1.4 The Constitution and Business
The Role of the U.S. Constitution
The supreme law of the land is the United States Constitution. Every law in the country must comply with the provisions of the Constitution or that law is void. The Constitution has two main functions: First, it establishes the three branches of the federal government and allocates the division of powers among them. Second, the Constitution enumerates the fundamental liberty rights of citizens and protects them from the government’s ability to restrict those rights. These enumerated rights, known as the Bill of Rights, are the first ten amendments of the Constitution.
The First Amendment
Perhaps the most revered of the fundamental rights guaranteed by the Bill of Rights is the First Amendment guarantee of freedom of speech, which prevents a governmental actor from prohibiting a citizen’s oral, written, or symbolic (e.g., arm band) expression. Speech that has a commercial purpose is less protected than political speech. Therefore, commercial speech may be subject to time, place, and manner restrictions which might not apply to public policy or political speech. For example, a city sign ordinance may lawfully prohibit a business advertisement sign on a residence, but may not prohibit a political poster in the same place.
Supremacy Clause
In addition to the Bill of Rights, the Constitution also contains a A Constitutional provision that states that the Constitution and federal laws are the highest laws in the land , which mandates that the Constitution and federal law, treaties, and regulations are the highest laws of the land and have priority over state law. This is known as the The notion that federal laws have priority over state laws .
Commerce Clause
The A Constitutional provision that gives the Constitution power to regulate commerce among the states and with foreign nations of the Constitution gives Congress the power to regulate commerce among the states, among the Indian tribes, and with foreign nations. Traditionally, the Commerce Clause was interpreted narrowly, but under the the notion that all commerce conducted in the United States comes under federal authority , virtually all commerce conducted in the United States comes under the purview of federal law. The affectation doctrine is the notion that any commerce that has a substantial effect upon commerce between states will come under Congressional authority. It is important for business entities to recognize that even when a business activity is local, it may be governed by federal law. However, through the police powers reserved to the states by the Constitution, a state also has the power to regulate commerce within its borders, subject to the preemption doctrine.
Due Process Clause
Another Constitutional provision that has implication for business is the A Constitutional provision that prohibits the government from depriving a citizen of life, liberty, or property without due process of law . The government cannot deprive a citizen of life, liberty, or property without giving him or her notice and an opportunity to be heard before a neutral arbiter. This is known as A Constitutional provision that grants fairness of any government proceeding that involves citizen rights . For example, before a state government can terminate a person’s driver's license, it must provide an opportunity for the driver to object or defend him or herself. The concept relates to the fundamental fairness of any government or legal proceeding involving the rights of a citizen.
The second component of due process is The principle that requires government laws to be clear, legitimate, understandable, and limited in scope . This is the notion that government statutes must be clear and understandable to the reasonable person, limited in their scope, and designed to further a legitimate governmental purpose. A law will violate substantive due process if it is arbitrary. Usually laws governing business practices are reasonably related to a legitimate governmental purpose.
Equal Protection Clause
Finally, the Fourteenth Amendment provides that the laws of the U.S. must be applied equally to all its citizens. This is known as the a Constitutional provision that applies U.S. laws equally to all citizens . Importantly, the courts have concluded that corporations are protected by it too.
3 Constitutional Tests
When laws, promulgated by a governmental actor, treat citizens differently, the courts employ three tests to determine if the law is legitimate:
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Strict scrutiny test
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Intermediate scrutiny test
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Rational basis test
Strict Scrutiny Test
First, if a law distinguishes between citizens based on what is called a suspect class, usually race, it will be constitutional only if designed to achieve a compelling state interest. This is known as the A test used to establish a law’s constitutionality by determining that the law is designed to achieve a compelling state interest, like national security, for example. .
Intermediate Scrutiny Test
Second, when a law curtails a citizen’s exercise of rights based upon protected classifications such as gender or age, it must be substantially related to important objectives to be valid under what is called the A test used to establish a law’s constitutionality by determining that the law furthers an important government interest by means that are substantially related to its objectives . For example, in the federal government’s effort to lower the number of illegitimate teen pregnancies, it is justified in creating a law that punishes men but not women for statutory rape, since only females can become pregnant.
Rational Basis Test
Finally, the A test used to establish a law’s constitutionality by determining that a justifiable reason exists for the disparate treatment of citizens will allow for treatment of citizens in a disparate way in matters of economic or social welfare, if there is a justifiable reason or a rational basis for the government action. For example, the federal government is justified in granting government subsidies to farmers but not to those in other occupations. As written, the tests for determining if a law complies with the Equal Protection Clause seem straightforward, but in application can be very complicated.
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