© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Chapter 4 Constitutional Law for Business and Online Commerce Chapter 4 Constitutional Law for Business and Online Commerce

3 - 2 The U.S. Constitution serves two major functions: 1. It creates the three branches of government (executive, legislative, and judicial) and allocates powers to these branches. 2. It protects individual rights by limiting the government’s ability to restrict those rights.

3 - 3 Basic Constitutional Concepts Federalism and Delegated Powers Separation of Powers Checks and Balances

3 - 4 Federalism and Delegated Powers Federalism is the U.S. form of government. The federal government and the 50 state governments share powers. Enumerated powers – certain powers delegated to the federal government by the states.

3 - 5 Federalism and Delegated Powers (continued) Any powers not specifically delegated to the federal government by the Constitution are reserved to the states. State governments are empowered to deal with local affairs.

3 - 6 Doctrines of Separations of Powers The federal government is separated into three branches.

3 - 7 The Doctrine of Separation of Powers Article I of the Constitution establishes the legislative branch of government. –Bicameral branch: the Senate the House of Representatives

3 - 8 The Doctrine of Separation of Powers (continued) Article II of the Constitution establishes the executive branch of government. –Provides for the election of: the President the Vice President

3 - 9 The Doctrine of Separation of Powers (continued) Article III of the Constitution establishes the judicial branch of the government. –Establishes: the Supreme Court other federal courts that may be created by the Congress

Checks and Balances: Certain checks and balances are built into the constitution to ensure that no one branch of the federal government becomes too powerful.

Checks and Balances Some of the checks and balances in our system of government are:  The judicial branch has authority to examine the acts of the other two branches of government and determine whether these acts are constitutional.

Checks and Balances (continued) 2. The executive branch can enter into treaties with foreign governments only with the advice and consent of the Senate.

Checks and Balances (continued) 3. The legislative branch is authorized to create federal courts and determine their jurisdiction and to enact statutes that change judicially made law.

The Supremacy Clause Supremacy Clause – establishes that the federal Constitution, treaties, federal laws, and federal regulations are the supreme law of the land. –State and local laws that conflict with valid federal law are unconstitutional.

Preemption Doctrine The concept that federal law takes precedence over state or local law.

The Commerce Clause A clause of the U.S. Constitution that grants Congress the power “to regulate commerce with foreign nations, and among the several states, and with Indian tribes.”

The Commerce Clause (continued) Because this clause authorizes the federal government to regulate commerce, it has a greater impact on business than any other provision in the Constitution.

Federal Regulation of Interstate Commerce The Commerce Clause also gives the federal government the authority to regulate interstate commerce. –Commerce that moves between states or that affects commerce between states.

Federal Regulation of Interstate Commerce (continued) The federal government may regulate: – Interstate commerce that crosses state borders. – Intrastate commerce that affects interstate commerce.

Federal Regulation of Interstate Commerce (continued) Effects on interstate commerce test –Regulated activity does not have to be in interstate commerce –Any intrastate activity that effects interstate commerce is subject to federal regulation

State and Local Government Regulation of Business Police Power – the power of the states to regulate private and business activity within their borders. States may enact laws that protect or promote the public health, safety, morals, and general welfare as long as the law does not unduly burden interstate commerce.

State and Local Government Regulation of Business (continued) State and local governments may regulate: – Interstate commerce – Intrastate commerce not exclusively regulated by the federal government. Zoning ordinances, state environmental laws, corporation and partnership laws, and property laws are enacted under this power.

The Foreign Commerce Clause The Commerce Clause of the U.S. Constitution gives the federal government the exclusive power to regulate commerce with foreign nations.

The Foreign Commerce Clause (continued) Direct and indirect regulation of foreign commerce by state or local governments that discriminates against foreign commerce violates the Foreign Commerce Clause is unconstitutional.

The Bill of Rights provides certain freedoms and protections to individuals and businesses.

Bill of Rights Ten amendments added in 1791 Limited intrusive activity of the federal government Due Process Clause of Fourteenth Amendment extended it to cover states Supreme Court added incorporation doctrine

Freedom of Speech Freedom of Speech – the right to engage in oral, written, and symbolic speech. –Fully Protected Speech –Limited Protected Speech –Unprotected Speech

Freedom of Speech (continued) Fully Protected speech –Cannot be regulated or prohibited by government Oral Written Symbolic

Freedom of Speech (continued) Limited Protected Speech –May be subject to time, place, and manner restrictions –Cannot be forbidden Offensive speech Commercial speech

Freedom of Speech (continued) Unprotected speech –May be forbidden Dangerous speech Fighting words intended to provoke hostile reactions Speech that incites the violent overthrow of the government Defamatory speech Child pornography Obscene speech

Freedom of Religion – the U.S. Constitution requires federal, state, and local governments to be neutral toward religion.

Freedom of Religion The Establishment Clause –First Amendment clause prohibiting the government from either establishing a state religion or promoting one religion over another. The Free Exercise Clause –First Amendment clause that prohibits the government from interfering with the free exercise of religion.

Equal Protection Clause Fourteenth Amendment –Added to the U.S. Constitution in –Prohibits discriminatory and unfair action by the government.

Equal Protection Clause (continued) Provides that a state cannot “deny to any person within its jurisdiction the equal protection of the laws.” The Supreme Court has held that it also applies to federal government action.

Equal Protection Clause (continued) State, local, and federal governments are prohibited from enacting laws that classify and treat “similarly situated” persons differently. Artificial persons, such as corporations, are also protected.

Equal Protection Clause (continued) The Supreme Court has adopted three different standards for reviewing equal protection cases. – Strict Scrutiny Test – applied to classifications based on race. – Intermediate Scrutiny Test – applied to classifications based on protected classes other than race (e.g., sex or age). – Rational Basis Test – applied to classifications not involving a suspect or protected class.

Due Process Clause The Fifth and Fourteenth Amendments both contain a Due Process Clause. These clauses provide that no person shall be deprived of “life, liberty, or property” without due process of the law.

Due Process Clause (continued) Fifth Amendment Due Process Clause –Applies to federal government action Fourteenth Amendment Due Process Clause –Applies to state and local government action

Substantive Due Process Requires government laws to be clear and not overly broad. The test is whether a reasonable person could understand the law. Laws failing test are declared void for vagueness

Procedural Due Process Requires the government to give a person proper notice and hearing before depriving that person of his or her life, liberty, or property.

Procedural Due Process (continued) Eminent Domain –Government may take property for public purpose after sufficient notice and hearing Just Compensation Clause –Government must pay fair compensation for the taking

The Privileges and Immunities Clause Article IV of the Constitution and the Fourteenth Amendment contain a Privileges and Immunities Clause. This clause prohibits states from enacting laws that unduly discriminate in favor of their residents. This clause applies only to citizens. –Corporations are not protected.