Business and the Constitution

I.  Overview of the U.S. Constitution

A.  Based on separation of powers

1.  Legislative powers – Article I establishes a Congress and sets out rules for making laws

2.  Executive power – Article II gives the president the power to execute or enforce laws

3.  Judicial power – Article III empowers the federal courts and determines the types of cases they can decide

B.  Checks and balances

1.  President can veto laws passed by Congress

2.  Congress can override veto with 2/3 vote of each house

3.  Congress can impeach and remove President

C.  Federalism – relationship between federal government and the states

1.  Article I lists powers that Congress cannot exercise

2.  Tenth Amendment says that powers that are not given to the federal government nor denied to the states are reserved for the states

D.  Federal Supremacy – federal statutes preempt or override inconsistent state laws

II.  Power to Regulate

A.  State Regulatory Power

1.  U.S. Constitution does not list powers state legislatures can exercise

2.  Does limit state powers

  1. Some areas are reserved for Congress
  2. Creating currency
  3. Taxing imports
  4. Other areas both state and Congress can make laws – concurrent powers, like police powers

B.  Federal Regulatory Power – found in Article I, Section 8

1.  Commerce Power

  1. Congress is authorized to regulate commence that occurs among the states
  2. Includes three categories of actions
  3. Regulating channels of interstate commerce
  4. Regulating and protecting instrumentalities of interstate commerce, including persons or things in interstate commerce
  5. Regulating activities that substantially affect interstate commerce, including many predominately instate activities such as
  6. regulation of railroad rates in a state
  7. application of the Civil Rights Act’s “public accommodations” section to a family-owned restaurant in one state

2.  Taxing Power

  1. Congress shall have the authority to lay and collect taxes
  2. The Supreme Court relied on this provision to uphold the Affordable Care Act

3.  Spending Power

  1. Congress has broad authority to spend for the public welfare
  2. Three requirements
  3. Serve general public purposes instead of particular interests; and
  4. When Congress conditions receipt of money on certain conditions, must do so clearly; and
  5. Condition must be reasonably related to purpose of the underlying federal expenditure

4.  Necessary and Proper Clause

  1. Congress can make all laws which are necessary and proper for carrying out other powers

III.  Independent Checks on the Federal Government and the States

A.  Incorporation

1.  Almost all of the provisions set forth in the Bill of Rights apply to the federal government and states alike

2.  Including

  1. Right to freedom of speech
  2. Equal protection of the laws
  3. Due process

B.  Government Action – required for most of the Constitution’s individual rights provisions

C.  Means End Tests

1.  Tests applied by the courts to laws to determine if they are constitutional

2.  Three types

  1. Rational basis test
  2. Very relaxed
  3. Government action need only have a reasonable relation to a legitimate government purpose to be constitutional
  4. Intermediate scrutiny
  5. Law must be substantially related to the achievement of an important government purpose
  6. Applies to
  7. Commercial speech
  8. Sex discrimination
  9. Strict scrutiny
  10. Law must be necessary to the fulfillment of a compelling government purpose
  11. Applies to
  12. Political or other noncommercial speech
  13. Race and national origin
  14. Alienage

D.  Due Process

1.  Procedural

  1. Before taking life, liberty or property, government must give
  2. Adequate notice; and
  3. Fair trial or hearing
  4. Must be a legitimate claim to title or benefit, including
  5. Disability benefits;
  6. Welfare benefits;
  7. Driver’s license

2.  Substantive

  1. Deals with substance of government action, including laws affecting economic rights and privacy

E.  Equal Protection

1.  Applies to attempts be government to classify or distinguish people

2.  Generally rational basis test applies unless law involves fundamental rights or suspect classes

IV.  Independent Checks Applying Only to the States

A.  The Contract Clause

  1. States cannot pass laws changing parties performance obligations under an existing contract after the contract is made
  2. Originally applied to private contracts but evolved to protect obligations of government actors

B.  Burden on, or Discrimination against, Interstate Commerce

1.  The Commerce Clause limits the states’ abilities to pass laws burdening interstate commerce

2.  Often applied to state restrictions on transportation

3.  State laws discriminating against interstate commerce will be subject to strict scrutiny review

C.  Federal Preemption

1.  Federal law is supreme and will trump conflicting state law

2.  Generally occurs if

  1. There is a literal conflict between the state and federal measures, so that it is impossible to follow both simultaneously
  2. The federal law specifically states that it will preempt state regulation in certain areas
  3. The federal regulation is pervasive
  4. The state regulation is an obstacle to fulfilling the purpose of the federal law

V.  The Takings Clause

A.  Traditionally comes into play when government exercise power of eminent domain

B.  Constitutional if

  1. For public use; and
  2. Just compensation

C.