The Commerce Clause acts as an implied restraint upon state regulatory powers. Such powers must give way before the superior authority of congress to legislate on, or leave unregulated matters involving interstate commerce. When the state acts solely as a market participant, no conflict between state regulation and federal regulatory authority can arise. The Privileges and Immunities Clause, on the other hand, imposes a direct restraint on state action in the interests of interstate harmony. This concern with comity cuts across the market regulator-market participant distinction that is crucial under the Commerce Clause. It is discrimination against out-of-state residents on matters of fundamental concern, which triggers the Clause, not regulation affecting interstate commerce.
A municipal ordinance required that at least 40 percent of the employees of contractors and subcontractors working on city construction projects be city residents. The council challenged the ordinance as ultra vires and as unconstitutional under the Commerce Clause, the Privileges and Immunities Clause, and the Equal Protection Clause. The state supreme court declined to apply the Privileges and Immunities Clause in the context of a municipal ordinance that had identical effects upon out-of-state citizens and state citizens not residing in the municipal locality. The council appealed, raising the same three challenges. The council abandoned the Commerce Clause challenge, and the 40 percent quota was changed to a hiring goal.
Did the ordinance violate the Privileges and Immunities Clause?
The Court concluded that the challenged ordinance was properly subject to the strictures of the Privileges and Immunities Clause. The ordinance was not immune from constitutional review at the behest of out-of-state residents merely because some in-state residents were similarly disadvantaged. The Court, therefore, reversed the judgment of the state supreme court and remanded the case for a determination of the validity of the ordinance under the appropriate constitutional standard.