Pennsylvania Supreme Court Says State Constitution Protects Economic Freedom

May 19, 2020
By Timothy Sandefur

In a victory for Keystone State entrepreneurs, the Pennsylvania Supreme Court today agreed with the Goldwater Institute and ordered a trial judge to consider a lawsuit that challenges the constitutionality of a licensing law for real estate brokers, on the grounds that such laws “must not be unreasonable, unduly oppressive, or patently beyond the necessities of the case.” The decision makes clear that economic freedom is not only one of the constitutional rights all Pennsylvanians enjoy, but it is more protected under that state’s Constitution than it is under the federal Constitution.

The case pits businesswoman New Jersey Sara Ladd against state regulators who claimed that, because she helped Pennsylvania homeowners to market their rental properties online, she qualified as a “real estate broker” and had to get a state license—which requires years of training and possibly thousands of dollars. But Ladd didn’t perform broker work, so she filed a lawsuit arguing that imposing such burdens on her was unreasonable and therefore unconstitutional. Represented by lawyers with the Institute for Justice, she argued that the Pennsylvania Constitution protects her right to economic freedom, and that such an unreasonable requirement violated that right.

The trial court, however, threw out her case, using the “rational basis” test—a legal test that says that as long as the government claims that what it’s doing is good for the public, that thing is constitutional. That test was invented by federal courts in the 1930s, yet many states have adopted it into their own legal precedents, without any basis for doing so in their state constitutions. Ladd therefore appealed, arguing that should at least have the opportunity to prove that the law is unreasonable, and that state courts should not use the biased, pro-government federal version of the “rational basis” test.

The Goldwater Institute filed a friend of the court brief that pointed out that economic liberty is deeply rooted in the history and tradition of Pennsylvania law, predating even the days of that famous Pennsylvanian Ben Franklin, who viewed economic liberty as one of the essential freedoms that the American Revolution was fought to secure. The Pennsylvania Constitution itself refers to the right to “pursue happiness,” and the right to earn a living is an essential element of that pursuit. In 1795, a federal judge declared that this provision of the state Constitution protected the right to engage in “honest labor and industry” without unreasonable government interference.

Today’s decision upheld the state’s stronger protections for economic liberty, declaring that courts interpreting the state Constitution are “less deferential to the legislature” than federal courts interpreting the federal Constitution, and that restrictions in economic freedom must be based on actual evidence, not on the mere speculation that often suffices in federal courts.

The decision is also a reminder of the problems associated with licensing laws that bar people from taking their occupations across state lines. Workers who are already licensed in one state shouldn’t have to jump through the hoops of additional time and training to keep doing a job that they’re already licensed to do, simply because their work occurs on this side or that of a state line. States certainly have authority to protect their citizens from dangerous or fraudulent activities, but when a competent and honest person is already licensed to practice in one state, the fact that she crosses an invisible line on the ground isn’t good reason to prohibit her—on pain of crippling financial penalties!—from doing that same job. That’s why the Goldwater Institute created our Breaking Down Barriers to Work Act—which you can read more about here.

Today’s court decision is an important victory for Pennsylvanians who seek to put their skills to work to provide for themselves and their families. It follows on the heels of decisions by the Georgia and Texas Supreme Courts that have affirmed stronger constitutional protections for economic freedom—and for the right to pursue happiness.

Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.