CA Court Rules Board Diversification Law Unconstitutional

On Friday, April 1, 2022, a Los Angeles judge ruled unconstitutional California’s law requiring certain corporations to have a minimum number of directors from an underrepresented community.

The bill, AB 979, which Governor Gavin Newsom signed into law in 2020, defines a director from an underrepresented community as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.”

By December 31, 2022, the bill required that:

  • A corporate board with four to nine directors have two directors from underrepresented communities; and
  • A corporate board with nine or more directors have three directors from underrepresented communities.

But a lawsuit filed in October 2020 asked the court to declare this diversification quota as unconstitutional under the California Constitution; the motion for summary judgment stated that, “Laws that explicitly distinguish between individuals on racial or ethnic, sexual preference, and transgender status grounds fall within the core of the prohibition of the equal protection clause.”

And the court agreed in a concise minute order ruling, stating that the plaintiff’s motion for summary judgment is granted, and the defendant’s motion for summary judgment is denied.

Still in litigation is California’s SB 826 — the bill passed in 2018 requiring any publicly held corporation with principal executive offices in California to place at least one female director on its board by December 31, 2019, and two or three female directors on its board by December 31, 2021, depending on the size of the board. In December 2021, a bench trial began in Los Angeles County Superior Court that was expected to last six or seven days, but closing arguments just wrapped up, and the case has been submitted for a preliminary decision. Stay tuned to HRWatchdog for more updates.

Jessica Mulholland, Managing Editor, CalChamber

CalChamber members can read more about Encouraging Diversity, Equity and Inclusion in the Workplace on HRCalifornia. Not a member? See what CalChamber can do for you.

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