Abstract

Excerpted From: Kate Elengold, Debt, Work, and the State, 109 Minnesota Law Review 1309 (February, 2025) (419 Footnotes) (Full Document)

Kahssay Ghebrebrhan emigrated to the United States from Ethiopia in 1975 after experiencing a Marxist coup d'état and a burgeoning civil war. Mr. Ghebrebrhan moved to Washington D.C. in 1990 where, for the next twenty-nine years, he worked as a street vendor. Prior to the COVID-19 pandemic, Mr. Ghebrebrhan operated a stand outside the D.C. Superior Courthouse, selling hot dogs, chips, soda, and candy. He worked five days per week, ten hours per day, year round to support his family. Because street vendors are regulated by the District of Columbia, Mr. Ghebrebrhan had to apply for a street vendor license and renew that license every two years.

On March 18, 2020, shortly after the world shut down because of the COVID-19 pandemic, the D.C. Superior Courthouse closed except for “absolutely essential” proceedings. Mr. Ghebrebrhan shut down too, both for his own safety and because no government workers were in D.C. to purchase his goods. The District, however, continued to charge him $375 quarterly for his vendor license.

While COVID-19 was raging, Mr. Ghebrebrhan's vendor license expired in September of 2020. After some delays due in part to government closures, Mr. Ghebrebrhan applied for his license renewal in September 2022. He found that he was unable to renew his vendor license because he owed the District more than $1,000. Mr. Ghebrebrhan's debt arose from the quarterly vendor license fees that had accrued during the COVID-19 shut-down, when being in public was considered unsafe and the streets were empty of customers. Without a vendor license, Mr. Ghebrebrhan could not pay his debt to the District, was unable to find other work, and had to turn to public benefits to survive. He found himself in a Catch-22, asking “I am willing to pay down any debts, but I do not have the ability to pay them without any income. How can I be asked to pay if I am unable to work?”

Mr. Ghebrebrhan's situation is not unique. In every state and in many municipalities, workers can lose their occupational licenses because they owe a debt to the state. These laws allow the state to use occupational licensing restrictions as a debt collection tool, making it illegal for the debtor to work in their licensed trade. Mr. Ghebrebrhan ran afoul of Washington D.C.'s Clean Hands Law, which mandates that the relevant licensing board deny an occupational license or its renewal if the worker owes more than $100 in outstanding fines, penalties, interest, or taxes to the District. Louisiana and Nevada have similar statutory schemes. Several large municipalities have enacted analogous measures. Miami, for example, will deny an occupational license if the “applicant, individual, partnership or other incorporated or unincorporated business entity” is in violation of a municipal code, zoning or city ordinance, or has outstanding related fines owed to the city.

State and local governments also have passed laws that use occupational licensing restrictions to target specific kinds of debt, like tax debt, child support debt, or debt related to civil or criminal violations. Every state and the District of Columbia rely on occupational license restrictions to incentivize payments on child support debt. At least twenty states and several municipalities restrict occupational licenses when the worker owes a tax debt. And interactions with the justice system--civil or criminal--also can lead to occupational license restrictions in certain jurisdictions. In Chicago, for example, the city's authority to restrict occupational licenses extends to debt owed pursuant to a court order or an order of the department of administrative hearings.

Through debt collection laws, states have given themselves tremendous power to control debtors' lives. They have extensive and punitive tools to collect state-owned debt, including wage garnishment, driver's license restrictions, and incarceration. But while scholars have criticized occupational licensing regimes, the rise of modern-day debtors' prisons, and debt-based driver's license restrictions, debt-based occupational licensing restrictions have completely fallen through the cracks. This Article's first contribution is to fill that gap--to map the existence and implementation of state statutes and municipal ordinances that authorize the government to use occupational licensing restrictions as a debt collection tool.

This Article also fills a theoretical gap in the literature. Recognizing the power and potency the state has in its debt collection tools, the Article's second contribution is a conceptual one: it offers a framework for how the state should decide whether and by what means to collect debt from its citizens. Rather than limiting its analysis to a traditional cost-benefit analysis focused on dollars collected versus dollars spent, this Article argues that the state must also consider moral and public interest factors unique to the relationship between the state and its citizenry. Although the theory is broadly applicable to any government debt collection analysis, the Article returns to occupational licensing restrictions to illustrate, concretely, how one would apply both a traditional cost-benefit analysis and the more extensive benefits-burdens analysis proposed herein. Finally, it offers pragmatic policy proposals to change the way that governments use debt-based occupational licensing restrictions to better reflect the state's unique moral and public interests.

Part I briefly introduces the concept of occupational licensing, providing scaffolding for the remainder of the Article. It then turns to debt-based occupational license restrictions, setting out the historical context for their rise and exploring how such collection tools expanded within the larger historical context of the Civil Rights Movement, the War on Drugs, and welfare reform.

Part II moves from the past to the present. It details the existence of debt-based occupational license restrictions, finding that every state, the District of Columbia, and many municipalities have given their government authority to restrict a worker's occupational license if they owe a debt to the state. Part II also sets out the limited enforcement data publicly available, concluding that despite the scarcity of the data, there is sufficient evidence of enforcement to warrant serious attention.

Part III offers a theory to guide governments in analyzing whether and how to collect debt from their citizens. It contrasts state debt collection for debt (unrelated to credit extended under contract with the individual) with a company's collection for credit extended, highlighting the state's unique moral and public interest considerations. With that theoretical framing, Part III returns to debt-based occupational licensing restrictions to illustrate the analysis. It first assesses the costs and benefits for using occupational licensing restrictions as a debt collection tool using a traditional cost-benefit analysis--dollars collected versus dollars expended. It then sets out the benefits-burdens analysis proposed herein, including analysis of moral and public interest factors unique to state actors collecting debt from individuals.

Part IV offers prescriptive solutions for righting the imbalance illustrated in Part III. It outlines four possibilities policymakers may consider alone or in combination, including: (1) implementing mandatory data collection and public disclosure on all debt-based licensing restrictions; (2) requiring robust ability-to-pay hearings that incorporate a willful contempt standard before stripping a worker's occupational license because of debt owed to the state; (3) offering creative alternatives for repayment prior to stripping a debtor's occupational license; and (4) limiting application of debt-based occupational license restrictions to occupations with a mean income higher than a specified threshold amount. While fully articulating these prescriptive possibilities is beyond this Article's scope, the ideas outlined are intended to spark a serious conversation about alternatives to state-owned debt collection that better reflect the government's unique interests in protecting individual debtors, families, and the broader public.

[. . .]

Work is critical to one's identity, social connection, and financial well-being. When one owes debt to the state, however, occupational licensing restrictions may limit their ability to work. This Article's mapping of debt-based occupational licensing statutes establishes that they are ubiquitous across the nation, largely affecting lower-income occupations.

As occupational licensing restrictions as a debt collection tool have largely been unstudied and uninterrogated, policymakers have not been asked to grapple with their costs and benefits. This Article challenges them to consider whether this punitive debt collection tool has more advantages than disadvantages, employing a traditional cost-benefit analysis alongside and supplemented by an assessment of moral and public interest tradeoffs unique to state action.

My goal here is to shed much-needed light on this under-recognized and under-reported phenomenon, its ironies, and its downstream consequences. I further aim to spur discussions among legal and non-legal scholars, advocates, and policymakers not only about whether to employ debt-based occupational licensing restrictions to collect on state-owned debt, but also how to undertake that kind of critical assessment.

Assistant Professor of Law, University of North Carolina School of Law.