CHAPTER 4

CONSTITUTIONAL LAW
FOR BUSINESS

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 Functions of U.S. Constitution

• Creates three branches of government

(executive, legislative, and judicial) and
allocates powers to these branches.
• Protects individual rights by limiting
government’s ability to restrict those
rights.

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 Basic Constitutional Concepts

Federalism and
Delegated Powers

Separation of Powers

Checks and Balances

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 Federalism and Delegated Powers
• U.S. form of government is federalism.
– Federal government and state governments
share powers.
– Certain powers—the “enumerated powers”—
delegated to the federal government by the
states.
• E.g., federal government deals with
international affairs.

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 Federalism and Delegated Powers
(continued)

• Any powers not specifically delegated to the

federal government by the Constitution are
reserved to the states.
• State governments are empowered to deal with
local affairs.
– E.g., states handle education, local public
safety issues.

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 Separation of Powers
The federal government is
separated into three branches.

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 Separation of Powers (continued)

• Article I of the Constitution establishes

the legislative branch of government.
– Bicameral legislature
• Senate
• House of Representatives

• Role to make federal law.

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 Separation of Powers (continued)

• Article II of the Constitution establishes

the executive branch of government.
– Provides for the election of President and Vice
President
• Establishes Electoral College

• Role to enforce federal law.

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 Separation of Powers (continued)

• Article III of the Constitution establishes the

judicial branch of the government.
– Supreme Court
– Other federal courts that may be created by
the Congress

• Role to interpret federal law.

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 Checks and Balances
Built into the Constitution to ensure
that no one branch of the federal
government becomes too powerful.

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 Checks and Balances (continued)

• Judicial branch has authority

to examine the acts of the other
two branches of government
and determine whether these
acts are constitutional.

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 Checks and Balances (continued)

• Executive branch can enter into

treaties with foreign governments only
with the advice and consent of the
Senate.

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 Checks and Balances (continued)

• Legislative branch is authorized to

create federal courts and determine
their jurisdiction and to enact statutes
that change judicially made law.

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 Supremacy Clause

• Establishes that the federal Constitution,

treaties, federal laws, and federal
regulations are the supreme law of the
land.
– State and local laws that conflict with valid
federal law are unconstitutional.

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 Preemption Doctrine
The concept that federal law
takes precedence over state or
local law.

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 Preemption Doctrine (continued)

• Congress may expressly provide that

federal statute exclusively regulates an
area or activity.
• More frequently, federal, state, and local
governments have concurrent power.

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 Commerce Clause
Congress has power:
“to regulate commerce with
foreign nations, and among
the several states, and with
Indian tribes.”

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 Commerce Clause (continued)
• Federal government has exclusive power
to regulate commerce with foreign
nations.
– Direct or indirect regulation by states that
unduly burdens foreign commerce is
unconstitutional.
– E.g., Massachusetts’ anti-Myanmar statute.

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 Commerce Clause (continued)

• The federal government may regulate:

– Interstate commerce that crosses state
borders.
– Intrastate commerce that affects
interstate commerce.

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 Commerce Clause (continued)

• Interstate commerce very broadly defined.

• E.g., wheat grown for home consumption or
refusing to rent motel rooms based on race
both tied to interstate commerce so that
federal regulation proper.
• Broad interpretation gives federal government
great power to regulate, so that this clause has
greater impact on business than any other
constitutional clause.

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 Commerce Clause (continued)

• States have power to regulate private and

business activity within their borders
(“police powers”).

• States may enact laws that protect or

promote the public health, safety, morals,
and general welfare as long as the laws
do not unduly burden interstate
commerce.

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 Dormant Commerce Clause
• State and local governments may regulate:
– Intrastate commerce
– Interstate commerce not exclusively
regulated by the federal government

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 Dormant Commerce Clause
(continued)

– Examples of state laws regulating business

include zoning ordinances, state
environmental laws, corporation and
partnership laws, property laws.
– Area of considerable current litigation.
– E.g., Granholm v. Heald (Michigan’s interstate
wine ban found to be unconstitutional)

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 The Bill of Rights
provides certain freedoms
and protections to
individuals and
businesses.

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 Bill of Rights

• Ten amendments added in 1791.

• Guarantees certain fundamental rights to
natural persons.
• Protects persons from intrusive
government action.
– By federal government
– By state governments (“Incorporation
doctrine”)

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 Freedom of Speech

• Freedom of Speech – the right to

engage in oral, written, and symbolic
speech.
– Fully Protected Speech
– Limited Protected Speech
– Unprotected Speech

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 Freedom of Speech (continued)

• Political speech is fully protected.

– Cannot be regulated or prohibited by
government.
– Can be oral, written, or symbolic.
• E.g., writing editorial criticizing President, or flag
burning as protest.

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 Freedom of Speech (continued)

• Speech with limited protection – can enact

time, place, and manner restrictions.
– Offensive speech
• E.g., offensive language on television may be
restricted to late-night hours.
– Commercial speech
• E.g., billboards may be limited to certain locations,
telemarketing calls may be restricted by Do-Not-
Call registry.

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 Freedom of Speech (continued)

• Unprotected speech
– May be forbidden
• Dangerous speech (“Fire” in crowded theater)
• Fighting words intended to provoke violent
reactions
• Speech that incites the violent overthrow of the
government
• Defamatory speech
• Child pornography
• Obscene speech (limited exception)

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 Freedom of Religion – the
U.S. Constitution requires
federal, state, and local
governments to be neutral
toward religion.

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 Freedom of Religion

• The Establishment Clause

– First Amendment clause prohibiting the
government from either establishing a state
religion or promoting one religion over another.
• The Free Exercise Clause
– First Amendment clause that prohibits the
government from interfering with the free exercise
of religion.

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 Equal Protection Clause
• Fourteenth Amendment
– Added to Constitution in 1868.
– To guarantee equal rights to all
persons after Civil War.
– Prohibits discriminatory and unfair
action by the government.

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 Equal Protection Clause (continued)

• Provides that state cannot “deny to any

person within its jurisdiction the equal
protection of the laws.”

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 Equal Protection Clause (continued)

• State, local, and federal governments are

prohibited from enacting laws that classify
and treat “similarly situated” persons
differently.
• Artificial persons, such as corporations,
are also protected.

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 Equal Protection Clause (continued)

• Three standards for reviewing equal

protection cases.
– Strict Scrutiny Test – applied to
classifications based on race.
• E.g., affirmative action law
– Intermediate Scrutiny Test – applied to
classifications based on protected classes
other than race (e.g., sex or age).

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 Equal Protection Clause (continued)

– Rational Basis Test – Classifications not

involving a suspect or protected class.
• Applies to most laws.
• Court will uphold law so long as there is a
justifiable reason for it.
• E.g., providing government subsidies to
farmers but not those in other occupations is
constitutional.

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 Due Process Clause

• Under Fifth and Fourteenth

Amendments, no person shall be
deprived of “life, liberty, or property”
without due process of the law.

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 Substantive Due Process

• Requires laws to be clear and not overly

broad.
• Test is whether a reasonable person
could understand the law.
• Laws failing test are declared void for
vagueness.

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 Procedural Due Process

• Requires the government to give a

person proper notice and hearing
before depriving that person of life,
liberty, or property.
– E.g., criminal defendant must receive fair
trial.

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 Privileges and Immunities Clause
• In Article IV and Fourteenth Amendment
• To promote nationalism
• States prohibited from enacting laws that unduly
discriminate in favor of their residents.
– E.g., cannot enact a law prohibiting nonresidents from
owning property or businesses.
– States have sufficient reason in certain cases to treat
nonresidents differently—e.g., out-of-state college
tuition.
• Applies only to citizens, not corporations.

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