California: Case challenging gender quotas for corporate boards to move forward

Yesterday, July 10, 2020, the Supreme Court of California of Los Angeles, ruled a lawsuit brought by Judicial Watch challenging gender quotas for corporate boards can move forward. The case will now proceed to the discovery phase, including the taking of depositions of state officials.

In 2018, California elected public officials enacted a law that requires publicly heldfashion-business-entrepreneur-woman-royalty-free-thumbnail corporations with headquarters in the state to have at least one director who self-identifies as a woman and by the close of next year must have at least three women on their boards. The lawsuit states that such a mandate is unconstitutional. Judicial Watch is not arguing women should not be on the boards of publicly traded corporations, it is arguing the State does not have the authority to mandate such a requirement.

In its complaint, Judicial Watch argues:

SB 826 is illegal under the California Constitution. The legislation’s quota system for female representation on corporate boards employs express gender classifications. As a result, SB 826 is immediately suspect and presumptively invalid and triggers strict scrutiny review.

Before the bill passed, a California Assembly floor analysis identified a “significant risk of legal challenges” to SB 826. It characterized the legislation as creating a “quota-like system” and noted:

[T]his bill, if enacted into law, would likely be challenged on equal protection grounds … The use of a quota-like system, as proposed by this bill, to remedy past discrimination and differences in opportunity may be difficult to defend.”

In signing SB 826 in September 2018, then-Governor Brown wrote that “serious legal concerns have been raised” to the legislation. “I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation.” He signed the bill anyway, noting, “ recent events in Washington, D.C. – and beyond – make it crystal clear that many are not getting the message.”

There are 625 publicly-traded companies chartered in California that are subject to the legislation’s provisions. In a March 2020 report the secretary of state identified 282 corporations that reported compliance with the law’s requirements.

“We are pleased that the court saw through California’s flimsy claim that taxpayers had no standing to sue to stop this brazenly unconstitutional gender-quota law,” said Judicial Watch President Tom Fitton. “Even Gov. Brown, in signing the law, worried that it is unconstitutional. Judicial Watch’s California taxpayer clients are stepping up to make sure that California’s Constitution, which prohibits sex discrimination, is upheld.”



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