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 1as 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 of time thereby encouraging the party with an exemption to work toward compliance with the new rules before the grace period elapses history of the grandfather clausethe 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 2the 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 3 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 the year lyndon b johnson introduced the voting rights act which enabled congress to end discriminatory voting practices such as the grandfather clause 4types of grandfather clausesdepending 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 examples of grandfather clausesone 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 5grandfather 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 1