Occupational Licensing and the First Amendment

July 2nd, 2014

In Edwards v. District of Columbia, the D.C. Circuit, per Judge Janice Rogers Brown, found unconstitutional a D.C. law that required tour guides to take a 100-question multiple choice test, and pay a licensing fee. What was most striking about the opinion, was the burden it placed on the government to assert a valid rationale for the law. In the context of the First Amendment, this is the standard course of business. The government must justify a burden on free speech.

Yet, at heart, this case involved an occupational licensing regime that involved people speaking. Most occupational licensing tests are subject only to the feckless rational basis test. Under this regime, the government bears no burden, and the plaintiff must negative every conceivable basis for the law–even those the court creates ex post.

There is an odd symmetry. If an occupational licensing law is viewed as an abridgment of free speech, the government will almost always lose. But, if the occupational licensing law focuses on a calling other than primarily speaking, the government will always win. If this case was framed, not as a Free Speech case, but as an economic liberty case under existing precedents, none of the burden would have been placed on the government. Two occupational licensing regimes, one involving free speech, one arguably not involving free speech, are worlds apart.

This does give some teeth to the theory that the First Amendment can, in some contexts, do what the Supreme Court will not do through the Due Process Clause.

Update: The Washington Post Editorial Board has come out swinging in favor of this ruling:

There is no question that the city has a stake in safeguarding an industry that brings some 15 million tourists to the city every year and is responsible for more than 66,000 jobs. But sightseeing services are already required to get a license to do business in the city. Market forces, including the proliferation of consumer review Web sites such as Yelp and TripAdvisor, provide an incentive for companies to offer good service. The requirement to pass a test not only discouraged competition but also gave rise to a parasite industry that profited from helping people pass, which in turn had no proven connection to the quality of guiding. It would be far better, as the appeals court suggested, for the city to have regulations aimed at unscruplous practices and a voluntary accreditation system for guides interested in being listed as city-approved. A spokesman for the Department of Consumer and Regulatory Affairs told us that officials are examining the ruling but are also looking at the possibility of narrower regulations.

We understand — and appreciate — the value of a well-informed tour guide who is able to transport visitors to a different time. We value even more highly the right to speak without paying $200 for a license.

In any event, Judge Brown’s opinion is well worth reading. Here are some of the highlights.

  • Finding the record wholly devoid of evidence supporting the burdens the challenged regulations impose on Appellants’ speech, we reverse and remand.
  • As to prongs two and four, Appellants present two arguments. First, they contend the record is “utterly devoid” of evidence that the burdens of studying for and passing the 100-question exam “do anything at all to advance a legitimate government objective.” Appellants’ Br. at 43. Second, they argue there is no evidence in the record the District’s interests would be achieved less effectively absent the exam requirement. We agree.
  • To be sure, the District is not required to produce empirical data “accompanied by a surfeit of background information.” See Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 555 (2001). Instead, the Supreme Court has “permitted litigants to justify speech restrictions by reference to studies and anecdotes pertaining to different locales altogether, or even, in a case applying strict scrutiny, to justify restrictions based solely on history, consensus, and simple common sense.” Id. That said, the burden remains on the District to establish the challenged regulations’ efficacy, and a regulation cannot be sustained “if there is little chance that the restriction will advance the State’s goal.” Id. at 566.
  • Despite the District’s seemingly talismanic reliance on these asserted problems, the record contains no evidence ill-informed guides are indeed a problem for the District’s tourism industry. The only record “evidence” supporting the District’s beliefs regarding the perils of unlicensed tour guides is the District’s 30(b)(6) deposition testimony that guides with criminal convictions might pose a danger, though no evidence exists they actually have. See J.A. 154. This will not do. See Turner Broadcasting Sys., Inc. v. FCC, 520 U.S. 180, 196 (“[I]n the realm of First Amendment questions[,] . . . the [legislature] must base its conclusions upon substantial evidence.”). The District’s reliance on a Washington Post article dating from 1927 to justify the exam requirement is equally underwhelming. See Appellee’s Br. at 4, 19, 46. The article merely establishes that, nearly a century ago, the newspaper expressed concern about unscrupulous or fraudulent charitable solicitation and that an unidentified number of persons said self-styled tour guides were overly aggressive in soliciting business. Reliance on decades-old evidence says nothing of the present state of affairs. Current burdens demand contemporary evidence. See Shelby Cnty. Ala. v. Holder, 133 S. Ct. 2612, 2627 (2013) (“[A] statute’s current burdens must be justified by current needs.”); Riley v. Nat’l Fed’n of the Blind of N.C., Inc., 487 U.S. 781, 802 (1988) (rejecting the government’s reliance on antiquated evidence to justify current burdens); Nashville, C. & St. L. Ry. v. Walters, 294 U.S. 405, 415 (1935) (“A statute valid when enacted may become invalid by change in the conditions to which it is applied.”).
  • Here, the District’s core premise is that tour guides who have not passed a multiple-choice exam will harm the tourism economy. See Appellee’s Br. at 19. But this is exactly the sort of “economic” harm we distinguished in Taylor as being “susceptible to empirical evidence.” See Taylor, 582 F.3d at 16.
  • Even if we indulged the District’s apparently active imagination, the record is equally wanting of evidence the exam regulation actually furthers the District’s interest in preventing the stated harms. Curiously, the District trumpets as a redeeming quality the fact that, once licensed, “[t]our guides may say whatever they wish about any site, or anything else for that matter.” Appellee’s Br. at 27 (citing Kagan v. City of New Orleans, 957 F. Supp. 2d 774, 779 (E.D. La. 2013)). But we are left nonplussed. Exactly how does a tour guide with carte blanche to—Heaven forfend—call the White House the Washington Monument further the District’s interest in ensuring a quality consumer experience?6 Also puzzling is the applicability of the exam requirement to specialty tour guides, such as those focused on ghost, food or movie tours.7 A general exam requirement is ill-suited to ensuring such specialty guides are well informed. And the existence and persistence of such varied themes highlights how tourism is as much about entertaining as educating.
  • Perhaps most fundamentally, what evidence suggests market forces are an inadequate defense to seedy, slothful tour guides? To state the obvious, Segs in the City, like any other company, already has strong incentives to provide a quality consumer experience—namely, the desire to stay in business and maximize a return on its capital investment…. Further incentivizing a quality consumer experience are the numerous consumer review websites, like Yelp and TripAdvisor, which provide consumers a forum to rate the quality of their experiences. One need only peruse such websites to sample the expressed outrage and contempt that would likely befall a less than scrupulous tour guide. Put simply, bad reviews are bad for business. Plainly, then, a tour operator’s self-interest diminishes—in a much more direct way than does the exam requirement—the harms the District merely hypothesizes. See City of Ladue v. Gilleo, 512 U.S. 43, 58 (1994) (observing that “[r]esidents’ self-interest [in maintaining their own property values] diminishe[d] the danger of the unlimited proliferation of residential signs” the city feared). That the coal of self-interest often yields a gem-like consumer experience should come as no surprise. In his seminal work, The Wealth of Nations, celebrated economist and philosopher Adam Smith captured the essence of this timeless principle: “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.” ADAM SMITH, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS 12 (Digireads.com Publishing 2004) (1776).
  • There is little mystery, therefore, that tour guides possess every incentive to provide quality tours.10 With this concept in mind, what, pray tell, does passing the exam have to do with regulating unscrupulous tour businesses and unethical guides? How does memorization of addresses and other, pettifogging data about the District’s points of interest protect tourists from being swindled or harassed by charlatans? Why would a licensed tour guide be any less likely to treat tourists unfairly and unsafely by abandoning them in some far-flung spot or charging additional amounts for return passage?—surely, success on the District’s history exam cannot be thought to impart both knowledge and virtue. The District never bothers to engage with these and other basic inquiries. The questions it does answer, however, serve only to underscore the substantial mismatch between its stated objectives and the means chosen to achieve those goals.
  • The District failed to present any evidence the problems it sought to thwart actually exist. Even assuming those harms are real, there is no evidence the exam requirement is an appropriately tailored antidote. Moreover, the District provided no explanation for abjuring the less restrictive but more effective means of accomplishing its objectives.
  • We are of course aware of the Fifth Circuit’s contrary conclusion in Kagan v. New Orleans, No. 13-30801, 2014 WL 2460495 (5th Cir. June 2, 2014), which affirmed the constitutionality of a similar tour guide licensing scheme. We decline to follow that decision, however, because the opinion either did not discuss, or gave cursory treatment to, significant legal issues. See Burka v. U.S. Dep’t of Health & Human Servs., 142 F.3d 1286, 1290 (D.C. Cir. 1998) (finding as unpersuasive and declining to follow a Fifth Circuit opinion that neglected to discuss or mention binding, Supreme Court precedent); Potomac Elec. Power Co. v. Dir., Office of Workers’ Comp. Programs, 606 F.2d 1324, 1329 (D.C. Cir. 1979) (declining to follow Fifth Circuit because “it did not discuss [an] issue in its brief opinion affirming [the district court]”).
  • The District’s failure to provide any justification—let alone a persuasive one—for the glaring inconsistency, effectively eviscerated what was left of the regulations’ waning credibility. See id. at 28:28–29:03. Why the regulations would permit a drunk’s pre-recorded narration on a tour bus, but proscribe the same conduct on a Segway, remains an enigma. What the foregoing makes plain, however, is that the tour-bus exemption is arbitrary and renders the regulations impermissibly underinclusive.

Disclosure: This case was litigated by the Institute for Justice. I have attended several IJ events over the years, and filed an amicus brief in favor of their petition for certiorari.