The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
State laws regulating contractors' dealings with foreign entities and associated companies are not novel. Many opponents suggest that states have no interest in foreign policy or what foreign governments to, so anti-BDS laws are an unprecedented gambit for state governments explicable only by the nefarious power of the Israel lobby. False. During the 1980s, many states passed laws banning state contractors from dealings with South Africa. No one at the time suggested that contractors had a First Amendment right to deal with South Africa, even if they wanted to do so for ideological reasons (either to show support for South Africa, or because they thought that a boycott would hurt the average South African black, or because they thought that commercial relations would help undermine South African apartheid, or whatever). While those laws had the opposite intent–ban commercial contact with a country, rather than ban boycotting a company–there is longstanding precedent that states may condition contracts on how and whether contractors react to boycott movements.
Laws banning boycotts of Israel aren't unprecedented. Federal law has banned U.S. entities from participating in or complying with the Arab League boycott of Israel since the late 1970s. Note that this includes U.S. entities that might want to comply with the boycott because they agree with it. This law has been around for forty-plus years, and has never been subject to a successful First Amendment challenge. This should give you some idea of how legally farfetched the challenges to state anti-BDS laws are.
Traditional antidiscrimination laws aren't special because they apply to "constitutionally protected classes": As is clear from the FAIR case, one reason that the Supreme Court has been unwilling to give boycotts First Amendment protection is that doing so would threaten the constitutional viability of "classic" antidiscrimination laws, because there is no clear analytical distinction between refusing to deal with members of a group (clearly discrimination) and a boycott.
In writing about this issue, I've consistently come across the weird claim that one can't draw an analogy between antidiscrimination laws and anti-BDS laws because antidiscrimination laws protect members of minority groups protected by the Constitution, whereas anti-BDS laws do not. Boys and girls, let's pull out our pocket Constitutions. There are no special "protected classes" under the constitution. There is no plausible textual or precedent-based argument that laws banning discrimination based on race, sex, etc. are exempt from First Amendment scrutiny but anti-BDS laws are not because of the category protected.
In the unlikely event the Supreme Court chose to declare that economic boycotts are protected speech unless the boycotts involve certain protected categories such as race, ethnicity, sex, etc., that still would not likely help campaigners against anti-BDS laws. I can imagine one route the Supreme Court could (but won't) take that might seem useful to those who oppose anti-BDS laws. The Court could, in theory, reverse current precedent and say that economic boycotts are speech protected by the First Amendment, but that laws prohibiting discrimination against "suspect classes" serve a compelling interest and therefore are constitutional. In other words, boycotting black people can be banned, but boycotting, say, Caterpillar for its dealings with Israel cannot.
First, I don't think the Court is inclined to hold that economic boycotts are speech. Second, the Court, after flirting in the 1980s with the notion that antidiscrimination laws should not be limited by First Amendment concerns because of the government's compelling interest in eradicating discrimination, unanimously rejected that notion in both the Hurley case and Boy Scouts v. Dale case (Dale was 5-4, but not on that issue).
Third, let's assume the Court did go down that route. Are laws prohibiting contractors from boycotting Israel a compelling interest? No? Says who? Oh, because they aren't based on traditionally-protected categories? Various state courts have held that laws banning discrimination based on sexual orientation ban discrimination against same-sex weddings, because same-sex weddings are closely associated with homosexuals. I think that reasoning is bogus, but it's widely accepted in the same circles that oppose anti-BDS laws, such as the ACLU. By the same token, Israel, as the only Jewish-majority country in the world, is closely associated with Jews. And boycotting people who do business with Israel will have a wildly disproportionate effect on Jews. So under modern antidiscrimination principles, if a state argued that it was banning Israel-related boycotts to protect Jews from anti-Semitism a court would have a hard time gainsaying the notion that this is also a "compelling interest." This is espcecially true because it's well-documented that the BDS movement originated at an explicitly antisemitic international conference in Durban, South Africa in 2001.
States have a non-ideological interest in prohibiting the contractors from engaging in Israel-related boycotts. Imagine a state government contracts with a company for cybersecurity. The company boycotts Israeli software. By far the best software for the job is Israeli-owned Checkpoint, which will cost $50 million. The company, however, boycotts Israel, so it goes with inferior McAfee software, which costs $75 million. The state winds up with worse software and a bill for an extra $25 million. Why would any state agree to contract with someone who might do this?