the legal environment of business © 2006 prentice hall ch. 5-1 a critical thinking approach fourth...

THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS

© 2006 Prentice Hall© 2006 Prentice Hall Ch. 5-Ch. 5-11

A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

© 2006 Prentice Hall, Inc.© 2006 Prentice Hall, Inc.© 2006 Prentice Hall, Inc.© 2006 Prentice Hall, Inc.

CHAPTER 5CHAPTER 5

Constitutional PrinciplesConstitutional Principles

THE LEGAL ENVIRONMENT OF BUSINESS

Ch. 5-Ch. 5-22



The ConstitutionThe ConstitutionProvides the legal framework for the nationProvides the legal framework for the nation

Sets out the basic structure of governmentSets out the basic structure of government

Establishes the balance of powers Establishes the balance of powers

Amendments establish individual rightsAmendments establish individual rights



FederalismFederalismDefinitionDefinition: A division of political power : A division of political power between a central authority and constituent between a central authority and constituent unitsunits

Operation:Operation: All powers not specifically given to All powers not specifically given to the federal government are reserved to the the federal government are reserved to the statesstates

Federal regulation must be based in a Federal regulation must be based in a constitutional provisionconstitutional provision

* See slide * See slide 4-144-14



Supremacy ClauseSupremacy Clause

Article V of the ConstitutionArticle V of the Constitution

Any state or local law that directly Any state or local law that directly conflicts with the federal Constitution, conflicts with the federal Constitution, laws, or treaties is void.laws, or treaties is void.



Federal PreemptionFederal Preemption

Federal law “preempts” state or local law Federal law “preempts” state or local law where a local law indirectly conflicts with where a local law indirectly conflicts with congressional intent, as evidenced by congressional intent, as evidenced by federal legislation regulating the same federal legislation regulating the same area.area.



Separation of PowersSeparation of Powers

Checks and Balances on PowerChecks and Balances on Power

Article I - Legislative BranchArticle I - Legislative Branch

Enacts the LawEnacts the Law

Article II - Executive BranchArticle II - Executive Branch

Enforces the LawEnforces the Law

Article III - Judicial Branch Article III - Judicial Branch

Interprets the LawInterprets the Law



Case 5-1:Case 5-1: Clinton v. Jones Clinton v. Jones Separation of Powers Doctrine does not Separation of Powers Doctrine does not

provide complete presidential immunity provide complete presidential immunity from private suits; both for official and from private suits; both for official and unofficial actsunofficial acts

Precedent: Civil cases involving Truman, Precedent: Civil cases involving Truman, Kennedy, Nixon, FordKennedy, Nixon, Ford



The Commerce ClauseThe Commerce Clause

Article I, Sec. 8

Congress has the power “To regulate Commerce with foreign Nations, and among the several States and with the Indian Tribes…”.

Article I, Sec. 8

Congress has the power “To regulate Commerce with foreign Nations, and among the several States and with the Indian Tribes…”.



The Commerce ClauseThe Commerce ClauseIs the basis for federal regulation of Is the basis for federal regulation of businessbusiness

Is a limited grant of powerIs a limited grant of power

Is subject to interpretation by the CourtIs subject to interpretation by the Court

Currently, this power is interpreted broadly Currently, this power is interpreted broadly and includes intrastate as well as interstate and includes intrastate as well as interstate activityactivity



Interstate CommerceInterstate Commerce is found in is found in::

Intrastate activities - Intrastate activities - NLRB v. Jones & LaughlinNLRB v. Jones & Laughlin (1937)(1937)

Growing and consuming wheat on a farm – Growing and consuming wheat on a farm – Wickard v. FilburnWickard v. Filburn (1942) (1942)

Loansharking – Loansharking – Perez v. U.S.Perez v. U.S. (1971) (1971)

A local restaurant – A local restaurant – IHOP v. PinnockIHOP v. Pinnock (1993) (1993)

Local coal mining – Local coal mining – U.S. v. LakeU.S. v. Lake (1995) (1995)

Supreme Court CasesSupreme Court Cases



Supreme Court CasesSupreme Court Cases

Interstate Commerce Interstate Commerce NOTNOT found in found in::

Gun-Free School Zone Act - Gun-Free School Zone Act - U.S. v. LopezU.S. v. Lopez (1995) (1995)

Violence against Women Act – Violence against Women Act – Brzonkala v. Brzonkala v. MorrisonMorrison (2000) (2000)



The Police PowerThe Police Power

When does the state’s police power conflict

with federal Commerce Clause power?

When does the state’s police power conflict

with federal Commerce Clause power?

DefinitionDefinition

The inherent regulatory The inherent regulatory power of the state to power of the state to pass laws to protect the pass laws to protect the public health, safety, public health, safety, welfare, and morals of welfare, and morals of the communitythe community



The Two-Pronged Test The Two-Pronged Test The Rational Basis TestThe Rational Basis Test

The Balancing TestThe Balancing Test

Case 5-3:Case 5-3: Oregon Waste Systems v. Oregon Oregon Waste Systems v. Oregon

Discriminatory state pricing burdens interstate Discriminatory state pricing burdens interstate commerce…no state showing of rational basis, commerce…no state showing of rational basis, nor of an offsetting legitimate state interestnor of an offsetting legitimate state interest



Taxing and Spending ClauseTaxing and Spending Clause

Article I, Section 8

Gives congress the “Power to lay and collect taxes…” and to “pay the Debts and provide for the common Defense and General Welfare…”.

Article I, Section 8

Gives congress the “Power to lay and collect taxes…” and to “pay the Debts and provide for the common Defense and General Welfare…”.

This power often used to accomplish This power often used to accomplish specific goals, (i.e., federal highway funds)specific goals, (i.e., federal highway funds)



Protects citizens against the federal Protects citizens against the federal governmentgovernment

Comprised of the first Ten Comprised of the first Ten AmendmentsAmendments

Extended to the states via the Extended to the states via the Fourteenth AmendmentFourteenth Amendment

The Bill of RightsThe Bill of Rights



The First AmendmentThe First Amendment

Freedom of SpeechFreedom of Speech

Freedom of the PressFreedom of the Press

Right to AssemblyRight to Assembly

Right to Petition for Redress Right to Petition for Redress

Separation of Church and StateSeparation of Church and State

Right to Free Exercise of ReligionRight to Free Exercise of Religion



Restrictions on SpeechRestrictions on Speech

Speech that causes dangerSpeech that causes danger

Obscene speechObscene speech

Hate speechHate speech

Commercial speechCommercial speech

Corporate speechCorporate speech



Case 5-4:Case 5-4: Central Hudson v. New York Central Hudson v. New York Commercial speech relates solely to Commercial speech relates solely to

economic interestseconomic interests Occurs in an area traditionally subject to Occurs in an area traditionally subject to

government regulationgovernment regulation Commercial speakers have knowledge of Commercial speakers have knowledge of

the market and their productthe market and their product Commercial speech is a hardy breed of Commercial speech is a hardy breed of

expressionexpression



Corporate SpeechCorporate Speech

CommercialCommercial speech entitled to lesser speech entitled to lesser protection, yet is still protected if not protection, yet is still protected if not misleading or unlawfulmisleading or unlawful

State must assert a substantial interestState must assert a substantial interest

Regulation must be no more than Regulation must be no more than necessary to achieve legitimate interestnecessary to achieve legitimate interest

PoliticalPolitical speech treated the same as for speech treated the same as for individual citizensindividual citizens



The Fourth AmendmentThe Fourth Amendment

The right of individuals to be secure in The right of individuals to be secure in their persons, their homes, and their their persons, their homes, and their personal propertypersonal property

No unreasonable searches and seizuresNo unreasonable searches and seizures

Requires probable cause and a warrant Requires probable cause and a warrant for searchesfor searches



The Fourth AmendmentThe Fourth AmendmentException: Administrative SearchesException: Administrative Searches

Where industry is subject to pervasive Where industry is subject to pervasive regulationregulation

Where there is a reduced expectation of privacyWhere there is a reduced expectation of privacy

Where there is a substantial government Where there is a substantial government interestinterest

Where there is a constitutionally adequate Where there is a constitutionally adequate substitute for a warrantsubstitute for a warrant



The Fifth AmendmentThe Fifth Amendment

Protects against self-incrimination and Protects against self-incrimination and double jeopardydouble jeopardy

Due ProcessDue Process

Procedural:Procedural: Notice and opportunity to be Notice and opportunity to be heard; to confront witnessesheard; to confront witnesses

Substantive:Substantive: Protection against arbitrary Protection against arbitrary laws unrelated to legitimate state laws unrelated to legitimate state purposespurposes



The Fifth AmendmentThe Fifth Amendment

The Takings Clause:The Takings Clause:

Private property may not be Private property may not be taken by the state unless;taken by the state unless;

It is taken for public It is taken for public purposespurposes

The owner is paid just The owner is paid just compensationcompensation

The Takings Clause:The Takings Clause:

Private property may not be Private property may not be taken by the state unless;taken by the state unless;

It is taken for public It is taken for public purposespurposes

The owner is paid just The owner is paid just compensationcompensation

When does regulation When does regulation amount to a taking?amount to a taking?

See See Lucas v. S. Lucas v. S. Carolina Coastal Carolina Coastal

CommissionCommission

When does regulation When does regulation amount to a taking?amount to a taking?

See See Lucas v. S. Lucas v. S. Carolina Coastal Carolina Coastal

CommissionCommission



The Fourteenth AmendmentThe Fourteenth Amendment

Applies the Bill of Rights and the Due Applies the Bill of Rights and the Due Process Clause to the statesProcess Clause to the states

Exceptions: Grand Jury and right to jury Exceptions: Grand Jury and right to jury trialstrials

Also important: Also important:

The Equal Protection ClauseThe Equal Protection Clause



SummarySummaryThe Constitution is the framework of the The Constitution is the framework of the governmentgovernment

Federalism is the fundamental conceptFederalism is the fundamental concept

States regulate local mattersStates regulate local matters

Federal government has only limited powerFederal government has only limited power

Commerce Clause is the primary source of Commerce Clause is the primary source of federal power to regulate businessfederal power to regulate business

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