Can UNC system audiology clinics fit and sell hearing aids to the public, or does the Umstead Act ban that as competition with private hearing aid dealers?

Plain-English summary

The North Carolina State Hearing Aid Dealers and Fitters Board (NCHADFB), through attorney Jackson Nichols, asked the AG whether UNC system audiology clinics could fit and sell hearing aids to the public. The Umstead Act (N.C.G.S. § 66-58) generally prohibits state agencies from selling goods or services ordinarily provided by private enterprise. The NCHADFB also questioned UNCG's advertised reduced prices for hearing tests.

Senior Deputy AG Grayson Kelley, Special Deputy AG Thomas Ziko, and Assistant AG Laura Crumpler said the UNC clinics did not violate the Umstead Act, and the discount pricing was acceptable.

The Umstead Act framework. In re Appeal of UNC (1980) established that the Umstead Act prohibits state agencies from competing with private enterprise. The Act is criminal (Class I misdemeanor under § 66-58(e)), so it gets strict construction. Vogel v. Reed Supply Co. and Elliott v. North Carolina Psychology Bd. confirm that criminal and right-to-engage-in-occupation statutes get strict construction. But the AG's 1986 formal opinion (55 NCAG 101) drew an important line: the Umstead Act bars activities not incidental to a state agency's legitimate function, while activities that are themselves legitimate state functions remain permissible.

Education is the legitimate function. The UNC system offers accredited Audiology Masters degree programs at UNCG, UNC-Chapel Hill, and East Carolina University. Training in hearing aid evaluation, selection, fitting, orientation, sale, and repair is an integral part of those programs. ASHA's Certificate of Clinical Competence in Audiology (CCC-A) requires 80 clinical hours in hearing aids. NCHADFB licensure itself requires 250 hours of supervised hearing aid fitting and sale activity (N.C.G.S. § 93D-(c)). So fitting and sale at the UNC clinics is part of state-mandated training.

The clinical supervision structure. UNC clinics use graduate student clinicians working under properly licensed faculty supervisors. Students participate in hearing evaluation and fitting practices only as the NCHADFB allows and only under direct supervision of audiology faculty who are themselves NCHADFB-licensed. At UNCG, students are not allowed to make ear impressions or place hearing aids in patients' ears; only licensed supervisors do those steps. A NCHADFB-licensed faculty member is always the responsible dealer or fitter listed on the statement of sale required by N.C.G.S. § 93D-7. So the clinics functioned as licensed dispensing operations with student involvement at supervised steps only.

UNC's express public service mission. N.C.G.S. § 116-1(b) directs UNC to pursue its educational mission through "public service, which contributes to the solution of societal problems and enriches the quality of life in the State." Article IX, §§ 8 and 9 of the North Carolina Constitution put education as a constitutional priority. The AG concluded that providing hearing aid fitting through a graduate training program was within UNC's legitimate function and therefore outside the Umstead Act's reach.

The UNCG pricing question. UNCG offered reduced prices on hearing tests and hearing aid batteries but sold the hearing aids themselves at prices comparable to private audiologists. The clinical faculty conducted biennial market surveys with other state training institutions to keep diagnostic fees comparable. The AG approved this pricing structure: the discount was on services tied to student training, while the actual hearing aid products were sold at market.

The combined effect of the analysis is to carve out a clear safe harbor for UNC clinical training programs that incidentally provide health services to the public. The opinion emphasized that the carve-out depends on the activity being a legitimate function (here, graduate education) and on the clinical operation being properly licensed under NCHADFB standards.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The Umstead Act has been amended over the years and the boundary between state agency activity and private enterprise competition has continued to be litigated. The NCHADFB has been restructured into the Hearing Aid Specialists Board and licensure requirements have changed. Anyone evaluating current Umstead Act issues should consult current G.S. § 66-58, current NCHADFB rules, and recent appellate decisions before relying on this opinion.

Background and statutory framework

The Umstead Act's purpose. Named for Senator William Umstead, the Act dates to 1929 and reflects a depression-era concern that state agencies were competing with struggling private businesses. The statute makes it a Class I misdemeanor for the state or its agencies to render services or sell goods that are "ordinarily and customarily" provided by private enterprise. Numerous statutory exceptions narrow the prohibition.

Strict construction. Vogel v. Reed Supply (1970) holds that criminal statutes get strict construction. Elliott v. North Carolina Psychology Bd. (1998) confirms that statutes restricting occupational practice also get strict construction. Both lines of reasoning support narrow application of the Umstead Act, restricted to activities that clearly fall within its prohibition.

In re Appeal of UNC (1980). This case established the framework: the Umstead Act bans activities that intrude on areas traditionally associated with private enterprise but does not bar legitimate state agency functions. The 1986 formal opinion at 55 NCAG 101 elaborated: when an activity is itself a legitimate function of the governmental agency, the Act has no application.

UNC's public service mission. N.C.G.S. § 116-1(b) authorizes UNC to use public service to address societal problems and enhance quality of life. Article IX, §§ 8 and 9 of the constitution recognize education as a public function. The opinion drew on both to characterize hearing aid fitting through audiology training as legitimate UNC activity, not commercial competition.

ASHA and NCHADFB licensure requirements. ASHA's CCC-A requires 80 clinical hours with hearing aids. The NCHADFB itself requires 250 hours of supervised fitting activity for licensure. Without clinical sites providing those hours, audiology students could not complete training or qualify for licensure. The state's regulatory structure thus implicitly relied on training clinics offering the services.

The supervision structure. Faculty audiologists held NCHADFB licenses. Students participated only in steps NCHADFB rules permitted, under direct supervision. The licensed faculty member was always the responsible dealer on the § 93D-7 statement of sale. This separation kept the clinic's licensure clean and tracked the NCHADFB's own regulatory framework.

Pricing analysis. The Umstead Act question was about competition with private enterprise. Discounted hearing tests reflected the lower expected proficiency of student-staffed sessions and were comparable across state training institutions. Hearing aid product prices were at market. The AG concluded this pricing pattern did not function as state-sponsored undercutting of private dealers.

Common questions

Q: Could a UNC clinic open a satellite hearing aid store at the mall without violating the Umstead Act?

A: Based on the 2002 opinion's framework, probably not. The opinion's safe harbor depends on the activity being incidental to a legitimate state function (graduate training). A retail-style satellite operation untethered from a training program would look more like commercial activity competing with private enterprise.

Q: What if a student dropped out of the program but kept working at the clinic as paid staff?

A: The opinion did not address that scenario. The safe harbor flowed from the training function; a non-student staff member providing the services would shift the analysis. Whether the clinic could employ post-degree audiologists to support student training is a related but distinct question.

Q: Could the UNC clinic advertise its services more aggressively?

A: The opinion approved UNCG's existing pricing structure but did not address marketing intensity. The carve-out turns on the activity being incidental to training, not on the volume of public business. Aggressive marketing might invite Umstead Act scrutiny by suggesting the clinic was pursuing market share rather than supporting student training.

Q: What about other UNC professional clinics (dental, optometry, pharmacy)?

A: The same framework would apply. As long as the clinic is incidental to legitimate professional education, properly supervised, and operates within the relevant board's licensure framework, the Umstead Act should not bar it. Each clinic's analysis would turn on the specific training function and supervision structure.

Citations

Statutes and constitutional provisions:
- N.C.G.S. § 66-58 (Umstead Act)
- N.C.G.S. § 66-58(e) (criminal misdemeanor enforcement)
- N.C.G.S. § 116-1(b) (UNC mission and public service)
- N.C.G.S. § 93D-(c) (NCHADFB supervised activity for licensure)
- N.C.G.S. § 93D-7 (statement of sale)
- N.C. Const. Article IX, §§ 8 and 9

Cases:
- In re Appeal of University of North Carolina, 300 N.C. 563, 268 S.E.2d 472 (1980) (Umstead Act does not bar legitimate state agency functions)
- Vogel v. Reed Supply Co., 277 N.C. 119, 177 S.E.2d 273 (1970) (criminal statutes strictly construed; G.S. § 87-1 general contractor licensing)
- Elliott v. North Carolina Psychology Bd., 348 N.C. 230, 498 S.E.2d 616 (1998) (strict construction of statutes restricting occupational practice)

Prior AG opinion:
- 55 N.C.A.G. 101 (March 1986) (legitimate state function exception to Umstead Act)

Source

• Landing page: https://ncdoj.gov/opinions/fitting-and-selling-of-hearing-aids-in-unc-speech-and-hearing-clinics/

Original opinion text

REPLY TO: Thomas J. Ziko
Education Section
Tele: (919) 716-6920
FAX: (919) 716-6764

January 8, 2002

M. Jackson Nichols
Allen & Pinnix, P.A.
P.O. Drawer 1270
Raleigh, North Carolina 27602

Re: Advisory Opinion; Fitting and Selling of Hearing Aids in UNC Speech and Hearing Clinics; N.C.G.S. §§ 116-1(b); 66-58 ("Umstead Act")

Dear Jack:

On behalf of the North Carolina State Hearing Aid Dealers and Fitters Board (NCHADFB), you have written to request an Attorney General's opinion regarding the application of G.S. § 66-58 ("Umstead Act") to the fitting and sale of hearing aids through hearing and speech pathology clinics operated by the University of North Carolina (UNC) in conjunction with speech, hearing and communication disorders degree programs offered at its constituent institutions. You have also specifically questioned the propriety of the UNC Greensboro (UNCG) Speech and Hearing Center advertising reduced prices for hearing tests.

The Umstead Act generally prohibits the State of North Carolina or any agency thereof from rendering services or selling goods ordinarily and customarily rendered by private enterprise. In re Appeal of University of North Carolina, 300 N.C. 563, 268 S.E.2d 472 (1980). The Umstead Act is a criminal statute; persons who violate or participate in violations of the Act are guilty of a Class I misdemeanor. G.S. § 66-58(e). Well established rules of statutory construction require criminal statutes to be strictly construed so as not to extend their scope to activities and transactions that the General Assembly did not intend to subject to criminal punishment. See, Vogel v. Reed Supply Co., 277 N.C. 119, 131, 177 S.E.2d 273, 281-81 (1970) (holding that G.S. § 87-1, which makes it a misdemeanor to engage in general contractor activities without a license, must be strictly construed); see also, Elliott v. North Carolina Psychology Bd., 348 N.C. 230, 498 S.E.2d 616 (1998) (holding that statutes restricting the right to engage in a lawful occupation to a special class of persons must be strictly construed). Consequently, while recognizing that the General Assembly intended the Umstead Act to prevent State agencies from competing with private sector enterprises, this Office has consistently stated that the Umstead Act does not prohibit state agencies and state employees from performing their legitimate functions. For example, in a formal opinion published in March of 1986, this Office stated:

[A] careful reading of the statute and its numerous exceptions reveals that the Act is intended to proscribe those activities of government which are not incidental to the legitimate function of the agency involved, but rather intrude upon those areas which have traditionally been associated with private enterprise. In re University of North Carolina, 300 N.C. 563, 268 S.E.2d 472 [(1980)]. Under the Constitution, Article IX, §§ 8 and 9, and the statutes, N.C.G.S. §§ 116-1 and 11, education is in fact the "business" of the University of North Carolina and its constituent institutions. Where . . . the activities involved are, in fact, themselves legitimate functions of the governmental agency, the Act has no application.

55 N.C.A.G. 101. We continue to adhere to that longstanding position.

UNC offers courses in hearing habilitation and rehabilitation in its accredited Audiology Masters degree programs in the UNCG Department of Communication Sciences and Disorders, the UNC-Chapel Hill (UNC-CH) Division of Speech and Hearing Sciences and the East Carolina University (ECU) Department of Communication Sciences and Disorders. Consistent with their desire to provide their students with the best professional training, all of those programs maintain hearing and speech clinics wherein graduate student clinicians, working under the supervision of properly licensed faculty, provide health services to the public.

Training in hearing aid evaluations, selection, fitting, orientation, sale and repair is an integral part of the education of audiology students enrolled in UNC Audiology Masters Degree programs. Audiology graduate students must complete 80 clinical hours in the area of hearing aids to meet the requirements for a Certificate of Clinical Competence in Audiology (CCC-A) from the American Speech Language and Hearing Association (ASHA), the national audiologist accrediting body. The NCHADFB itself requires audiology graduate students to have 250 hours of supervised activity fitting and selling hearing aids in order to qualify for NCHADFB licensure. N.C.G.S. § 93D-(c).

In order to provide graduate student clinicians with the training necessary for ASHA certification or licensure and to prepare them for NCHADFB licensure, the UNC clinics offer hearing aid evaluation and fitting along with many other diagnostic and therapeutic language, speech and hearing services. The graduate students participate in hearing evaluation and fitting practices only as allowed for and as outlined by the NCHADFB and under direct supervision of audiology faculty who are licensed by the NCHADFB. For example, at UNCG students are not allowed to make ear impressions or place hearing aids in patient's ears. Those services are performed only by properly licensed supervisors. Moreover, a NCHADFB licensed faculty member is always the responsible dealer or fitter listed on the "statement of sale" required under G.S. § 93D-7.

UNC is specifically authorized to pursue its educational mission through "public service, which contributes to the solution of societal problems and enriches the quality of life in the State." N.C.G.S. § 116-1(b). In light of the fact that training in hearing aid fitting is an integral part of the education students in the UNC Audiology Masters programs at UNCG, UNC-CH and ECU, it is our opinion that the fitting and sale of hearing aids to clients of the clinics operated in conjunction with those programs does not violate the Umstead Act.

We also do not believe the pricing policies at UNCG violate the Umstead Act. Insofar as the services offered at the UNCG Speech and Hearing Center are provided in substantial part by graduate students in the Audiology Masters degree training program, the cost of diagnostic services is less than that of private practitioners. However, every two years, the clinical faculty meet on the issue of fees and conduct a market survey with the other training institutions across the state to assure that the fees for diagnostic and therapeutic services are comparable with other clinics operating in other North Carolina training programs. In the past two years, UNCG has offered discounts on the cost of hearing tests and hearing aid batteries only; the hearing aids themselves have always been sold at prices comparable to those offered by other audiologists practicing in the area.

In summary, it is our opinion that the hearing aid fitting services provided in UNC clinics by graduate students in the UNC Audiology Master Degree programs are an integral part of their professional education and training. Consequently, the constituent institutions of UNC are not violating the Umstead Act by operating clinics in which their graduate students provide hearing aid evaluation and fitting services to the public.

Very truly yours,

Grayson G. Kelley
Senior Deputy Attorney General

Thomas J. Ziko
Special Deputy Attorney General

Laura E. Crumpler
Assistant Attorney General

cc: Leslie Winner
Lucien Capone
Susan H. Ehringhaus
Ben Irons