Challenge to California Female Board Member Requirement
As the end of 2019 is quickly approaching, SB 826 is causing a stir! SB 826 signed into law last year and codified in California Corporations Code §301.3 & §2115.5, requires that all publicly held foreign or domestic corporations whose principal executive offices are in California are required to have at least one female director on their board of directors by December 31, 2019, and depending on board size, up to three female board members by December 31, 2021. SB 826, which is California’s proactive step to achieve equality in the board room, affects about one-third of California-based companies that lack female director representation. This mandate alone could lead to a 22% increase in U.S. female directorship by 2021.
Earlier this month, three taxpayers sued the California Secretary of State Alex Padilla to prevent the enforcement of this bill. The Plaintiffs allege that the requirement to have at least one female director violates Article I, Section 31 of the California Constitution, which prevents discrimination based on sex. The complaint asserts that SB 826 uses an unconstitutional “quota system” and therefore they seek an injunction permanently prohibiting the enforcement of SB 826. Additionally, Plaintiffs, California taxpayers are also seeking a judgment declaring it illegal to use any taxpayer funds or resources to enforce the bill. Although the enforceability of SB 826 is currently in question it is important to stay compliant with the current state of the law.
For information to ensure compliance with the current law updates, please contact the employer lawyers at Chauvel & Glatt.
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