Blog

Get expert advice on every topic you need as a small business owner, from the ideation stage to your eventual exit. Our articles, quick tips, infographics and how-to guides can offer entrepreneurs the most up-to-date information they need to flourish.

Subscribe to our blog

A landmark California law requiring board diversity has been struck down as unconstitutional

Posted by Neha De

April 22, 2022    |     2-minute read (389 words)

A California law that required diversity on corporate boards of directors has been ruled unconstitutional by Judge Terry Green of the Los Angeles County Superior Court, in a blow to the state’s efforts to address gender and racial disparities in the workplace.

The law, Assembly Bill 979, which came into effect in 2020, requires publicly traded companies based in California to have members of the board from underrepresented communities including Black, LGBT, Asian, Latino, Native American or Pacific Islander.

In signing the bill, Gov. Gavin Newsom remarked that it was crucial for minorities to have a voice on the boards of powerful organizations. He said, “when we talk about racial justice, we talk about empowerment, we talk about power, and we need to talk about seats at the table.”

The lawsuit argued that the law violated the state’s constitutional equal protection clause because it mandated quotas. 

In its court filings, on the other hand, the state argued that the measure did not “discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.”

The ruling granted summary judgment to the conservative legal group Judicial Watch, which sought a permanent injunction against the measure. According to Judicial Watch President Tom Fitton, the decision “declared unconstitutional one of the most blatant and significant attacks in the modern era on constitutional prohibitions against discrimination.” 

Assembly Bill 979 required organizations to appoint at least one member from an underrepresented community on their boards by the end of 2021, either by filling a vacant seat or by adding one.

It also mandated at least two such directors on boards that have four to nine directors and three directors for boards that have nine or more directors by the end of 2022. Companies that failed to comply could face fines of US$ 100,000 for first violations and US$ 300,000 for any subsequent ones.

The state in its argument said that no businesses were fined to date and that no tax dollars were used to enforce Assembly Bill 979.

It defended the law as constitutional, arguing it was essential to reverse a culture of discrimination that favored men (and majorities) and was only put in place after other measures failed.

We provide you with essential business services so you can focus on growth.