LAW AND COURTS1

The Roles of Law and Courts in Today’s Business Environment

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The Roles of Law and Courts in Today’s Business Environment

Introduction

Law and the court play a profound role in today’s business environment. From its inception, more than two centuries ago to its evolved dual system today, the judiciary provides a means of interpreting the laws and establishing policies that enable businesses to function in an organized and transparent manner. It strives for fairness and just operation in all things, with alternative means of solving disputes, the principle of judicial review allowing for oversight of all branches of government, and careful regulation of business practices in and out of the country. The presence of the law and the courts in the organization and administration of United States businesses is a vital one.

Origins of the U.S. Judicial System

The U.S. judicial system can be a bit confusing in that it is composed of a dual court system, with both the state and federal levels of government having its own distinct court system. Before the Constitution was adopted, the Articles of the Confederation represented the governing power of the United States. The absence of a judiciary branch, however, was a weakness, and it was not long before the Virginia Plan proposed a Supreme Court and weaker federal courts(Carp & Stidham, 2001). This was countered with the New Jersey Plan, which argued for a state court system to hear initial arguments and then a single Supreme Court tribunal to hear appeals. Article III of the Constitutional Convention finally established that "The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish"(Carp & Stidham, 2001).

The Judiciary Act of 1789 organized a judicial system that established a Supreme Court over all, composed of a chief justice and five lesser justices, followed by three circuit courts. Each circuit court was led by two justices of the Supreme Court plus a district judge. Beneath these was a second set of lower courts: 13 district courts, each headed by a single district judge(Carp & Stidham, 2001).

How the Judicial System Impacts Businesses

From the time of its inception, the Supreme Court has held sway as a policy maker. Issues pertaining to public policy come before the court as legal disputes in order for the court to interpret the law and resolve the dispute. In doing so, it more often than not sets policy for future generations and, more importantly for this purpose, businesses (Carp & Stidham, 2001).

Recently, for example, the Supreme Court handed down three separate decisions that will have lasting impact on businesses. The first, Vance v. Ball St. University, the court decided that the standard between supervisors and co-workers was different when it comes to harassment and “vicarious liability”(Lucas, 2016). This establishes a difference in the supervisory actions and responsibility of supervisors and co-workers, and takes into consideration the presence or lack of a policy regarding harassment.

In the University of South Texas Western Medical Center c. Nassar, a disgruntled employee complained about discrimination. The Medical Center had been engaged in a performance review at the time of the complaint, and Nassar felt that due to the complaint he was passed over for a promotion. The Medical Center held that the employee did not receive the promotion based on ability rather than any other characteristics, and the Court agreed, establishing the “but for cause” policy. Both of these are clear policy wins for employers (Lucas, 2016).

The Concept of Judicial Review

An interesting concept given the judicial system’s character as policy maker is the concept of judicial review. Judicial review provides the court the authority to declare acts by other branches of government unconstitutional. In effect, a law established by the legislative branch—separate but equal, for example—could be overruled and declared unconstitutional by a higher court. This is what occurred with Brown vs. the Board of Education in 1954, when the Supreme Court ruled that state laws establishing separate schools for blacks and white students were unconstitutional (Haas, 2014).

Alternative Dispute Resolution (ADR)

One aspect the judicial system takes in the world of business is that of Alternative Dispute Resolution (ADR). ADR is exactly what it sounds like: a substitute method of solving problems in business. It is generally geared toward providing the route of least expense and avoiding the cost of a courthouse settlement.

ADR can take different forms, among them mediation and arbitration. With mediation, the parties meet and utilize an objective third-party facilitator to negotiate a resolution to their dispute. Both parties are usually allowed space to discuss their position, as well as their ideas for a solution. As mediation can be very beneficial and cost effective, many businesses are more and more often writing mediation clauses into contracts as a requirement prior to filing a lawsuit(Thomson Reuters, 2016).

Arbitration is a bit different from mediation in that it is much more legally driven and defined. Under the Federal Arbitration Act (FAA), arbitration is an action that can be compelled if the existence of an arbitration agreement can be proven. All procedures for the arbitration are set forth by the existing agreement, including the choice of arbitrator, and failure to uphold the procedures can result in loss of any award. There may be between one and three arbitrators, all neutral, or one appointed by each party and a neutral third appointed by the two other arbitrators. Arbitration proceedings are very similar to an actual court trial, albeit a bit less formal. The results of arbitration are binding, and can be enforced through the courts (Thomson Reuters, 2016).

The Impact of Law in Global Business

Law, specifically international law governing business, plays a significant role in day to day organization and processes of global businesses. This type of law focuses on laws which assist in regulating international transactions, such as licensing procedures, tariffs, and taxes, and is typically focused on a specific trade, commerce, and jurisdictional area. Parties involved in global business are generally bound by trade agreements and certain regulatory agreements they have entered into. Their respective countries, “who join together for a specific trade agreement, must meet the specific regulations instituted by each practicing nation’s interpretation of international business law”(Laws.com, 2015). Laws also provide for and regulate licenses, which are required in order to do business in another nation. The requirements for the license permit the conduct of business, transactions for goods and/or services, and the exchange of intellectual property between parties (Laws.com, 2015).

Regulations Impacting Current Industry

An example of how local law impacts my personal industry is our inability as small business owners to cut off service to non-paying customers. We are web designers, and have clients who from time to time neglect to pay their bill. Once the website is published on the internet, we are legally unable to take it down if the client does not pay their monthly service fee without first instigating a small claims procedure. Instead, we enact a milestone process whereby we request a 50 percent down payment, and then smaller percentage-based payments at other milestones following the midpoint until the project is complete (Buckler, 2012).

Conclusion

It is clear to see how significant is the court and laws established for the operation of business in the United States. Over the past two hundred years, the judiciary has evolved into an interpretatory and policymaking machine that assists businesses both local and international with sound business operation. Through such practices as alternative means of dispute resolution, judicial review, and the provision of regulatory measures to guide operations, businesses are able to function safely and profitably both in and outside of the United States. The presence of the law and the courts is a necessary and vital one in the lives of businesses in the United States.

References

Buckler, C. (2012). 5 tips for dealing with clients who won't pay. SitePoint. Retrieved from

Carp, R. & Stidham, R. (2001). History and organization of the federal judicial system. Iipdigital.usembassy.gov. Retrieved from

Haas, S. (2014). Judicial review. Juris.nationalparalegal.edu. Retrieved from

Laws.com. (2015). International business. Business.laws.com. Retrieved from

Lucas, S. (2016). How 3 new supreme court decisions will affect your business. Inc.com. Retrieved from

Thomson Reuters,. (2016). Alternative dispute resolution basics for those in business. Findlaw. Retrieved from