Judge Rules California Diversity Mandate for Corporations Is Unconstitutional

Posted: Apr 02, 2022 12:55 PM
Judge Rules California Diversity Mandate for Corporations Is Unconstitutional

Source: AP Photo/Damian Dovarganes

A California judge ruled that the state's diversity law requiring corporations to have racial minorities or members of the LGBTQ+ community serve on their board of directors was unconstitutional.

The judge, who handed down the ruling Friday, concluded that the law violated California's constitutional equal protection clause, according to a summary judgment granted to Judicial Watch, a conservative legal group that filed a permanent injunction against the measure.

Judicial Watch President Tom Fitton said in a statement to The Associated Press that the decision "declared unconstitutional one of the most blatant and significant attacks in the modern era on constitutional prohibitions against discrimination."

Signed into law by Democratic Gov. Gavin Newsom in 2020, the law mandates that corporate boards of publicly traded companies with a main executive office in California must have a racial or ethnic minority or a member of the LGBTQ+ community serving on their boards by the end of 2021. 

The measure also made it a requirement that, by the end of 2022, two members of an aforementioned "underrepresented community" must serve on the board in corporations with four to nine directors and three such minority directors must serve on a board with more than nine directors.

"When we talk about racial justice, we talk about empowerment, we talk about power, and we need to talk about seats at the table," Newsom said when he signed the legislation into law.

The state had argued in its court filings 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."

Corporations that fail to follow the rule could face fines of $100,00 for first violations and $300,000 for subsequent violations.

According to a "Diversity on Boards" report released last month by California's secretary of state, 300 out of 700 corporations had complied with the law but more than half did not submit the proper disclosure statement.

Former California Gov. Jerry Brown signed a similar law in 2018 requiring women to serve on boards of directors in the state despite his acknowledgment that the law could be overturned in court.

A Judicial Watch lawsuit is challenging that measure as well.