1. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-1 A Critical Thinking Approach Fourth Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

2. © 2006 Prentice Hall, Inc. CHAPTER 5 Constitutional Principles THE LEGAL ENVIRONMENT OF BUSINESS Ch. 5-2

3. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-3 The Constitution Provides the legal framework for the nation Sets out the basic structure of government Establishes the balance of powers Amendments establish individual rights

4. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-4 Federalism Definition: A division of political power between a central authority and constituent units Operation: All powers not specifically given to the federal government are reserved to the states Federal regulation must be based in a constitutional provision * See slide 4-14

5. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-5 Supremacy Clause Article V of the Constitution Any state or local law that directly conflicts with the federal Constitution, laws, or treaties is void.

6. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-6 Federal Preemption Federal law “preempts” state or local law where a local law indirectly conflicts with congressional intent, as evidenced by federal legislation regulating the same area.

7. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-7 Separation of Powers Checks and Balances on Power Article I - Legislative Branch Enacts the Law Article II - Executive Branch Enforces the Law Article III - Judicial Branch Interprets the Law

8. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-8 Case 5-1: Clinton v. Jones  Separation of Powers Doctrine does not provide complete presidential immunity from private suits; both for official and unofficial acts  Precedent: Civil cases involving Truman, Kennedy, Nixon, Ford

9. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-9 The 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…”.

10. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-10 The Commerce Clause Is the basis for federal regulation of business Is a limited grant of power Is subject to interpretation by the Court Currently, this power is interpreted broadly and includes intrastate as well as interstate activity

11. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-11 Interstate Commerce is found in: Intrastate activities - NLRB v. Jones & Laughlin (1937) Growing and consuming wheat on a farm – Wickard v. Filburn (1942) Loansharking – Perez v. U.S. (1971) A local restaurant – IHOP v. Pinnock (1993) Local coal mining – U.S. v. Lake (1995) Supreme Court Cases

12. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-12 Supreme Court Cases Interstate Commerce NOT found in: Gun-Free School Zone Act - U.S. v. Lopez (1995) Violence against Women Act – Brzonkala v. Morrison (2000)

13. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-13 The Police Power When does the state’s police power conflict with federal Commerce Clause power? Definition The inherent regulatory power of the state to pass laws to protect the public health, safety, welfare, and morals of the community

14. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-14 The Two-Pronged Test The Rational Basis Test The Balancing Test Case 5-3: Oregon Waste Systems v. Oregon Discriminatory state pricing burdens interstate commerce…no state showing of rational basis, nor of an offsetting legitimate state interest

15. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-15 Taxing 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 specific goals, (i.e., federal highway funds)

16. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-16 Protects citizens against the federal government Comprised of the first Ten Amendments Extended to the states via the Fourteenth Amendment The Bill of Rights

17. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-17 The First Amendment Freedom of Speech Freedom of the Press Right to Assembly Right to Petition for Redress Separation of Church and State Right to Free Exercise of Religion

18. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-18 Restrictions on Speech Speech that causes danger Obscene speech Hate speech Commercial speech Corporate speech

19. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-19 Case 5-4: Central Hudson v. New York  Commercial speech relates solely to economic interests  Occurs in an area traditionally subject to government regulation  Commercial speakers have knowledge of the market and their product  Commercial speech is a hardy breed of expression

20. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-20 Corporate Speech Commercial speech entitled to lesser protection, yet is still protected if not misleading or unlawful State must assert a substantial interest Regulation must be no more than necessary to achieve legitimate interest Political speech treated the same as for individual citizens

21. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-21 The Fourth Amendment The right of individuals to be secure in their persons, their homes, and their personal property No unreasonable searches and seizures Requires probable cause and a warrant for searches

22. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-22 The Fourth Amendment Exception: Administrative Searches Where industry is subject to pervasive regulation Where there is a reduced expectation of privacy Where there is a substantial government interest Where there is a constitutionally adequate substitute for a warrant

23. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-23 The Fifth Amendment Protects against self-incrimination and double jeopardy Due Process Procedural: Notice and opportunity to be heard; to confront witnesses Substantive: Protection against arbitrary laws unrelated to legitimate state purposes

24. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-24 The Fifth Amendment The Takings Clause: Private property may not be taken by the state unless; It is taken for public purposes The owner is paid just compensation The Takings Clause: Private property may not be taken by the state unless; It is taken for public purposes The owner is paid just compensation When does regulation amount to a taking? See Lucas v. S. Carolina Coastal Commission When does regulation amount to a taking? See Lucas v. S. Carolina Coastal Commission

25. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-25 The Fourteenth Amendment Applies the Bill of Rights and the Due Process Clause to the states Exceptions: Grand Jury and right to jury trials Also important: The Equal Protection Clause

26. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 5-26 Summary The Constitution is the framework of the government Federalism is the fundamental concept States regulate local matters Federal government has only limited power Commerce Clause is the primary source of federal power to regulate business