A landmark decision against bureaucratic browbeating has advocates for limited government, free markets, and shapely eyebrows celebrating. One year ago, in Patel v. Texas Department of Licensing & Regulation, the Texas Supreme Court ruled against a state agency that forced eyebrow threaders to complete 750 hours of training before they could legally work.[1] This decision on a little-known beauty practice is actually one of the most significant rulings in favor of economic liberty since the New Deal. The ruling by the Texas Supreme Court can both defend entrepreneurs from an ever-encroaching regulatory state and reinvigorate a languishing tradition of protecting honest enterprise under state constitutions.

Concurring with the majority, Justice Don Willett even penned a moving encomium to economic liberty, quoting figures as diverse as Frederick Douglass and Pope Francis (and that was just on the first page).[2] “Threaders with no license,” Willett wrote, “are less menacing than government with unlimited license.”[3] That clearly left an impression on columnist George F. Will, who suggested a Republican president would be wise to nominate Willett to the U.S. Supreme Court.[4]

Make no mistake: This case about a little piece of string has Texas-sized importance for everyone in the country.

Making a Living on a String

Threading eyebrows is an ancient South Asian technique of removing facial hair. Watching threaders at work can be oddly hypnotic: A practitioner loops a single strand of cotton thread around a hair before pulling it out. Unheard of in the United States until recently, immigrants from South Asia have brought the practice to salons and mall kiosks, serving both their community and anyone else who wants excess facial hair removed with less pain than waxing or tweezing.

That line of work attracted entrepreneurs like Ash Patel, who formed a threading salon venture with two partners in 2009. But Texas had other plans. The Texas Department of Licensing and Regulation decided threading eyebrows required a full-blown license in cosmetology. Threaders found themselves caught amidst a regulatory crackdown. In San Antonio, the Department slapped three threaders with $2,000 administrative fines. The Department’s actions drove one of the threaders, Vijay Yogi, who had been threading for eight years, to abandon her trade and into unemployment; she would be out of work for the next five years.[5]

While the Department never directly targeted Patel’s salon, the crackdown frustrated his expansion plans and threatened his ability to provide for his family. Any threader in Texas could face fines up to $5,000 per day if he hired, supervised or worked as an unlicensed cosmetologist.

Obtaining that license is an ordeal. The Department asserted threaders had to either complete 750 hours of training for an esthetician specialty license or finish 1,500 hours of training for a full cosmetology license. Beauty schools charge anywhere from $7,000 to $22,000 for their courses, which take months to complete.

Despite the Department’s insistence that threaders stop working and become licensed, Texas does not actually require cosmetology schools to teach threading techniques. Out of 389 beauty schools in the state, fewer than 10 taught the practice. Instead, threaders would learn about facial treatments (225 hours), applying makeup (75 hours), “electricity, machines, and related equipment” (75 hours) and aromatherapy (15 hours).[6]

These regulations forced Patel into a precarious Catch-22: Working or hiring the unlicensed would mean risking steep fines, but hiring licensed cosmetologists would mean employing people woefully unqualified to thread eyebrows. Determined to vindicate their rights, in late 2009, Patel and several other threaders partnered with the Institute for Justice and sued the state.

“So Burdensome as to be Oppressive”

In court, Patel and the threaders’ central argument was that out of the 750 hours required for the esthetician license, only 40 hours, all pertaining to “sanitation, safety and first aid,” were relevant. This mismatch was simply so arbitrary that, they argued, it violated the Texas Constitution. Their expert witness, a physician and medical spa owner, testified that to prevent many potential bacterial and viral infections, threaders simply had to learn and practice washing their hands, use new thread between customers and keep their work areas clean. She concluded that one hour of training would suffice.[7] 

In contrast, the state asserted 430 hours were salient, citing broad interpretations of health and public safety statues and deference to the legislature. Remarkably, that meant the Department had conceded 320 hours—more than 40 percent—of the coursework was “not related to activities threaders actually perform.”

Ultimately, almost six years after filing, and after losses in the trial court and court of appeals, the Texas Supreme Court ruled in Patel v. Texas Department of Licensing & Regulation that forcing threaders to obtain esthetics licenses was unconstitutional under the Texas Constitution’s Due Course of Law Clause (the equivalent of the U.S. Constitution’s Due Process Clause).[8] In doing so, the court crafted a new test for assessing challenges to economic regulations made under the Texas Constitution and made much of the state’s concession of 320 irrelevant hours.

Under the court’s new test, economic regulations “are presumed to be constitutional,” but that presumption can be overcome in one of two ways.[9]  First, a regulation can be unconstitutional if it is not “rationally related to a legitimate governmental interest.” That requirement is similar to challenges made under the U.S. Constitution’s Due Process Clause, except the Texas court explained that a rational relationship must be demonstrated with actual evidence, something many federal courts often do not require.[10] Second, independently of the first option, a regulation can be unconstitutional if in light of its real-world effect it is “so burdensome as to be oppressive in light of the governmental interest.”[11] 

Applying this test to the case at hand, the court focused on the second prong of the test. Given the state’s concession on the irrelevancy of hundreds of hours of esthetician training, the court was aghast that “threaders are required to undergo the equivalent of eight 40-hour weeks of training unrelated to health and safety as applied to threading.”[12] Furthermore, the court cited high “associated costs” for the license, which includes both the cost to complete such training and the opportunity cost of “delayed employment opportunities.”[13] Applying the full 750 hours of licensure training to the eyebrow threaders is “not just unreasonable or harsh, but it is so oppressive” it violates the Due Course of Law Clause.[14]

In other words, crafting the new “so burdensome as to be oppressive” standard of review was in line with the court’s legal traditions. By adding that standard alongside the traditional rational basis test, Patel provides a way to harmonize past lines of cases. Patel demands the government put forward evidence of a law’s rationality, while the law itself can be declared unconstitutional, either for being irrational or oppressive.[15] This approach allows previous lines of cases to exist without overruling them wholesale, which courts are reluctant to do.

Patel’s Implications

Armed with this new standard of review, the Texas Supreme Court’s decision in Patel can undermine the power of “oppressive” regulations. One particular field ripe for judicial pruning would be the kudzu-like growth in occupational licensing laws. During the nineteenth century, Texas licensed precisely two occupations: doctors and dentists. By 2013, Texas regulated more than 500 occupations, affecting more than 2.7 million individuals and businesses in the state, the Texas House of Representatives Committee of Government Efficiency & Reform found.[16] Nationwide, one in four American workers must procure a license to work, a fivefold increase from the 1950s.[17] Licensing affects more Americans than those represented by a union or who earn the minimum wage, combined.[18]

Even economic advisors for President Barack Obama have criticized occupational licensing. In July 2015, amidst references to Adam Smith and Capitalism and Freedom, a white paper by the White House Council of Economic Advisers, Department of the Treasury and the Department of Labor found “substantial costs on job seekers, consumers and the economy more generally” from licensure.[19] “Instituting a more rational approach to occupational regulation,” the report concluded, “would improve economic opportunity.”[20]

Regulatory burdens are particularly harmful for those just taking their first steps up the economic ladder. According to a 2012 report by the Institute for Justice, the average license in Texas for low- and middle-income workers imposes over $300 in fees, two exams and 326 days of training. Surprisingly, Texas licensing laws are more burdensome than in blue states like Illinois, New Jersey and New York. In Texas, installing security and fire alarms, cutting hair, and massaging customers all require far more training than emergency medical technicians, who quite literally hold others’ lives in their hands. [21]

Yet if other state supreme courts adopt standards of review similar to Patel’s “so burdensome as to be oppressive” test, this could mark a renaissance of engaged judging.[22] With the onset of the New Deal, the U.S. Supreme Court began eroding constitutional protections for economic liberty, rendering federal courts increasingly hostile to honest enterprise.

In 1934, citing the dangers wrought by “destructive competition,” the High Court upheld a conviction for a grocer who had sold milk and bread below New York’s mandated price floor on milk.[23] When faced with an economic regulation, Justice Owen Roberts wrote in Nebbia v. New York, courts must consider “every possible presumption is in favor of its validity.”[24] Four years later, in another Supreme Court decision that upheld milk regulations, Justice Harlan Stone wrote that noneconomic rights, including the right to vote, assemble and disseminate information freely, would be subject to “more exacting judicial scrutiny under the Fourteenth Amendment.”[25] Meanwhile, laws that infringed on all other rights, including the right to earn an honest living, would be upheld as constitutional if the government merely offered a “rational basis” as justification.[26]

Yet economic liberty found surprising protection under state courts. In a 2005 American University law review article, one of the undersigned documented how state supreme courts continued to strike down regulations for infringing on Americans’ right to earn a living as protected by due process clauses under state constitutions.[27] But while the Supreme Court famously repudiated the legal doctrine of “economic substantive due process” in the late 1930s, several state supreme courts continued to abide by it. Notably, the number of victories on economic substantive due process grounds actually increased, rising from 68 wins in the 1940s to 96 in the 1950s. Amid the 1960s, that figure dropped to 67.

During this era, courts invalidated price controls, advertising bans and blue laws, even in states like Massachusetts. Nearly 30 state supreme courts struck down dozens of different licensing schemes, freeing barbers, dry cleaners, funeral directors, photographers, plumbers, tile contractors and watchmakers, among others, from burdensome restrictions.

Sometimes state courts would directly repudiate the U.S. Supreme Court. In 1951, the Georgia Supreme Court unanimously invalidated a milk price-fixing scheme, rejecting the High Court’s decision in Nebbia.[28] In a biting concurrence, Georgia Chief Justice William Henry Duckworth warned that if courts succumbed to “judicial timidity” and deferred to the whims of lawmakers, “By such conduct the legislature, aided and abetted by the judiciary of this State, could ultimately convert Georgia into a socialistic State despite the plain provisions of the Constitution which forbid such.”[29]

Now, this phenomenon should not be oversold.  More often than not, state courts upheld economic regulations, often citing post-New Deal federal precedent when interpreting their own state constitutions. But the fact that state courts protected economic liberty at anything more than a negligible rate is rather shocking. 

With time, however, that protection faltered. Economic liberty prevailed 48 times during the 1970s; by the 1990s, that figure had plunged to a mere eight victories. Yet, even as they increasingly became more like federal courts in their deference to economic regulation, state supreme courts were not, with a few exceptions, explicitly overruling older cases that had struck down economic regulations.

In many states, there were often two lines of precedent standing side-by-side. One would strike down regulations under a heightened form of scrutiny; the other would uphold them, typically by using a version of the rational-basis test. The former would use often-soaring rhetoric about the value of economic liberty; the latter would rhapsodize on the virtues of judicial restraint.

As mentioned above, this was particularly apparent when the Texas Supreme Court decided Patel. If Patel were applied in other states the nationwide trend of fewer economic liberty victories in state court could be reversed, potentially returning the frequency to the levels witnessed in the 1950s. This could make a difference for entrepreneurs across the country. Pulling a little piece of thread may be the best hope in unraveling the modern assault on economic liberty.

* * * * *

Anthony Sanders and Nick Sibilla work at the Institute for Justice, which represented the threaders in Patel v. Texas Department of Licensing & Regulation.

 

[1] Patel v. Tex. Dep’t of Licensing and Regulation, 469 S.W.3d 69, 73 (Tex. 2015).

[2] Id. at 92–124 (Willett, J., concurring).

[3] Id. at 95.

[4] George Will, The 110-year old case that still inspires Supreme Court debates, Wash. Post, July 10, 2015, https://www.washingtonpost.com/opinions/110-years-and-still-going-strong/2015/07/10/f30bfe10-2662-11e5-aae2-6c4f59b050aa_story.html

[5] Plaintiffs’ Original Petition, Application for Injunctive Relief, and Request for Disclosure, Patel v. Texas Dep’t of Licensing and Regulation at 6, 25, 469 S.W.3d 69 (Tex. 2015) (No. D-1-GN-09-004118), https://www.ij.org/images/pdf_folder/texas/eyebrow_threading_petition.pdf.

[6] Patel, 469 S.W.3d at 88.

[7] Id. at 130 (Hecht, C.J., dissenting).

[8] Patel, 469 S.W.3d at 88.

[9] Id. at 87.

[10] See id.

[11] Id.

[12] Id. at 90.

[13] Id.

[14] Id.

[15] See id. at 89–90.

[17] Department of the Treasury Office of Economic Policy, Council of Economic Advisers & Department of Labor, Occupational Licensing: A Framework for Policymakers, at 17 (2015), https://www.whitehouse.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf.

[18] See U.S. Bureau of Labor Statistics, Table 1. Union affiliation of employed wage and salary workers by selected characteristics (2016), http://www.bls.gov/news.release/union2.t01.htm; U.S. Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2014 (2015), http://www.bls.gov/opub/reports/minimum-wage/archive/characteristics-of-minimum-wage-workers-2014.pdf.

[19] Occupational Licensing: A Framework for Policymakers, supra note 16, at 56.

[20] Id.

[21] See generally Dick M. Carpenter II, Lisa Knepper, Angela C. Erickson & John K. Ross, License to Work: A National Study of Burdens from Occupational Licensing, Institute for Justice (2012), http://ij.org/report/license-to-work/

[22] See Patel, 469 S.W.3d at 87.

[23] Nebbia v. People of N.Y., 291 U.S. 502, 518 (1934).

[24] Id. at 538.

[25] United States v. Carolene Products Co., 304 U.S. 144, 152 n.4 (1938).

[26] Id. at 152.

[27] Anthony B. Sanders, The “New Judicial Federalism” Before its Time: A Comprehensive Review of Economic Substantive Due Process Under State Constitutional Law Since 1940 and the Reasons for its Recent Decline, 55 Am. U. L. Rev. 457, 467 (2005).

[28] Harris v. Duncan, 67 S.E.2d 692, 693–95 (1951).

[29] Id. at 570–71.