The Constitution and the Law
Federal and state constitutions are a major source of business law. The United States Constitution is the
supreme law of the United States. In addition to the individual constitutions established in each state, the U.S.
Constitution sets out the fundamental rules and principles by which the country and individual states are
governed. Constitutional law is the term used to describe the powers and limits of the federal and state
governments as established in the Constitution. The political system that divides authority to govern between
the state and federal governments is known as federalism, and this too is established in the Constitution. The
Tenth Amendment states that any area over which the federal government is not granted authority through
the Constitution is reserved for the state. This statement means that any federal legislation impacting business
and commerce must be established by an expressed constitutional grant of authority.
Federal Preemption
The Founding Fathers created a federal system that would, at times, “preempt” state law through the
supremacy clause, outlined in Article VI of the Constitution. In other words, since the U.S. Constitution is the
“supreme law of the land,” if a state law conflicts with the U.S. Constitution, the state law is declared invalid.
When the federal constitutional law prevails over the state law, it is said that the state law has been
preempted. Before that determination is made, the courts try to determine if Congress intended to preempt
state law in enacting the particular provision in question. If the answer is “no,” then those who are asserting
protections of state law may make claims under state law. If the answer is “yes,” however, federal law prevails.
The Tenth Amendment to the Constitution gives the states powers over areas of law not held exclusively by the
federal government through the U.S. Constitution, e.g., states can make laws about how to get married, who
may get married, or how to dissolve a marriage, as well as which activities are crimes and how the crimes will
be punished. If the U.S. Constitution does give the federal government some power, however, then the federal
government may exercise it, free from state interference. For instance, the U.S. Congress (the legislative
branch of the federal government) has the power, among other things, to coin money, to create a military, to
establish post offices, and to declare war. Since there is specific mention of these powers, states may not
create their own currency, military, or postal service, and they may not declare war.
The Commerce Clause and The Affordable Care Act
After much debate, negotiation, and political wrangling, Congress passed the Patient Protection and
Affordable Care Act (PPACA) in 2010, which was designed to increase the number of Americans who had access
to health insurance (a policy initiative known as Obamacare). The Act included a provision mandating that
individuals not insured through employment or who were otherwise exempt from receiving health insurance
obtain minimum essential health insurance or face a penalty issued through the Internal Revenue Service
(IRS). The National Federation of Independent Business (NFIB), supported by 26 of the 50 states, challenged
the constitutionality of this particular provision, known as the individual mandate. Their argument was upheld
by the 11th Circuit Court of Appeals, which ruled that Congress did not have the authority to enact this
provision. Later, however, the appellate court determined that the individual mandate was severable from the
remainder of the PPACA, so ultimately the Act was upheld.
The main source of authority for the federal regulation of interstate and international commerce is the
commerce clause. This clause is established in Article I, Section 8, of the Constitution. The Article grants
Congress the power to “regulate Commerce with foreign Nations, and among the several States, and with the
Indian Tribes.” Thus, the commerce clause serves to simultaneously empower the federal government, while
44
Chapter 4 Business and the United States Constitution
This OpenStax book is available for free at http://cnx.org/content/col30149/1.5