1. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-1 The Legal Environment of Business A Critical Thinking Approach 5 th Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

2. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-2 CHAPTER 5 Constitutional Principles

3. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-3 The Constitution  Provides the legal framework for the Nation  Sets out the basic structure of government  Specifies the roles of the State and Federal governments  Amendments establish individual rights

4. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-4 Federalism Definition: A division of political power between a central authority and constituent units.  The federal government only has the powers granted to it in the constitution.  All powers not specifically given to the federal government are reserved to the states  Concurrent Authority

5. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-5 Supremacy Clause  Article V of the Constitution  Any state or local law that directly conflicts with the federal Constitution, laws, or treaties is void.

6. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-6 Federal Preemption When it is clear that the U.S. Congress only wants federal regulation in a general area, it will strike down state law, even if it doesn’t conflict. Example: Interstate commerce

7. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-7 Separation of Powers Checks and Balances of Power  Article I - Legislative Branch  Enacts the Law  Article II - Executive Branch  Enforces the Law  Article III - Judicial Branch  Interprets the Law

8. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-8 Case 5-1: Clinton v. Jones  Fact: Jones filed civil action against Clinton alleging sexual advances  Separation of Powers Doctrine: does not provide complete presidential immunity from private suits; both for official and unofficial acts.  Precedent: Civil cases involving Truman, Kennedy, Nixon, Ford

9. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-9 The Commerce Clause Definition: Congress has the power “To regulate Commerce with foreign Nations, and among the several States and with the Indian Tribes…”. Article I, Sec. 8

10. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-10 The Commerce Clause  Is the basis for federal regulation of business  Is a limited grant of power  Is subject to interpretation by the Court  Currently, this power is interpreted broadly and includes intrastate as well as interstate activity

11. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-11 Intrastate Activities that affected Interstate commerce U.S. v. Lake (1995) Local coal mining IHOP v. Pinnock (1993) A local restaurant Perez v. U.S. (1971) Loansharking Wickard v. Filburn (1942) Growing and consuming wheat on a farm CaseTopic NLRB v. Jones & Laughlin (1937) Intrastate activities

12. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-12 Intrastate Activities that did NOT affect Interstate commerce Brzonkala v. Morrison (2000) Violence against Women Act CaseTopic U.S. v. Lopez (1995) Gun-Free School Zone Act

13. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-13 Gonzales V. Raich  Use of Marijuana for medicinal reasons  Congress has the power to regulate purely local activities that are part of an economic “class of activities” that have a substantial effect on interstate commerce.  Rational basis test

14. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-14 The Police Power When does the state’s police power conflict with federal Commerce Clause power? Definition: The inherent regulatory power of the state to pass laws to protect the public health, safety, welfare, and morals of the community.

15. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-15 The Police Power Two-Pronged Test The Rational Basis Test – Is the regulation rationally related to a legitimate state end ? - Is the regulatory burden imposed on ICC outweighed by the state interest in enforcing the legislation? The Balancing Test - Is the regulatory burden imposed on ICC outweighed by the state interest in enforcing the legislation? Regulation upheld If yes

16. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-16 United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority  County imposed a solid waste management ordinance  Dormant Commerce Clause  Is it discrimination on its face?  The ordinance which treated in-state private interests exactly the same as out-of-state ones, do not discriminate against ICC for purposes of the Dormant commerce clause

17. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-17 Taxing and Spending Clause Gives congress the “Power to lay and collect taxes…” and to “pay the Debts and provide for the common Defense and general Welfare of the United States …”. Article I, Section 8 This power is often used to accomplish specific goals, (i.e., federal highway funds)

18. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-18  Protects citizens against the federal government  Comprised of the first Ten Amendments  Extended to the states via the Fourteenth Amendment The Bill of Rights

19. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-19 The First Amendment  Freedom of Speech  Freedom of the Press  Right to Assembly  Right to Petition for Redress  Separation of Church and State  Right to Free Exercise of Religion

20. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-20 Freedom of Speech & student speech CONSTITUTIONAL Bong Hits 4 Jesus Student speech advocating drug use at a school function was restricted CONSTITUTIONAL. However if delivered in a public forum, would have been ok. Beth El School District Student speech at a school assembly that contained graphic & sexual metaphors was censored UNCONSTITUTIONAL Tinker Case A school policy that prohibited students from wearing anti-war armbands A school policy that prohibited students from wearing anti-war armbands

21. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-21 Restrictions on Speech  Speech that causes danger  Obscene speech  Hate speech  Commercial speech  Corporate speech

22. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-22 Case 5-4: Central Hudson v. New York  Commercial speech relates solely to economic interests  Occurs in an area traditionally subject to government regulation  Commercial speakers have knowledge of the market and their product  Commercial speech is a hardy breed of expression

23. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-23 Corporate Political Speech (CPS)  Corporations are treated as persons. Therefore, corporate political speech is treated the same as an individual’s political speech. Reasons:  “No taxation without representation” Corporations are taxpayers.  Corporations are not capable of voting.  CPS does not threaten individuals political speech.

24. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-24 The Fourth Amendment  The right of individuals to be secure in their persons, their homes, and their personal property  No unreasonable searches and seizures  Requires probable cause and a warrant for searches

25. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-25 The Fourth Amendment Exception: Administrative Searches  Where industry is subject to pervasive regulation  Where there is a reduced expectation of privacy  Where there is a substantial government interest  Where there is a constitutionally adequate substitute for a warrant

26. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-26 The Fifth Amendment Protects against self-incrimination and double jeopardy Due Process:  Procedural: Notice and opportunity to be heard; to confront witnesses  Substantive: Protection against arbitrary laws unrelated to legitimate state purposes

27. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-27 The Fifth Amendment The Takings Clause: Private property may not be taken by the state unless;  It is taken for “public purposes”  The owner is paid just compensation

28. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-28 Regulatory Taking Definition: a taking which does not involve a physical taking. Example: Environmental issues  The state supreme court held that a state regulation prohibiting permanent construction of an eroding beach was not an unconstitutional taking of a beachfront owner’s property without compensation. (Lucas )  The appellate Court ruled that a smoking ban was not a regulatory taking.( D.A.B.E. Inc. v. City of Toledo )

29. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-29 The Fourteenth Amendment  Applies the Bill of Rights and the Due Process Clause to the states  Exceptions: Grand Jury and right to jury trials The Equal Protection Clause

30. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-30 Summary  The Constitution is the framework of the government which established a system of government based on Federalism.  States regulate local matters.  Federal government has only limited power.  Commerce Clause is the primary source of federal power to regulate business.

31. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 5-31 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall