2. P A R T P A R T Foundations of American Law The Nature of Law The Resolution of Private Disputes Business and The Constitution Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking 1 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. Business & The Constitution PA E TR HC 3 "The very idea of the power and the right of the People to establish government presupposes the duty of every Individual to obey the established Government." -- George Washington (Farewell Address, September 19, 1796)

4. Learning Objectives  Basics of the Constitution and federalism  Relationship between federal and state powers  Important legal principles: supremacy, preemption  Constitutional guarantees and limitations 3 - 4

5. Overview of the Constitution  Establishes a tripartite government to ensure a separation of powers  A system of checks and balances exists in which no one branch may control another 3 - 5

6. The Power to Regulate  Federal government has exclusive power to administer certain national concerns, such as war and currency  Some powers are shared with the states  States possess exclusive power to enact laws to protect general welfare, health, and safety 3 - 6

7. Supremacy & Preemption  The Constitution and statutes enacted by Congress, including treaties, are the supreme law of the land  Congress may enact laws on certain issues and preempt state regulation of that issue 3 - 7

8. Testing Constitutionality  Courts apply a means-ends test to review allegedly unconstitutional statute  Rational basis test (minimal scrutiny)  if law has rational basis, it will stand  Intermediate scrutiny  law must substantially relate to important governmental objectives to stand  Strict scrutiny  Law presumed invalid if, on its face, it is based on race, ethnicity, and religion 3 - 8

9. The Commerce Power  Commerce clause ( Article I, Section 8, Clause 3 ) applies to interstate commerce  Supreme Court has applied the power to intrastate commerce when the activity affects interstate commerce  See Gonzales v. Raich 3 - 9

10. The First Amendment  First Amendment guarantees freedoms of religion, speech, press, assembly, and petition to individuals (and corporations)  Restriction on commercial speech is valid if it (1) seeks to implement a substantial government interest, (2) directly advances interest, and (3) is least restrictive method of achieving interest (see Kasky v. Nike ) 3 - 10

11. Constitutional Limitations  Fifth Amendment prohibits federal government from depriving “any person of life, liberty, or property without due process of law” (due process clause)  Protection from unreasonable procedures or unreasonable laws  Applied to states through Fourteenth Amendment 3 - 11

12. Constitutional Limitations  Equal protection clause of Fourteenth Amendment prohibits a government from treating one person differently than another without reasonable grounds for differential  Basic test: rational basis (minimal)  “Suspect” classifications (race, gender, ethnicity) require higher level of scrutiny 3 - 12

13. Constitutional Limitations  Phrase “depriving a person … of property” known as the takings clause  Requires government to pay compensation to property owner for taking property for public purpose through eminent domain 3 - 13

14. Test Your Knowledge  True=A, False = B  The Constitution establishes a tripartite government  The federal government has exclusive power over matters of war and taxation  States possess exclusive power to enact laws to protect welfare, health, and safety  The Fifth Amendment prohibits depriving any person of life, liberty or happiness  Federal supremacy means that the U.S. Constitution is the supreme law of the land 3 - 14

15. Test Your Knowledge  True=A, False = B  The Federal government may not interfere with interstate commerce  The federal government may not restrict individual or commercial speech  Constitutional limitations on governmental power includes the Fifth Amendment  The “takings clause” means that the federal government cannot take away an individual’s freedom 3 - 15

16. Test Your Knowledge  Multiple Choice  Courts apply a means-ends test to review an allegedly unconstitutional statute. Which level of scrutiny applies to a statute that gives benefits to people based on their religion?  (a)Minimal scrutiny  (b)Intermediate scrutiny  (c) Strict scrutiny 3 - 16

17. Test Your Knowledge  Multiple Choice  Substantive due process refers to a prohibition against:  (a)Unreasonable procedures  (b)Unreasonable laws  (c)Unreasonable (unfair) results  (d)Both A & B  (e)All of the above 3 - 17

18. Thought Question 3 - 18  What constitutional issues are important to you?