claims. That protection became narrower, however, with the U.S. Supreme Court’s 2015 decision in North Carolina State Board of Dental Examiners v. FTC. (Robinson Bradshaw represented amici curiae in that case.) There, the Federal Trade Commission charged the North Carolina State Board of Dental Examiners with unfair methods of competition after the board made efforts to prevent non-dentists from performing teeth whitening — a service that the board considered the unlicensed practice of dentistry. The board, a state-created agency composed mostly of licensed dentists, defended itself under the state-action immunity doctrine.
The Supreme Court held that when a board is controlled by a majority of actively practicing licensees, it will be ineligible for state-action immunity unless the state itself “actively supervises” the board decision in question. Although active supervision has no bright-line definition, boards can improve their chances of achieving active supervision by working with counsel to document administrative review of board actions, completing rules-review procedures and showing other forms of accountability to the state itself.
As government agencies, professional-licensing boards can also face constitutional claims. Many of these claims invoke the due process clause of the 14th Amendment, the equal protection clause of the same amendment, or parallel guarantees under state constitutions.
Case law under the due process clause requires professional-licensing requirements to have a rational connection with an applicant’s fitness or capacity to practice. That case law condemns licensing decisions that are based on “official whim.”
To state a violation of equal protection, in contrast, a disappointed applicant must prove that she was treated differently from similarly situated people. Equal-protection claims have arisen when boards condition licensure on state citizenship. They have also arisen when a board confronts applicants with requirements that current licensees did not face.
Unless a board’s decisions are based on a protected classification (such as race) or violate a fundamental right, those decisions are judged under the deferential “rational basis” test. That test requires only that a board’s decision have a rational connection with a legitimate state interest. A board’s decision will clear this low bar as long as it conceivably advances an interest such as public health or safety.
In cases under the rational-basis test, state licensing boards start on a good footing. Courts presume that these boards, as arms of a state, act in furtherance of a legitimate state interest. Usually, a board’s organic statute will reinforce this presumption by describing the state interests that a board serves. Thus, if a board acts within the framework of its organic statute, the board will be in a good position to defeat constitutional challenges.
State legislatures and licensing boards can strengthen a board’s protection from constitutional challenges by ensuring that licensing requirements are reasonable when balanced against the realities of the profession. That balance will vary from one profession to another. Requirements should also balance the cost of licensure with the earning capacity that comes with entry into the profession, the technical skill required by the profession and the potential risks to the public.
There is always the possibility that disappointed applicants will challenge a board’s licensing decisions. That possibility is no cause for alarm, however. As shown above, boards can stave off many of these challenges by paying attention to fairness, transparency and accountability.
The Regulated Professions Practice Group at Robinson Bradshaw is here to help boards and other parties avoid — or address — licensing-related claims.