By: Bridget F. Golden
In late June, the Ninth Circuit revived a constitutional challenge to California Law Senate Bill No. 826 (SB 826), which requires all publicly traded corporations headquartered in California to have a minimum number of females on their board of directors in proportion to the total number of directors.[1]
Plaintiff Creighton Meland Jr. originally filed this suit in November 2019, alleging that his Fourteenth Amendment rights were violated because he, a shareholder of a public corporation (OSI Systems, Inc.) headquartered in California, was now forced by law to discriminate on the basis of sex when exercising his shareholder voting rights.[2] The federal district court dismissed his claim, holding that Meland did not have standing to sue because he did not suffer an injury in fact; the law did not require him to vote for a woman; and, he did not have prudential standing as “he did not suffer a direct injury separate from any injury to OSI.”[3] On appeal, the Ninth Circuit reversed the district court’s dismissal and concluded the law did in fact compel Meland to discriminate on the basis of sex.[4] Because this constituted injury in fact, Meland was deemed to have the prudential standing necessary to continue with his suit.[5]
California’s mandatory gender quota for private companies is not novel. Many European Union countries have implemented similar laws over the past fifteen years in an effort to increase female representation in high-level, corporate positions.[6] The policy tool’s efficacy is demonstrated by the increase of the percentage of women on “the boards of the largest listed companies across the EU” from twelve percent in 2010 to twenty-eight percent in 2019.[7] The EU enacted these changes in response to a growing body of economic research indicating women’s careers are often disadvantaged due to prejudices.[8] Additional studies indicate gender quotas have allowed highly-skilled women to replace mediocre men in board positions, which increases productivity and effectiveness.[9] In contrast, other studies reveal that these increases have done little to improve the culture of these companies, or the presence of women in lower positions throughout the company. [10] Regardless, evidence shows that “increased gender representation on corporate boards serves two important interests: remedying pervasive gender discrimination and protecting the economic health of the state.”[11]
SB 826 is one of the first American experiments with mandatory quotas. However, the revival of Meland v. Weber indicates that it could perhaps become a failed experiment. As evidenced by the EU, quotas are effective at increasing representation of women, and thereby, the economic health of private-sector companies. Nonetheless, such quotas may not be adaptable for the American landscape that prides itself on free-market and meritocratic ideals. Title VII of the Civil Rights Act prohibits employers from discriminating–even unintentionally–against employees on the basis of sex. Therefore, company-specific gender quotas are legally risky as employees could potentially succeed on a Title VII claim against employers enforcing those quotas.[12] Here, however, California is requiring corporations to impose mandatory quotas for their boards of directors—who are not considered employees—therefore, SB 826 may not be covered under Title VII.[13] A shareholder voting on board members, like Meland, may have less of a legal basis for his or her gender discrimination lawsuit against California than an employee who would sue a company for implementing mandatory gender quota. But, the Ninth Circuit’s revival of Meland v. Weber reveals a deep reluctance within the United States to adopt laws that could possibly hamper a private entity’s autonomy–even when evidence from other developed nations exhibits tangible economic and social benefits of such laws.
With that being said, the United States will likely have to become more creative in developing policies aimed at improving gender equity, or else face the political-economic risks of lagging behind its European competitors.
[1] Meland v. Weber, No. 20-15762, 2021 LEXIS 18378, at *3 (9th Cir. June 21, 2021).
[2] Id. at *6
[3] Id. at *6-7.
[4] Id. at *11.
[5] Id. at *20
[6] The European Institute for Gender Equality, Legislative quotas can be strong drivers for gender balance in boardrooms, Gender Statistic Database (Jun. 28, 2019), https://eige.europa.eu/gender-statistics/dgs/data-talks/legislative-quotas-can-be-strong-drivers-gender-balance-boardrooms.
[7] Id.
[8]Id.
[9] Heather Long, 80 nations set quotas for female leaders. Should the U.S. be next?, Wash. Post (Mar. 29, 2019), https://www.washingtonpost.com/business/economy/80-nations-set-quotas-for-female-leaders-should-the-us-be-next/2019/03/29/a27434ba-45c4-11e9-aaf8-4512a6fe3439story.html.
[10] Id.
[11] Christopher J. Riley, An Equal Protection Defense of SB 826, Calif. L. Rev. Online (July 2020), https://www.californialawreview.org/equal-protection-defense-sb826.
[12] Julie Levinson Werner, Workplace Diversity—Getting It Right With Goals, Not Quotas, Bloomberg Law: US Law Weekly(Nov. 10, 2020 4:00 AM), https://news.bloomberglaw.com/us-law-week/workplace-diversity-getting-it-right-with-goals-not-quotas.
[13] Teal N. Trujillo, Do We Need to Secure a Place at the Table for Women? An Analysis of the Legality of California Law SB-826, 45 J. Legis. 324, 342 (2018) (“Critically, the most important question not yet discussed is whether there is coverage. Can corporate board directors even be held liable under Title VII?”)
