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What's New: Advocacy

SFAA Promotes the Value of License Bonds as Federal and State Governments Explore Occupational ...

Tuesday, May 1, 2018  
  SFAA Promotes the Value of License Bonds as Federal and State Governments Explore Occupational Licensing Reform 

In the 2018 state legislative sessions, occupational licensing provisions from the American Legislative Exchange Council’s (ALEC) model legislation are being introduced. The Occupational Licensing Defense Act would require the government to use the least restrictive means of furthering government interests and public safety. The Model Act contains a definition of “least restrictive regulation” that includes market competition, voluntary compliance, third party rating, private certification, civil lawsuits, deceptive trade practices, mandatory disclosures, voluntary bonding and insurance, and inspections as less restrictive than mandatory bonding and insurance, registration, certification, and licensure. Registration could include bonding.

The Occupational Board Reform Act restores antitrust immunity to the state license boards if the boards are actively supervised by the state. The Collateral Consequences Reduction Act would allow license applicants with a criminal history to petition a state license board for a determination of whether the individual’s criminal record will prevent them from obtaining a license. The applicant can appeal an adverse decision from the board.

The new law in Nebraska and the bills in Louisiana and New Hampshire all are similar and are based in part on the ALEC models, but additionally create a five-year review of all occupational licenses. It is too early to tell, but these bills could eventually become the standard for future state legislation.

Recent Enactments

The new law under Nebraska LB 299 contains some elements of all three ALEC models. The new law provides that the State must use the least restrictive regulations to protect consumers, and is similar to the ALEC model in terms of the definition of the least restrictive form of regulation. The new law requires the standing committees of the legislature to review and analyze 20% of the occupational laws and regulations annually to create a five year review process. Each committee must provide a report with recommendations on whether the occupational laws and regulations should be terminated, continued, or modified, and the law contains a list of likely outcomes of these reviews. If, for example, the need is to protect consumers from fraud, the recommendation likely will be to strengthen the deceptive practices law. When protection is needed against potential damages from failure of providers to perform under contracts, bonding is the likely recommendation. The committees also must provide information on the occupational boards' members, procedures, budgets, and history of granting licenses, which addresses the issues of state oversight over the state licensing boards.

The new law in Nebraska follows the ALEC model in that it allows applicants with criminal convictions to petition the license boards to determine whether their background would bar them from getting a specific license before undergoing training. If denied, the applicants can appeal.

LB 299 had bipartisan report in Nebraska. The bill sponsor is a Libertarian, and there was significant support from Democrats and Republicans. The local ACLU also supported it, and the new law got recognition in the Wall Street Journal and Forbes as a possible model for the states.

Still Pending

Missouri HB 1928 would require the State to use the least restrictive type of regulation for any occupation or profession, and unlike the ALEC model, HB 1928 lists bonding and insurance as the least restrictive type of regulation. The bill provides that when the threat to the general welfare resulting from a practitioner’s services is easily predictable, a system of insurance, bonding, or registration must be implemented. Registration could include bonding. Certification is required when the consumer is at a disadvantaged in being unable to judge the quality of service being provided. If bonding, insurance, registration, and certification are insufficient, a licensing system would be required. The bill has passed the House, and now is out of committee in the Senate.

Louisiana HB 748 would require the least restrictive regulation on any occupation or profession. The bill is similar to the ALEC model in that mandatory bonding or insurance requirements would be considered more restrictive. Registration could include a bond requirement. The Governor's Office would be required to review 20% of the State's occupational regulations annually to create a five-year review process, which will be repeated. The Governor's annual report would have to recommend legislation that either repeals an occupational regulation, converts an occupational regulation to a less restrictive form of regulation or instructs the relevant licensing board or agency to revise its regulations to implement a less restrictive regulation that the legislature directed. The Governor also may recommend that no new legislation be enacted. The Workforce Commission (Commission) also would have to collect data and provide annual reports on each license board, including the number of applicants with criminal records applying for a license, the number of applications approved, and the types of offenses that were approved or denied, and any other data the Commission requires.

New Hampshire HB 1685 provides that the State’s policy is to use the least restrictive form of regulation to protect consumers. The bill follows the ALEC model in that voluntary bonding and insurance would be among the lesser restrictive regulations, and mandatory bonding or insurance, registration, certification, and licensing would be considered more restrictive. The bill would create the Occupational Regulation Review Commission (Commission) to review 20% of existing occupational licensing requirements annually to create a five year review process.
The Commission would have to report annually with recommendation for legislation that either repeals an occupational regulation, converts an occupational regulation to a less restrictive form of regulation, or instructs the relevant licensing board or agency to revise it regulations to implement a less restrictive regulation that the legislature directed. The bill also allows applicants with criminal convictions to petition the license board to determine whether their background would bar them from getting a specific license before undergoing training.
If denied, the applicants can appeal. The bill passed the House but likely will not make it through the Senate this year.

Some states are simply considering eliminating some license requirements:

Louisiana SB 482 would exempt licensed mechanical contractors from obtaining an additional license for HVAC and gas fitting work.

Ohio HB 583 would eliminate the authorization for municipalities to require specialty contractors, who must be licensed at the state level, to register with the municipality and post a bond. A bond is not required in connection with a state license for contractors. The bill also would prohibit political subdivisions from requiring licenses for any profession that already is required to obtain a license under state law. The bill also would address other occupational licensing issues such as disqualification from obtaining a license for having a criminal record, nonspecific moral character requirements, and licensing fees.

In Minnesota, HB 3872/SB 3444 would repeal the licensing laws for residential building contractors, residential remodelers, residential roofers, manufactured home installers, all which require a license bond.

Helping those with criminal backgrounds obtain occupational licenses got the most traction in the state legislatures this year. A new law in Delaware prohibits license boards from considering a conviction over ten years old if the applicant has a clean record, and reduces the waiting period from five to two years that an applicant petition for a conviction waiver. In Indiana (HB 1245), all licensing boards are required by year’s end to list all crimes that would disqualify applicants for a license, exclude arrest records that did not result in conviction, and eliminate vague terms regarding the applicant’s character that give the license board unfettered discretion. Nebraska’s new law on this issue is noted above.

Legislation on this issue still is pending in Kansas (SB 421), New Hampshire (HB 1685), Ohio (HB 583) and Tennessee (SB 2465)

Dead for 2018

HB 1319, the Governor's bill in South Dakota, would create an interstate compact under which licensees in good standing in their state could get a temporary (18 month) license in another state. States joining the compact agree to provide the destination state with information on whether their state licensee has a valid license and is in good standing with the home state. Compacting states may opt out of granting such reciprocity to particular occupations from other states only by enacting legislation with findings to show that the other state's requirements are inadequate to protect the public. Under the compact, the laws of member states are superseded by the interstate compact to the extent they conflict and the compact law should be interpreted to avoid conflicts. The bill was defeated on the House floor.

Members should visit Advocacy / General Info (Members) for more information.



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