A grandfather clause, also called a “legacy clause,” is an exemption that allows persons or entities to continue with activities or operations that were approved before the implementation of new rules, regulations, or laws. Such allowances can be permanent, temporary, or instituted with limits.
Key Takeaways
- A grandfather or legacy clause is a provision that allows people or entities to follow old rules that once governed their activity instead of newly implemented ones, often for a limited time.
- The “grandfather clause” term originated after the U.S. Civil War and referred to statutes enacted in the South to keep African Americans from voting.
- Grandfather clauses can be permanent, temporary, or instituted with limits.
- Grandfather clauses often apply to zoning laws when the purpose of a development changes.
Understanding How a Grandfather Clause Works
Generally speaking, a grandfather clause only exempts people or entities engaged in specified activities before new rules were put in place. All other parties entering the market post-implementation are required to abide by the new rules.
As a result, grandfather clauses effectively place two sets of rules or regulations on otherwise similar businesses or circumstances, which can create unfair competitive advantages for exempted parties. In these situations, grandfather clauses may only be granted for a set period, thereby encouraging the party with an exemption to work toward compliance with the new rules before the grace period elapses.
Historical Origins of the Grandfather Clause
The origin of the term “grandfather clause” refers to statutes put in place after the Civil War by seven Southern states in an attempt to block African Americans from voting. The statutes enumerated new voting requirements such as literacy tests, property ownership, and poll taxes. However, white voters whose grandfathers had the right to vote before the end of the Civil War were exempt from the new requirements under the legacy clause. As African Americans had no voting rights until the enactment of the 15th Amendment to the Constitution in 1870, they did not qualify for the exemption.
The statute was deemed to be unconstitutional by the Supreme Court in 1915 because it violated equal voting rights, but the use of the term indicating rights prior to rule changes carries on. The term has expanded beyond its roots in racial exclusion to refer mainly to legal exclusions granted on the basis of a current business practice being grandfathered in.
1965
The year Lyndon B. Johnson introduced the Voting Rights Act, which enabled Congress to end discriminatory voting practices such as the grandfather clause.
Types of Grandfather Clauses
Depending on specific circumstances, grandfather clauses can be implemented in perpetuity, for a specified amount of time, or with specific limitations. In situations where this clause creates a competitive advantage for the exempted party, exemptions are usually granted for a specified period to allow existing businesses to make the changes necessary to get up to speed and comply with new rules and regulations.
Clauses with specific limitations may also be put in place to prevent unfair competition, such as prohibitions on the expansion, remodeling, or retooling of an existing facility. This keeps a manufacturing plant, for example, from avoiding upgrades to current environmental standards while still continuing to increase production.
Practical Examples of Grandfather Clauses
One of the most common uses of grandfather clauses is found in changing zoning laws. For example, in a situation where a change in zoning law from commercial to residential prohibits new retail establishments, the existing stores are typically granted grandfather clauses allowing them to stay in business if they abide by specified limitations. A common limitation is the sale of a business, which can void the grandfather clause.
Grandfather clauses are also common in the electricity industry. In many countries, new regulations on carbon emissions are being applied to proposed generation plants, while grandfather clauses for specified time frames have been granted to existing coal-powered facilities. In part, the clauses are being put in place to allow coal-powered plants time to integrate emission controls and to allow workers and communities dependent on coal mining enough time to transition away from the industry.
Frequently Asked Questions
What Is a Grandfather Clause?
A grandfather clause exempts people, businesses, and other entities from adhering to new legal rules or laws governing their behavior.
How Long Does a Grandfather Clause Last?
The length of time the clause is in force can either be unlimited or for a specified amount of time. It also can end when a specified set of circumstances has been achieved.
What Is the Origin of the Term ‘Grandfather Clause’?
The term “grandfather clause” was coined to describe laws put in place in the South after the U.S. Civil War to prevent African Americans from voting. New laws governing who could and could not vote were implemented that required literacy tests, owning property, and the payment of poll taxes. However, anyone whose grandfather had had the right to vote was exempt from these new laws, hence the name. As slaves were considered property and thus could not vote, it ensured that all African Americans would be subject to the new voting restrictions, while most White Americans would not.
The Bottom Line
Though born in the infamy of racism, the term “grandfather clause” has survived the years and come to be viewed as benign and untethered to its origins. It describes a legal clause that provides an exemption to adhering to a new law or standard. It is most often used to prevent unfair advantage and is frequently limited in duration, for example allowing older businesses to get up to speed and comply with new regulations while amortizing the costs of doing so. It can also be limited by circumstance, such as when an area is rezoned from commercial to residential, but existing businesses are allowed to stay in operation, so long as that operation is continuous. Sometimes it exists in perpetuity.
Related Terms: zoning laws, competitive advantage, regulatory compliance, business exemptions.
References
- Cornell Law School Legal Information Institute. “Grandfather Clause”.
- Encyclopedia Britannica. “Grandfather Clause”.
- Justia. “Guinn & Beal vs. The United States.”
- National Archives. “Voting Rights Act.”
- Rosenberg & Estis, P.C. “The Grandfathering Clock: Zoning and Nonconforming Uses”.
