1. Chapter 4: Constitutional Authority to Regulate Business BUSINESS LAW: Text & Cases — Legal, Ethical, International, and E-Commerce Environment11 th Ed. BUSINESS LAW: Text & Cases — Legal, Ethical, International, and E-Commerce Environment 11 th Ed.

2. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 §1: The Constitutional Powers of Government  Before the Revolutionary War, States wanted a confederation with weak national government and very limited powers.  After the war, in 1787, the States voted to amend Articles of Confederation and create a new, federal government that shared power with States.  Problems with Confederation.  Before the Revolutionary War, States wanted a confederation with weak national government and very limited powers.  After the war, in 1787, the States voted to amend Articles of Confederation and create a new, federal government that shared power with States.  Problems with Confederation.

3. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 The Constitutional Powers of Government  Federal Form of Government: –Shares power between national and state governments. –National government has limited, enumerated powers delegated from States.  Regulatory Powers of States. –10 th Amendment. –Police Powers: order, safety, morals.

4. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Relations Among States  Privileges and Immunities Clause. –Art. IV §2. –Prevents state from imposing unreasonable burdens on citizens.  Full Faith and Credit Clause (Art. IV §1). –Applies only to civil matters. –Ensures that any judicial decision with respect to such property rights will be honored and enforced in all states.

5. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 Separation of National Government’s Powers  National government provides checks and balances among three branches: executive, legislative and judicial. –Legislative (Congress): Creates laws. –Executive (President/Agencies): Enforce laws. –Judicial (Federal Courts): Interprets laws.

6. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 U.S. Commerce Clause  Power to regulate interstate commerce defined in Gibbons v. Ogden (1824).  Expansion to private businesses began with Wickard v. Fillburn (1942).  Today, the Commerce Clause authorizes the national government to regulate virtually any business enterprise, including the internet- based. Limits: U.S. v. Lopez (1995).  Medical marijuana and interstate commerce.

7. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 State Actions and the “Dormant” Commerce Clause  National government has exclusive authority to regulate commerce that substantially affects trade among the states.  States possess inherent police powers to regulate health, safety, public order, morals and general welfare.  State police powers or regulations that substantially interfere with interstate commerce will be struck down.  CASE 4.1 Granholm v. Heald (2005).

8. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 The Supremacy Clause and Federal Preemption  Article VI of the Constitution “Supreme Law of the Land.”  In case of direct conflict between state and federal law, state law is invalid.  Preemption: when Congress chooses to act exclusively when national and state governments have concurrent powers.

9. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Taxing and Spending Powers  Article I, Section 8: Congress has the “Power to lay and collect Taxes, Duties, Imposts, and Excises” which shall be “uniform” among the states.  Expansion of commerce clause gives taxing power as well.  However, no violation of Bill of Rights.

10. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 §2: Business and the Bill of Rights  Bill of Rights are not absolute. –Originally the Bill of Rights was a limit on the national government’s powers. –Starting in 1925, the Supreme Court applied the Bill of Rights to the States via the “due process” clause of the 14th Amendment.  Limits on Bill of Rights.

11. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 Freedom of Speech  Afforded highest protection by courts.  Symbolic Speech. –Texas v. Johnson (1989), the “flag burning” case.

12. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 Commercial Speech  Advertising is protected speech. Restrictions must: –Implement substantial government interest; –Directly advance that interest; and –Go no further than necessary.  CASE 4.2: Bad Frog Brewery, Inc. v. New York State Liquor Authority (2003).

13. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Unprotected Speech  Certain types of speech are not protected by the First Amendment: –Slander. –Obscenity (Miller v. California). –Fighting Words.  CASE 4.3 Lott v. Levitt (2007).  Online Obscenity: –CDA, COPA, Children’s Internet Protection Act. –Children’s Internet Protection Act (2000).

14. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Freedom of Religion  First Amendment may not “establish” a religion or prohibit the “free exercise” of religion.  First Amendment mandates accommodation of all religions and forbids hostility toward any. –Sunday Closing Laws. –Religious Displays on Public Property. First amendment does not require complete separation of church and state.

15. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 Freedom of Religion  First Amendment guarantees the “free exercise” of religion.  Employers must reasonably accommodate beliefs as long as employee has sincerely held beliefs.

16. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16 Searches and Seizures  Fourth Amendment requires warrant with “probable cause.”  Warrantless exceptions exist for “evanescent” evidence.  Searches of Business: generally business inspectors must have a warrant.  Border Searches of Computers. –U.S. v. Romm (2006).

17. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 Self-Incrimination  Fifth Amendment guarantees no person can be compelled to testify against himself in a criminal proceeding.  Does not apply to corporations or partnerships.

18. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 18 §3: Due Process and Equal Protection  Fifth and Fourteenth Amendments provide “no person shall be deprived of life, liberty or property without due process of law.”  Procedural and Substantive issues. 

19. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 19 Procedural Due Process  Procedures depriving an individual of her rights must be fair and equitable.  Constitution requires adequate notice and a fair and impartial hearing before a disinterested magistrate.

20. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 20 Substantive Due Process  Focuses on the content or substance of legislation.  Laws limiting fundamental rights (speech, privacy, religion) must have a “compelling state interest.”  Laws limiting non-fundamental rights require only a “rational basis.”

21. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 21 Equal Protection  Strict Scrutiny Test. –Laws that affect the fundamental rights of similarly situated individuals in a different manner are subject to the “strict scrutiny” test. –Any “suspect class” (race, national origin) must serve a “compelling state interest” which includes remedying past discrimination.

22. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 22 Equal Protection  Intermediate Scrutiny. –Applied to laws involving gender or legitimacy. –To be constitutional laws must be substantially related to important government objectives. (EXAMPLE: Illegitimate teenage pregnancy).(EXAMPLE: Illegitimate teenage pregnancy).

23. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 23 Equal Protection  “Rational Basis” Test. –Applied to matters of economic or social welfare. –Laws will be constitutional if there is a rational basis relating to legitimate government interest.

24. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 24 §4: Privacy Rights  Fundamental right not expressly found in the constitution, but derived from First, Fifth and Fourteenth Amendments.  Laws and policies affecting privacy are subject to the compelling interest test.  Federal Statutes Affecting Privacy Rights. –Privacy Act of 1974. –HIPAA of 1996. –PATRIOT Act of 2001.