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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
a. Some areas are reserved for Congress
i. Creating currency
ii. Taxing imports
b. 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
a. Congress is authorized to regulate commence that occurs
among the states
b. Includes three categories of actions
i. Regulating channels of interstate commerce
ii. Regulating and protecting instrumentalities of
interstate commerce, including persons or things in
interstate commerce
iii. Regulating activities that substantially affect
interstate commerce, including many predominately
instate activities such as
1. regulation of railroad rates in a state
2. application of the Civil Rights Act’s “public
accommodations” section to a family-owned
restaurant in one state
2. Taxing Power
a. Congress shall have the authority to lay and collect taxes
b. The Supreme Court relied on this provision to uphold the
Affordable Care Act
3. Spending Power
a. Congress has broad authority to spend for the public
welfare
b. Three requirements
i. Serve general public purposes instead of particular
interests; and
ii. When Congress conditions receipt of money on
certain conditions, must do so clearly; and
iii. Condition must be reasonably related to purpose of
the underlying federal expenditure
4. Necessary and Proper Clause
a. 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
IV.
a. Right to freedom of speech
b. Equal protection of the laws
c. 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
a. Rational basis test
i. Very relaxed
ii. Government action need only have a reasonable
relation to a legitimate government purpose to be
constitutional
b. Intermediate scrutiny
i. Law must be substantially related to the
achievement of an important government purpose
ii. Applies to
1. Commercial speech
2. Sex discrimination
c. Strict scrutiny
i. Law must be necessary to the fulfillment of a
compelling government purpose
ii. Applies to
1. Political or other noncommercial speech
2. Race and national origin
3. Alienage
D. Due Process
1. Procedural
a. Before taking life, liberty or property, government must
give
i. Adequate notice; and
ii. Fair trial or hearing
b. Must be a legitimate claim to title or benefit, including
i. Disability benefits;
ii. Welfare benefits;
iii. Driver’s license
2. Substantive
a. 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
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
a. There is a literal conflict between the state and federal
measures, so that it is impossible to follow both
simultaneously
b. The federal law specifically states that it will preempt state
regulation in certain areas
c. The federal regulation is pervasive
d. 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.