AG Says Some Discrimination on Residence is OK

Responding to questions posed by state Sen. Stacey Campfield, Tennessee Attorney General Bob Cooper says city and county governments can dictate where their employees live while both state and local governments can give some preferential treatment to businesses located within their boundaries.
Campfield, R-Knoxville, says he sought the opinions “for clarity, mostly” in light of a prior Cooper opinion saying that a state law restricting liquor store licenses to Tennessee residents is unconstitutional. (Note: The full opinion is HERE.)
In the June opinion on liquor licenses, Cooper said the prohibition against out-of-state ownership violates the Commerce Clause of the U.S. Constitution. The new opinion says that local government residency requirements for employees have “only a negligible effect” on interstate commerce.
“Second, where the local government acts as an employer, its conduct is generally exempt from Commerce Clause restrictions under the ‘market participant’ exception. Under this exception, where a government acts in its more general capacity of market participant, it may favor its own citizens over others without violating the Commerce Clause,” the opinion says.
The opinion also cites a 1976 state Supreme Court decision upholding a Memphis’ ordinance requiring employees of the city to live within Memphis, which had been attacked on other constitutional grounds.

The Cooper opinion goes on to say that, though the residency requirements for city or county employment are constitutional, the General Assembly could prohibit local governments from imposing such restrictions. Though he had asked about that possibility in posing his questions, Campfield said he presently had no plans for introducing such legislation in next year’s 108th General Assembly.
The senator also asked if the state government or local governments can “constitutionally impose residency requirements or incentives that give preferential treatment to contractors” residing within their jurisdiction.
“Generally, yes,” replied the attorney general. “Where a state or local government acts as a market participant rather than a regulator and purchases good or services on its own account, it may discriminate in favor of its citizens without violating the Commerce Clause of the United States Constitution.
“Further, since the right to contract with a governmental entity is not a fundamental right, such a practice would not violate the equal protection requirements of the United States or Tennessee Constitution so long as the practice is supported by a rational basis. If the practice extends so far that it burdens the right to pursue a common calling, however, it could be subject to challenge under the Privileges and Immunities Clause of the United States Constitution.”

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