Grandfather clause refers to a section of a law, regulation, or other legal document that limits how changes will be applied to legal relations and activities existing prior to the change. When laws and regulations go through major changes, they can critically harm businesses or individuals who relied on the prior system. So, legislators, regulators, and businesses often negotiate grandfather clauses to make the changes apply only to new activity. Businesses or individuals who were partaking in the regulated activity prior to the change can continue to do so after the law or regulation goes into effect. Grandfather clauses can last forever, or they often can be limited. For example, legislators requiring power plants to be carbon neutral may allow currently operating power plants to be grandfathered for ten years, giving them ten years to prepare for the change.
The term grandfather clause comes from a racially driven set of voting laws in the South after the Civil War. Many Southern states began requiring individuals to satisfy literacy tests, property ownership, and poll taxes in order to vote. In these laws, exceptions were made for individuals whose grandfathers voted for war, allowing them to avoid the new requirements. Since essentially no African Americans were able to vote in these states prior to the Civil War, only white citizens were able to benefit from this grandfather exception. This effectively prevented most African Americans from being able to vote after the implementation of these laws. The grandfather clause in this law, which limited their application to prior voters, became the term for any clause that has an effect of not applying to individuals doing an activity prior to the law.
[Last updated in February of 2022 by the Wex Definitions Team]