Legal Challenge Filed Regarding Gender Quotas for Corporation Boards
In 2018, then-Governor Brown signed an amendment to the California Corporations Code that mandated that publicly-traded companies headquartered in the Golden State must have a certain number of women as members of their corporate board of directors. See USAToday report here.
In particular, by the end of this year, all such publicly-traded corporations must have at least one female director (including persons who self-identify as female). Then, by the end of 2021, the gender quota is as follows:
- One female director if there are fewer than five members of the board
- Two female directors if there are five members of the board
- Three female directors if there are six or more members of the board
Per the statute, all corporations must comply, and failure to meet the quotas can result in statutory penalties imposed of up to $100,000 for the first violation and $300,000 for subsequent violations. According to figures released by the California Secretary of State, the act applies to over 500 corporations.
Supporters of the law felt strongly that women’s voices were needed in corporate board rooms. The quota law was originally authored by Sen. Hannah-Beth Jackson, a Democrat from Santa Barbara, and by Senate President Pro Temp, Toni Atkins from San Diego. However, even as the act was being passed and signed, there was some concern about whether requiring gender quotas was legal both constitutionally and with respect to anti-discrimination laws. For example, as he was signing the law, Governor Brown noted that “… serious legal concerns have been raised” about the statute.
Last week, a conservative political action group called Judicial Watch announced that it had filed a lawsuit in Los Angeles Superior Court challenging the gender quota law. See San Diego Times report here.
According to the lawsuit, mandating gender quotas creates a gender-based requirement that violates the equal protection clause of the US Constitution and the California Constitution. According to the suit, the quota is an express gender classification and such classifications are presumptively invalid. When a gender classification is used in a statute, such use triggers what is called “strict scrutiny review” by the courts. The justification for using such a classification must be strong. According to Judicial Watch’s lawsuit, there is no such justification for the California gender quota law.
As noted in the linked article, Senator Atkins called the lawsuit an effort “to try to erode the landmark progress our state is making not only for women, but for business and our economy.” We will continue watching and providing updates as the case develops.
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For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard provides a full panoply of legal services for businesses including formation of corporate entities of all types. Like us on Facebook.