Substantive Due Process

Substantive due process has a venerable history in Anglo-American law.Footnote ²³ Its lineages are traced to Magna Carta, in which rebellious barons extracted from King John, among other concessions, the promise that “no free man shall be taken or imprisoned or disseised or outlawed or exiled or in any way ruined, nor will we go or send against him, except by the lawful judgment of his peers or by the law of the land.”Footnote ²⁴ Justice Chase offered the first reported account of the legal and moral wrong substantive due process was intended to forbid. In Calder v. Bull (1798), he contended that “an act of the legislature (for I cannot call it a law) contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority.” One of the most egregious violations of the fundamental pact was “a law that takes property from A. and gives it to B.”Footnote ²⁵ This formula was used to illustrate the meaning of the Constitution's Fifth Amendment, prohibiting the federal government from depriving any person “of life, liberty, or property, without due process of law,” and of its reiteration, in the Fourteenth Amendment, extending the prohibition to the states. Following the Civil War, statutes taking from A and giving to B became “every … lawyer's favorite example of an unconstitutional statute.”Footnote ²⁶ “Taking from A and giving to B,” writes Orth, “had become … the shorthand to describe what substantive due process was supposed to prevent.”Footnote ²⁷

What is wrong with taking from A and giving to B? A's property rights, including property in one's labor, were not unlimited: they could be regulated to guard against harm to others or to the public. Among the more influential doctrines informing American understandings of public authority was the maxim sic utere tuo ut alienum non laedas (use your own so as not to injure another) of the common law of nuisance. In Freund's view, this was the source of the state's “police power,” its authority to strike “at all gross violations of health, safety, order, and morals.”Footnote ²⁸ Its classic statement is Massachusetts Chief Justice Shaw's defense of legislative authority in Commonwealth v. Alger (1851): “We think it is a settled principle, growing out of the nature of well ordered civil society, that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it may be so regulated, that it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the rights of the community.”Footnote ²⁹

A norm of fairness governed substantive due process jurisprudence. Property rights could be regulated solely for public uses and ends. Courts reviewed legislation to constrain government's reach, so that A's property rights were not abridged to advance B's private interests. To do so was to inflict an undeserved loss on A, allowing B to gain wrongfully at A's expense. “Extreme instances of laws lacking in generality,” explained McGehee, “are acts which forfeit or confiscate the life, liberty, or property of a private citizen, or citizens, by the mere edict of the legislature…. Confiscatory legislation of a civil character is as much opposed to due process of law as judgments of the legislature imposing penalties for a crime.”Footnote ³⁰ Burdick concluded that “the conception of due process does exclude legislation which inflicts inequality of burden, which is clearly arbitrary, and without any basis in reason.”Footnote ³¹ Courts erected three constitutional barriers to the exercise of the police power: statutes satisfied due process if their ends were public, the means they adopted were reasonably related to accomplishing these ends, thereby minimizing burdens on private conduct, and everyone advantaged or burdened by regulations was treated alike. Therefore, in Dent v. West Virginia (1889), Justice Field wrote that “legislation is not open to the charge of depriving one of his rights without due process of law, if it be general in its operation upon the subjects to which it relates.”Footnote ³² Legislation failing to meet these requirements is arbitrary, favoring some classes over others, who are thereby unreasonably deprived of liberty and property rights.Footnote ³³ In the words of Chief Justice Fuller's unanimous opinion in Caldwell v. Texas (1891), due process was “secured by laws operating on all like,” prohibiting statutes that were “special, partial, and arbitrary.”Footnote ³⁴

The ideology of free labor, predicated on the view that the marketplace gave everyone an equal opportunity to rise, informed American elites late into the nineteenth century. The state, not the market, was the principal threat to fairness. Jacksonians adopted the ideal of the neutral state to serve egalitarian ends: to prevent the wealthy from capturing state power to create legal privileges they could exploit for gain.Footnote ³⁵ This is the meaning of Justice Field's dissent in the Slaughter-House Cases (1873), often used to illustrate the origins of late nineteenth century substantive due process jurisprudence. The central issue was the constitutionality of a slaughterhouse monopoly created by the Louisiana legislature. For Field, steeped in Jacksonian values, commodity prices in competitive markets served as the measure of fair exchanges.Footnote ³⁶ Louisiana's slaughterhouse was precisely an instance of using state power for undeserved gain that the Fourteenth Amendment was intended to prevent. The underlying wrong of monopoly is coercion. Field distinguished “slavery in the strict sense of the term,” which he defined as “compulsory service for the mere benefit or pleasure of others,” from involuntary servitude, which put smaller producers at a disadvantage by limiting their economic alternatives. “A prohibition to … pursue certain callings … would be almost as oppressive and nearly as great an invasion of his liberty as the compulsion which would force him to labor for the benefit or pleasure of another, and would equally constitute an element of servitude.”Footnote ³⁷ This prior coercion made exploitation possible. Privileged operators used their artificial advantage to charge what modern economists call “monopoly rents,” so that, wrote Field, “every man who pursues the business of preparing animal food for market must take his animals to the buildings of the favored company … and for the use of the buildings must pay a prescribed tribute to the company.”Footnote ³⁸ Independent butchers were deprived of the right to pursue lawful callings without due process; to no public end, but only to allow the privileged to gain at their expense.

The rise of a dependent working class challenged the claim that markets reliably protected employment relations from coercion. “The America of 1870,” writes Montgomery, “largely rural though it remained, was already predominantly a nation of employees.”Footnote ³⁹ Deepening economic inequalities transformed the relationship between social classes and the state. Large employers did not need to use the government to put workers at a disadvantage. They encountered a vulnerable population they could exploit to increase profits. Jacksonian fears that special legislation fostered artificial concentrations of wealth became less pressing. The principal threat to liberty stemmed from private sources of power, not public law. Progressives turned to the state as the chief institutional vehicle for redressing economic inequalities. Redistributive policies intended to create greater social equality became a moral and political problem. They were also a constitutional one as courts faced the question of whether the police power permitted governments to intrude upon negotiations over the terms of employment.

Critics of the turn-of-the-century judiciary contend that its continuing fidelity to the view that labor markets were fair thwarted legislative efforts to regulate the employment contract. “Whether adjudicating a private law dispute or a challenge to a statute,” contends McCurdy, “judges took it for granted that alleged disparities of bargaining power could not provide a ground of the decision.”Footnote ⁴⁰ “Acceptance of the argument that workers working in large industries were ‘helpless’ and in need of special protection,” explains Gillman, “would have signaled the collapse of the long-standing distinction between legitimate public-purpose legislation and illegitimate class politics, at least as applied to most labor legislation.”Footnote ⁴¹ Kens concurs, adding that adherence to a formal principle of impartiality against the background of increasing economic disparities divorced the tradition from its commitment to fairness. “The Lochner era's doctrine's concern for class legislation remained true to the aspect of Jacksonian democracy that favored government neutrality, but not to its underlying ideals. Lochner era doctrine did not advocate government neutrality in order to reduce the power of wealth and privilege or to preserve democracy. It was driven by a fear that the working of democracy might undermine the economic and social system that had created that wealth. In essence, it turned the ideal of Jacksonian democracy on its head.”Footnote ⁴²

The fate of time and manner of payment regulations before the courts, however, tells a different story: following an initial period of hostility, state and federal courts gradually turned back due process attacks against wage regulations. Judges' growing recognition that labor relations were unfair undermined constitutional protection of the employment contract. Courts authorized the extension of the state's police power to redress the wrong of hard bargains, in which employers took unfair advantage of wage workers' economic inequality.

Time and Manner of Payment

Employers used a variety of payment strategies to erode earnings: long payment periods forced workers to seek credit between paydays; workers discharged for cause or leaving without cause forfeited unpaid wages, and workers owed wages were required to wait until the next payday; payment in store orders or scrip could only be redeemed for inflated prices at company stores; and various methods of weighing coal undercounted the amount mined for the purposes of determining wages.Footnote ⁴³ Beginning in the last quarter of the nineteenth century, state legislatures enacted measures—for example, requiring payment at short intervals and in lawful money—to protect earnings. All of the initial regulations of the manner and time of payment were struck by state courts on substantive due process grounds. Their decisions bristled with free labor assumptions. They distinguished sharply between traditional common law incapacities, which provided legitimate grounds for constraining contractual liberty, and economic disparities, which did not. Courts repudiated the claim that bargaining inequalities allowed employers to gain unfairly at wage laborers' expense.Footnote ⁴⁴ Wage regulations were seen as the product of political opportunism, distorting market outcomes and arbitrarily advantaging favored classes. The suspicion, wrote Judge Peckham in People v. Gillson (1888), was that legislation of this kind, “which has been so frequent of late,” is enacted to “protect some class in the community against the fair, free and full competition of some other class, the members of the former class thinking it impossible to hold their own against such competition, and … flying to the legislature to secure some enactment which shall operate favorably to them or unfavorably to their competitors in the commercial, agricultural, manufacturing or producing fields.”Footnote ⁴⁵

Beginning in the 1890s, however, progressive arguments gained traction in state courts, which demonstrated a new concern to block contracts in which A took unfair advantage of B's necessity.Footnote ⁴⁶ The Supreme Court of Rhode Island, in State v. Brown & Sharpe Manufacturing (1892), pointedly rejected a free labor rationale in sustaining a statute requiring weekly wage-payment. The workers' negotiating disadvantage undermined consent:

The purpose of the statute “is to protect the employees of corporations from what has been termed ‘the greed of corporate capital’.”Footnote ⁴⁸ The court appealed to what had by then become “common knowledge:” “that whereas corporations, owing to this very corporate power of aggregating capital, are the richest and strongest bodies as a rule, in the State, their employees are often the weakest and least able to protect themselves, frequently being dependent upon their current wages for their daily bread.”Footnote ⁴⁹

The end of the nineteenth century marked a turning point.Footnote ⁵⁰ Judges rejected due process challenges to wage payment statutes with increasing frequency and confidence.Footnote ⁵¹ State courts routinely held that disproportionate bargaining power provided a valid ground for government intervention. Judges in these cases did not question the premise that the market established the measure of fairness, so that employers owed workers the competitive wage rate for their labor. But a commitment to the fairness of market relations did not entail a judicial commitment to shield contractual liberty from protective legislation. Rather, judges stressed that employers gained undeservedly at workers' expense, reducing actual earnings below labor's contract price, because workers' necessitous circumstances made it difficult for them to defend their interests. In Harbison v. Knoxville Iron (1899), the Tennessee Supreme Court upheld a law requiring wage payment in legal money. The court ruled that the statute was not class legislation in that “it is … certainly general in its terms, embracing equally every employer and employee who is or may be in like situation and circumstances.”Footnote ⁵² Moreover, and more importantly, the court held “that the limitation placed upon the right of contract by this Act is not arbitrary and oppressive, but entirely just and reasonable.”Footnote ⁵³ The state rightfully preserved the full value of the wage contract by blocking its harsh terms. “The Legislature,” explained Judge Caldwell, “evidently deemed the laborer at some disadvantage … and, by this Act, undertook to ameliorate his condition … by enabling him … at his election and at a proper time, to demand and receive his unpaid wages in money rather than in something less valuable. Its tendency, though slight it may be, is to place the employer and employee upon equal ground in the matter of wages…. This alone commends the Act and entitles it to a place on the statute book as a valid police regulation.”Footnote ⁵⁴ The laborer's “condition is bettered by the Act, in that it naturally enables him to get a better price for … his labor; and yet, although the [employer] may not in that transaction realize the expected profit, … it in no event pays more in dollars and cents for the labor than the contract price.”Footnote ⁵⁵

Legislation regulating the manner of payment was additionally “calculated to promote the public peace and good order, and to lessen the growing tendency to strife, violence, and even bloodshed in certain departments of important trade and business.”Footnote ⁵⁶ Caldwell argued that the police power “is an important and comprehensive one, and its application must be expected and allowed to expand and take in new subjects from time to time, as trade and business advance and new conditions arise.”Footnote ⁵⁷ Legislation intended to maintain labor peace was well within its purview. He stressed that good order in labor relations was predicated on fair relations between the contending classes: the act “is neither prohibitory nor penal, not special but general, tending toward equality between employer and employee in the matter of wages, intended and well calculated to promote peace and good order, and to prevent strife, violence and bloodshed.”Footnote ⁵⁸

Neutrality was preserved rather than impaired by legislation barring harsh agreements between unequal parties. The Indiana Supreme Court sustained a law requiring weekly wage payment, holding that “a large proportion of the persons affected by these statutes of labor are dependent upon their daily or weekly wages for the maintenance of themselves and their families. Delay of payment or loss of wages results in deprivation of the necessaries of life … and, in many cases, may make the wage-earner a charge upon the public. The situation of these persons renders them peculiarly liable to imposition and injustice at the hands of employers, unscrupulous tradesmen, and others who are willing to take advantage of their condition.”Footnote ⁵⁹ In South Carolina, the Supreme Court sustained a law blocking payment in store orders reasoning that its purpose “is to protect all laborers from coercion by employers to compel laborers to receive, as wages for labor, goods, wares or merchandise or supplies in lieu of lawful money.” Store orders created “an opportunity for apprehension in enabling the unscrupulous employer to take advantage of the necessities of the laborer, and demand extortionate prices for the merchandise. The statute seeks to remove this inequality between the employer and employee by making such checks … negotiable and redeemable in cash under specified conditions and at stated times.”Footnote ⁶⁰ The Supreme Court of Washington sustained a statute requiring wage payment upon discharge, ruling that protective labor legislation, in the form of time and manner of payment statutes, was a legitimate exercise of the police power: “We think the practice, pursued by certain employers of labor, of paying the wages of their employees in orders drawn upon stores redeemable in commodities other than lawful money of the United States, and of postponing the day of payment until long after the wages were earned, was a real evil, operating to the detriment of the wage earner, and consequently to the detriment of the state. As such the practices were subject to correction by the legislature, and its act in that regard was well within the rules of sound public policy.”Footnote ⁶¹

Among the last of the state cases in this vein is State v. Missouri Pacific (1912), in which the Missouri Supreme Court sustained an act requiring semimonthly wage payments. Counsel for the railroad cited a number of cases, most prominently Godcharles v. Wigeman (1886) and State v. Loomis (1893), in which time and manner of payment legislation was struck as a violation of due process. The Missouri Supreme Court repudiated their authority because they failed to take economic disparities into account:

The Supreme Court was more receptive to wage regulations than state courts, sustaining every time and manner of wage payment statute it reviewed. In St. Louis, Iron Mountain and St. Paul Railway Co. v. Paul (1899), the Court affirmed a ruling by the Arkansas high court rejecting a due process challenge to a law requiring railroads to pay their workers all wages owed at the cessation of employment.Footnote ⁶³ The Supreme Court drew principally on the opinion of the Arkansas court in Leep v. Railway Co. (1894), ruling that the legislation legitimately protected workers by preventing employers from eroding their earnings. To require railroads to disburse all “unpaid wages earned at the contract rate at the time of the discharge” secured to workers the market price of their labor without unjustly impairing the railroad's profitability.Footnote ⁶⁴ Moreover, the statute served a public purpose in protecting the state's workers from exploitation: “If the legislature … seeing that their employees are and will be persons dependent on their labor for a livelihood, and unable to work on a credit, should find that better servants and service could be secured by the prompt payment of their wages on the termination of their employment … it might require them to pay for the labor of their employees … at the end of their employment.”Footnote ⁶⁵

The Supreme Court decided three influential wage-payment cases in the first decade of the twentieth century. In Knoxville Iron Co. v. Harbison (1901) and Dayton Coal and Iron Co. v. Barton (1901), the Court affirmed the Tennessee Supreme Court's ruling in favor of a statute requiring payment in legal money, stating that the state court “justified its conclusions by so full and satisfactory a reference to the decisions of this court as to render it unnecessary for us to travel over the same ground” and quoting extensively from its opinion, in particular the paragraphs highlighting the legislature's legitimate concerns with redressing bargaining inequalities.Footnote ⁶⁶McLean v. Arkansas (1909) affirmed the ruling of the Supreme Court of Arkansas rejecting a due process claim that a coal weighing statute restricted contractual liberty. Writing for the majority, Justice Day acknowledged that the marketplace failed to order class relations in the mines harmoniously and without coercion. Particularly troublesome was the employers' use of screens to separate rock from coal before weighing it to ascertain miners' wages. An extensive study of labor relations concluded that “disputes concerning the introduction and use of screens had led to frequent and sometimes heated controversies between the operators and the miners.”Footnote ⁶⁷ Arkansas's law barred the use of screens and voided contracts contrary to its provisions. Laws intended “to prevent fraud and to require honest weights and measures,” stated Day, serve a legitimate public purpose “although in compelling certain modes of dealing they interfere with the freedom of contract.”Footnote ⁶⁸ But the statute did not address dishonest practices so much as establish a fairness benchmark to ascertain the coal's weight for the purpose of determining miners' pay.Footnote ⁶⁹ In effect, the legislature took clear sides in the labor dispute, blocking contracts for wages on the basis of the weight of screened coal rather than coal mined. The Court upheld the law, reasoning that use of the screens lowered the value of miners' wages below their contract rate: “the validity of this law” is “its tendency … to require the miner to be honestly paid for the coal actually mined and sold…. The miner is deprived of a portion of his just dues when paid upon the basis of screened coal.”Footnote ⁷⁰ Powerful employers are thus precluded from overreaching. The report, concluded Day, persuaded a majority of the Court that the law was not unreasonably related to “the protection of a large class of laborers in the receipt of their just dues and the promotion of the harmonious relations of capital and labor engaged in a great industry in the State.”Footnote ⁷¹

Acknowledging that bargaining inequalities rendered wage workers exploitable was one aspect of the judicial calculation of unfairness. Workers did not have enough to sustain themselves if they refused employment, allowing employers to take advantage of their economic weakness to drive hard bargains. The second consideration is the standard judges used to determine what fairness required.Footnote ⁷²Lochner era judges were perhaps persuaded of the justice of time and manner of payment legislation because the market price served as the normative benchmark of a just wage. The complaint was that employers' economic power enabled them to pay workers less than the full value of wages set by competitive markets. Blocking contracts whereby employers paid in scrip or store orders, used screens in weighing coal, or required lengthy pay periods, limited the employers' profit, but did not require them to pay more than the market price for labor.Footnote ⁷³ Would turn-of-the century courts sustain legislative efforts to void employment contracts that violated nonmarket benchmarks of well-being? States were permitted under the police power to intervene in the market to enforce public norms of health, safety, welfare, and morals. Courts still needed to rule, however, whether states could deploy the police power to establish public standards of what workers were owed, voiding employment contracts that failed to satisfy these standards.

The Legal Working Day

The struggle to limit the working day became one of the main efforts of wage workers and their progressive allies during the last half of the nineteenth century.Footnote ⁷⁴ Their successes in winning legislative approval for maximum hours laws were attacked in the courts as violations of substantive due process. With some notable exceptions, these challenges failed.Footnote ⁷⁵ State and federal courts steadily if unevenly upheld statutes expanding the exercise of the police power to restrict working hours, beginning in the late 1890s until the ruling of the Supreme Court in Bunting v. Oregon (1917), sustaining an hours law for industrial employees, brought the legal controversy to an end.Footnote ⁷⁶ Substantive due process jurisprudence was far more receptive to the problem of bargaining disparities than its critics contend. The hours cases were no exception: the judiciary became increasingly willing to permit states to regulate a core term of the employment contract, enforcing nonmarket standards of what constitutes a legal day's labor.

The most controversial constitutional issues in substantive due process cases involved statutes limiting the working day of adult male laborers in private firms. Laws establishing maximum working hours for women and children rarely failed in the courts on the ground that their physical frailty and incapacity justified protective legislation.Footnote ⁷⁷ Employment regulations covering workers for the state, state contractors, and firms affected with a public interest also met with general judicial approval. States had the authority to determine their own employment terms, and to legislate for firms, for example, railroads, that had undertaken special duties to the public.Footnote ⁷⁸ The traditional police power rationale, however, did not extend to private firms employing legally competent workers. Could states legitimately take sides in their employment negotiations?

The Supreme Court faced this question in Holden v. Hardy (1898).Footnote ⁷⁹ This was the first time the Justices “had the opportunity to review a state labor law and join … debates” about its constitutionality.Footnote ⁸⁰ They sustained a statute, enacted by Utah in 1896, creating an 8 hour day for underground miners, reasoning that limiting their working hours was necessary to safeguard their health and safety. Justice Brown, writing for the majority, began by exploring the boundaries of the state's police power. Neutrality provided the principal substantive constraint on legislative interference with contractual prerogatives.Footnote ⁸¹ Courts reviewed the state's authority, so that it “cannot be put forward as an excuse for oppressive and unjust legislation.”Footnote ⁸² Nevertheless, he wrote, “the law is a progressive science.”Footnote ⁸³ “While the cardinal principles of justice are immutable,” courts must permit states to adapt their policies to new circumstances.Footnote ⁸⁴ Due process is one of those “natural and inherent principles of justice” prohibiting governments from taking anyone's property for another's or the public's benefit without compensating the owner.Footnote ⁸⁵ The question now was the application of this principle in the changing conditions of an industrializing America. We are no longer, wrote Brown, “purely an agricultural people,” where “the occasion for any special protection of a particular class did not exist.”Footnote ⁸⁶ Two recent economic developments demanded legislative attention: “the new relations between employers and employees,” and the “enormous increase in the number of occupations which are dangerous, or so far detrimental to the health of employees as to demand special precautions for their well-being and protection.”Footnote ⁸⁷

The police power provided the chief warrant for Utah's statute. The characteristic dangerousness of these occupations authorized the legislature to limit working hours. Brown drew an analogy between the hours law and the myriad regulations states enacted to improve the safety of urban accommodations, manufacturing firms, and underground mining, especially statutes mandating workplace health and safety measures.Footnote ⁸⁸ These regulations, he underscored, had been uniformly sustained by the courts. Accordingly, wrote Brown, turning to the instant case, “upon the principles … stated, we think the act in question may be sustained as a valid exercise of the police power…. These employments, when too long pursued, the legislature has judged to be detrimental to the health of the employees, and, so long as there are reasonable grounds for believing that this is so, its decision upon this subject cannot be reviewed by the Federal courts.”Footnote ⁸⁹ He confined the law's reach “to the protection of that class of people … subjected by their employment to the peculiar conditions and effects attending” underground mining and smelters.Footnote ⁹⁰ The state's power “legitimately exercised can neither be limited by contract nor bartered away by legislation.”Footnote ⁹¹ Brown's opinion, however, did not conclude with the claim that dangerousness was a touchstone distinguishing a legitimate exercise of the police power from impermissible class legislation. He introduced an additional ground for the decision: that bargaining inequalities precluded miners from negotiating safe terms of employment.Footnote ⁹²

Why did Brown raise this controversial claim? His language suggests that the discussion of workers' bargaining disadvantage was intended to rebut the free labor assumptions that shielded the employment contract from the reach of the police power. The analogy between workplace safety and maximum hours was insufficient to sustain Utah's statute. Judges generally agreed that workplace safety lay at the periphery of employment negotiations, so that statutes mandating precautions did not implicate contractual liberty. The police power was alone sufficient authority. They did not require, and courts upholding them did not offer, an explanation that workers were in need of special protective legislation.Footnote ⁹³ The hours statute, in contrast, intruded upon the core of the employment contract that Montgomery called its “sanctum sanctorum.”Footnote ⁹⁴ Brown's observations were therefore necessary to justify bringing the hours term of the contract within traditional police power jurisprudence, and not subject to significantly more exacting scrutiny because it chafed against the premises of free labor ideology. He had pointed to other precedents—laws regulating lotteries and intoxicating liquor, and statutes limiting the working hours of women and children—that protected vulnerable parties from harm to themselves and others.Footnote ⁹⁵ Until the Holden Court, however, judges had repeatedly rejected the claim that adult males were economically disadvantaged in a way that justified legislation to protect their welfare.Footnote ⁹⁶

Brown offered a penetrating criticism of the claim that market ordering was necessarily harmonious and safeguarded workers' economic interests. Employment relations in the mines were an instance of market failure. The miners' vulnerability rendered them exploitable: “the proprietors lay down the rules and the laborers are practically constrained to obey them.” Their agreement was no indication that the contract's terms were mutually beneficial because they “do not stand upon an equality…. In such cases self-interest is often an unsafe guide, and the legislature may properly interpose its authority.” Utah's elected representatives had determined that miners' necessitous circumstances made it difficult for them to protect their health and safety. The hours statute provided a public benchmark of a just contract, spelling out the terms that undisadvantaged workers would accept. Employers “naturally desire to obtain as much labor as possible from their employees, while the latter are often induced by fear of discharge to conform to regulations which their judgment, fairly exercised, would pronounce to be detrimental to their health or strength.” Brown scornfully dismissed the employer's solicitousness for the violation of the employees' contractual liberty: “the argument would certainly come with better grace and greater cogency from the latter class. But the fact that both parties are of full age and competent to contract does not necessarily deprive the State of the power to interfere where the parties do not stand upon an equality, or where the public health demands that one party to the contract shall be protected against himself.”Footnote ⁹⁷ Wage workers were free to bid for jobs, but only within the limit of a legal working day. The maximum hours statute, he concluded, reflected the legislators' reasonable conclusion that employers extracting more than an 8 hour day gained too much at the expense of miners' well-being.

Brown's analysis of the workers' economic vulnerability severed the principle of neutrality from its free labor moorings. It explained why the legislature was warranted in piercing “the ‘specialness’ of the labor contract.”Footnote ⁹⁸ Just as important, his critique of free labor served two additional ends. First, it buttressed the claim that “the legislature has adopted the statute in exercise of a reasonable discretion,” and not as “a mere excuse for an unjust discrimination, or the oppression, or spoliation, of a particular class.”Footnote ⁹⁹ Neutrality, Brown suggested, was promoted by a statute that blocked contracts in which workers “are often induced by the fear of discharge” to accept terms that posed unacceptable risks to their welfare.Footnote ¹⁰⁰ Second, Brown's acknowledgement that economic disparities undermined voluntariness meant that protective legislation enhanced, rather than limited, freedom of contract.

The Court's decision was profoundly influential in establishing the terms of the legal controversy. Holden, rather than Lochner, articulated the principles guiding turn-of-the century jurisprudence on employment legislation.Footnote ¹⁰¹ The outcome of substantive due process challenges turned on two questions: the scope of the state's authority to establish public benchmarks of workers' well-being, and whether workers' bargaining disadvantage weakened their ability to negotiate satisfactory terms on their own. Courts moved cautiously in sanctioning legislation involving disputes over the core terms of the labor contract. Holden brought working hours within the ambit of the police power only for hazardous occupations; it did not reach wage workers generally. But courts were not wedded to a narrow definition of the police power. In People v. Havnor (1896), the New York Court of Appeals rejected a due process attack on a law mandating 1 day's rest in the workweek of the state's barbers.Footnote ¹⁰² Barbering was not particularly dangerous. “The vital question,” wrote Judge Vann for the majority, “is whether the real purpose of the statute … has a reasonable connection with the public health, welfare or safety.”Footnote ¹⁰³ He offered a more expansive justification of what shorter hours were for: a day of rest was essential to human flourishing and therefore to the public's prosperity and well-being. “It is to the interest of the state to have strong, robust, healthy citizens, capable of self-support, of bearing arms, and of adding to the resources of the country. Laws to effect this purpose, by protecting the citizen from overwork and requiring a general day of rest to restore his strength and preserve his health, have an obvious connection with the public welfare.” The state of existing labor relations explained why protective legislation was necessary: the statute, argued Vann, “affords an opportunity, recurring at regular intervals, for rest, needed both by the employer and the employed, and the latter, at least, may not have the power to observe a day of rest without the aid of legislation.”Footnote ¹⁰⁴ The Nevada Supreme Court, in Ex Parte Boyce (1904), provided an additional police power justification for blocking hard bargains: the negative externalities that result from victimizing a vulnerable population.Footnote ¹⁰⁵ It upheld an 8 hour law in underground mines, smelters, and ore reduction works in part on the ground that “to have strong, healthy men, instead of sickly and disabled ones, without earning and self-supporting capacity, and the resultant widows and orphans dependent upon public and private charity, is quite as important to the state in time of peace or war; and the health and lives of all the people, wherever endangered, should receive care and protection.”Footnote ¹⁰⁶

The constitutional controversy over New York's bakeshop act at issue in Lochner was framed by judges' disagreements over the extent of the police power and the degree to which the employment market accorded with the ideals of free labor. The New York Court of Appeals narrowly upheld the statute establishing a legal working day for bakers, relying on the authority of Holden and Havnor to justify the expansion of the state's police power to reach bakers, and to explain that bakers' bargaining disadvantage assimilated the working day within its traditional purview to regulate health and safety.Footnote ¹⁰⁷ Judge Davy, writing for a majority of an Appellate Division court, stressed the state's legitimate concern that wage workers' economic weakness eroded their ability to protect themselves. “The Legislature no doubt recognized the fact that proprietors of these establishments desire to obtain as much labor as possible from their employees, who, from fear of being discharged, are often induced to comply with the employer's request to work during both night and day.” He defended the limit on their working hours by adopting a broad understanding of the human purposes served by relief from toil. “The rule laid down in People v. Havnor shows that courts are disposed to uphold a statutory regulation enacted for the safety of the public and to protect the health of the individual employee from the dangers threatened by excessive or exhaustive labor.”Footnote ¹⁰⁸ Chief Judge Parker, writing for a plurality of the judges in the New York Court of Appeals, called “special attention” to Holden, especially its recognition that legal principles must be adapted to meet “the change of conditions,” by which he meant the rise of occasions for the “special protection of a particular class,” and cited the court's opinion in Havnor to support the conclusion that the state had a legitimate responsibility for ensuring “strong, robust, healthy citizens, capable of self-support,” especially when “the latter … may not have the power” to do so “without the aid of legislation.”Footnote ¹⁰⁹

Lochner (1905) invalidated the New York bakeshop act. Justice Peckham, writing for the majority, argued that “it is impossible for us to shut our eyes to the fact that many of the laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed from other motives.”Footnote ¹¹⁰ The state's police power authorized legislation necessary to ensure public welfare. He found no infirmity in those sections of the statute that were directly related to improving sanitary conditions in baking establishments, and only tangentially implicated employment negotiations: “furnishing proper wash-rooms and water-closets, apart from the bake-room, … providing proper drainage, plumbing and painting; the sections, in addition, [providing] for the height of the ceiling, the cementing or tiling of floors, where necessary in the opinion of the factory inspector.”Footnote ¹¹¹ Regulations reaching more directly into the heart of the employment contract were also legitimate when they were demonstrably necessary to safeguard public health. But “the connection” between working hours and wholesome bread, he argued, “is too shadowy and thin to build any argument for the interference of the legislature.”Footnote ¹¹²

Peckham, however, significantly qualified his strict opposition to employment laws, presumably in an effort to sway the votes of moderate justices, inadvertently laying the ground for Lochner's demise.Footnote ¹¹³ The majority's opinion was framed in terms of the analytical framework established in Holden. Peckham conceded that regulations prohibiting adult male workers from agreeing to employment contracts injurious to their well-being were not without due process. The New York law “must be upheld, if at all, as a law pertaining to the health of the individual engaged in the occupation of a baker.”Footnote ¹¹⁴ Additionally, the state was required to show that workers were unable to negotiate safe terms of work on their own. Establishing the claim that they were economically “at a disadvantage” was necessary to explain why it was “reasonable and proper for the State to interfere to prevent the employees from being constrained by the rules laid down by the proprietors in regard to labor.”Footnote ¹¹⁵ The state had the burden of proving that the act has a “direct relation, as a means to an end,” and the end itself is “appropriate and legitimate, before an act can be held to be valid which interferes with the general right of an individual to be free in his person and in his power to contract in relation to his own labor.”Footnote ¹¹⁶ The Court affirmed Holden and Knoxville (mandating pay in legal money) but distinguished New York's bakeshop act on the ground that the state failed to meet this burden. Unlike underground mining, baking was not particularly hazardous.Footnote ¹¹⁷ Peckham narrowed the reach of the police power to bodily health and safety. Employers were not requiring too much from their workers unless working hours became a direct threat to their physical well-being. He rejected more expansive claims that the public had a legitimate interest in a “strong and robust” population, fearing that any broader measure would remove all limits on the exercise of the police power.Footnote ¹¹⁸ Moreover, New York's bakers, in contrast to Utah's and Tennessee's miners, experienced markedly different employment relations and working conditions: “there is no contention that bakers as a class are not equal in intelligence and capacity to men in other trades or manual occupations, or that they are not able to assert their rights and care for themselves without the protecting arm of the State.”Footnote ¹¹⁹

Justice Harlan, dissenting for himself and Justices White and Day, parted with the majority on the question of which party shouldered the burden of proving the act's unconstitutionality: “when the validity of a statute is questioned, the burden of proof … is upon those who assert it to be unconstitutional.”Footnote ¹²⁰ The New York legislature had exercised a reasonable discretion in concluding that working more than 60 hours in a week was injurious to bakers' welfare. His opinion was buttressed by statistics demonstrating that the average workday in other countries and other U.S. states was not inconsistent with New York's law. Reports showed that the occupation of baking was hazardous on both a narrow definition of physical health and a broader standard of comfort and well-being: “improved health, longer life, more content and greater intelligence and inventiveness.”Footnote ¹²¹ He agreed that defining the legal working day—drawing the line between the “legitimate protection” of workers and interfering in their liberty of contract—“is not a question easily solved.”Footnote ¹²² But Harlan maintained that the legislature was not unreasonable “in the belief that employers and employees in such establishments were not upon an equal footing, and that the necessities of the latter often compelled them to submit to such exactions as unduly taxed their strength.”Footnote ¹²³

Harlan's dissent paved the way for future courts to uphold the legal working day. The Lochner majority had conceded the constitutionality of protective labor policies, at least in cases of time and manner of wage payment (Knoxville) and maximum hours in hazardous employments (Holden). Harlan's opinion authorized judges to defer to legislative judgment on the two grounds that had obstructed general hours statutes.Footnote ¹²⁴ An expansive definition of harm was not an unreasonable ground on which to single out industrial workers for protective legislation. Due process shielded contractual prerogatives unless legislatures determined that bargaining inequalities brought the hours term of the employment contract within the purview of the police power.Footnote ¹²⁵ Maximum hours acts were not arbitrary intrusions on contractual liberty or private property because they protected the interests of workers whose economic disadvantage precluded them from negotiating contracts safeguarding their welfare.

The Mississippi (State v. Newman, 1912) and Oregon (State v. Bunting, 1914) Supreme Courts made the conceptual moves.Footnote ¹²⁶ Both courts sustained maximum hours laws in private manufacturing firms, where there was no unusual or extraordinary danger, for the workers' own good. Both relied on Harlan's dissenting opinion, granting to the legislature authority to regulate “the hours of labor in certain industries, in which too many hours of service in one day would be injurious to the health and well-being of the operatives.”Footnote ¹²⁷ They used a broad standard of welfare to assess the statutes' reasonableness: “a certain minimum of physical well-being,” ruled the Oregon court, “is necessary in order that social life may exist, the usefulness and intelligence of the citizens be increased, and the progress of civilization accelerated…. The required minimum … varies in different periods, but rises with advancing civilization until it includes a certain standard of comfort.”Footnote ¹²⁸ The Mississippi court was asked to review the constitutionality of the law a second time “upon the suggestion that the court erred in its former opinion.”Footnote ¹²⁹ The justices overruled, underscoring the disparities in bargaining power that prompted the legislature to act: “it was believed that there are manufactories in this state whose operatives could not work longer than ten consecutive hours without impairing their health, and without endangering their lives and their bodies, and yet competition forced the laborer to take the risk or starve.”Footnote ¹³⁰ They betrayed some annoyance in mocking the manufacturer's apparent solicitude for their employees' freedom: “we pause here to remark the notable fact that it is rare for the seller of labor to appeal to the courts for the preservation of his inalienable right to labor. This inestimable privilege is generally the object of the buyer's disinterested solicitude.”Footnote ¹³¹

The United States Supreme Court affirmed the Oregon court's decision in Bunting v. Oregon (1917). Felix Frankfurter, co-authoring the brief supporting the law, set out to show that Holden, not Lochner, had been correctly decided. Lochner's chief defect was its reliance on the “common understanding” that the work of bakers was not injurious to their health. Frankfurter called for a more scientific jurisprudence: “particularly in the last decade science has been giving us the basis for judgment by experience to which … judgment by speculation must yield. This is precisely what Holden v. Hardy looked forward to…. It is now demonstrable that the considerations that were patent to miners in 1898 are to-day operative … throughout the industrial system.”Footnote ¹³² Scientific findings, however, would hardly be persuasive unless the Court also agreed that statutes protecting workers from harm to themselves were not without due process. The legal working day served as a public measure of what workers were due, and contracts that failed to benefit them as it required were void. This is precisely what the Bunting Court ruled.Footnote ¹³³ Justice McKenna, writing for the majority, summarily dismissed the employer's claim that Oregon's law was “not either necessary or useful” to safeguard workers' well-being, observing that “the record contains no facts to support the contention, and against it is the judgment of the legislature and the [Oregon] Supreme Court.”Footnote ¹³⁴ Without mentioning Lochner, McKenna quoted a passage from the Oregon court's opinion that was itself taken from Harlan's dissent, deferring to the legislature's police power unless its exercise was patently arbitrary. Little wonder that Chief Justice Taft, dissenting in Adkins v. Children's Hospital (1923), remarked that “the Lochner Case” had been “overruled sub silentio” in Bunting.Footnote ¹³⁵ The legal controversy over working day was at an end. A note on “Liberty of Contract and Social Legislation” in the Columbia Law Review (1917) stated that “it is now well established that the passing of measures which tend to level the inequalities of fortune is a legitimate field for legislation, and … a man may, at the expense of his liberty, be prevented from making contracts which are detrimental to his own welfare.”Footnote ¹³⁶Bunting, write Bickel and Schmidt, concluded “the course of litigation on hours-of-labor statutes … before the Court.”Footnote ¹³⁷

Minimum Wages

The claim that the Supreme Court's ruling in West Coast Hotel v. Parrish (1937) marked a revolution in American jurisprudence rests on the assumption that wage regulation posed a direct challenge to the neutrality principle and the presumption in favor of economic liberty. On this view, alternative constitutional visions informed the legal controversy over the minimum wage. Wage standards, writes Gillman, were “unprecedented” because they were linked “to the general goal of granting to workers an ‘unnatural’ (non-market-based) economic advantage vis-à-vis their employers.”Footnote ¹³⁸ Courts had limited the legislature's reach to traditional police power ends—the protection of health and safety—and were vigilant to disallow class legislation. In Parrish, the Court allowed “government to intrude itself into market relations on behalf of favored classes.”Footnote ¹³⁹ Mayer contends that the Court in this “landmark case … abandoned its protection of liberty of contract as a fundamental right.”Footnote ¹⁴⁰

Wage legislation, however, did not challenge traditional police power jurisprudence. Alternative understandings of the market's essential fairness informed judges' view of wage statutes. The key decisions involved laws regulating women's pay in private employment. Beginning in the 1910s, the judiciary, especially state courts, sustained minimum wage laws on the ground that they were necessary to safeguard women's health and morals. Judicial opposition was predicated on free labor assumptions that insulated the wage term from legislative reach. “The amount of wages to be paid and received,” argued Justice Sutherland in Adkins v. Children's Hospital (1923), striking a minimum wage law, “was the heart of the contract.”Footnote ¹⁴¹ The price of commodities, including the value of labor, was fairly determined by the market, buttressing a heightened presumption in favor of liberty of contract. “Legislative authority to abridge it,” he maintained, “can be justified only by the existence of exceptional circumstances.”Footnote ¹⁴² Support for minimum wage laws, in contrast, presupposed a more skeptical attitude toward market ordering of prices and wages. The market's failure to produce decent living standards undercut the special character of the wage term, relocating it within the authority of the police power. Courts reviewing minimum wage regulations moved away from the claim that women could legitimately be singled out only because they were the weaker sex, physically incapable of holding their own in competition with men, and because the state had a public interest in protecting their maternal role. They came to accept the legitimacy of an income floor for women because they were poorer and, therefore, economically vulnerable to exploitation by overreaching employers. Courts also moved away from that the idea that the market established a standard of fair wages toward the notion that women were due “a reasonable living wage.”Footnote ¹⁴³ A critical difference dividing the judiciary was whether the fairness benchmark for the wage contract was labor's market price or the wage adequate for “decent self-support,” until, in Parrish, a majority of the Supreme Court sustained an act establishing an adequate livelihood as the minimum standard for women.Footnote ¹⁴⁴

The Oregon Supreme Court upheld the constitutionality of a minimum wage law for women and children against due process challenges in two cases decided in 1914: Stettler v. O'Hara and Simpson v. O'Hara. The state created an Industrial Welfare Commission and authorized it to prescribe “standards of minimum wages for women in any occupation within the State of Oregon” and ascertain “what wages are inadequate to supply the necessary cost of living to any such women workers and to maintain them in good health.”Footnote ¹⁴⁵ Justice Eakin, delivering the court's opinion in Stettler, observed that the validity of minimum wage laws was a question that was “practically new in the courts of this country.”Footnote ¹⁴⁶ He adopted Harlan's view, in his Lochner dissent, that those challenging a statute's validity bore the burden of proof. The state's legislature had not unreasonably established a decent livelihood as the public standard of the minimum wages that workers were due. An income floor was warranted in prohibiting women's employment at pay “inadequate to supply the necessary cost of living to such women factory workers, and to maintain them in health.”Footnote ¹⁴⁷ Eakin drew an analogy between maximum hours and minimum wage laws as a way of “bringing [the latter] within the police power of the legislature. The state should be as zealous of the morals of its citizens as of their health…. ‘Common belief’ and ‘common knowledge’ are sufficient to make it palpable and beyond doubt that the employment of female labor as it has been conducted is highly detrimental to public morals, and has a strong tendency to corrupt them.”Footnote ¹⁴⁸ Additionally, Eakin pointed to the negative externalities of allowing the labor market to determine a woman's wage. Employers paying the market rate fail to take responsibility for the full costs of their decisions, passing them on to society. Eakin quoted the findings of the Massachusetts Commission on Minimum Wage Boards (1912): “Wherever the wages of such a woman are less than the cost of living and the reasonable provision for maintaining the worker in health, the industry employing her is in receipt of the working energy of a human being at less than its cost, and to that extent is parasitic. The balance must be made up in some way. It is generally paid by the industry employing the father. It is sometimes paid in part by future inefficiency of the worker herself, and by her children, and perhaps in part ultimately by charity and the state.”Footnote ¹⁴⁹

The effect of low wages on women's well-being, however, formed only the first part of Eakin's opinion. He turned to the complaint, raised by counsel for the employer, “that the law upon this question interferes with plaintiff's freedom of contract.” Eakin countered by exploring in some detail the economic circumstances that made women vulnerable to hard bargains. He began by offering a brief history of substantive due process. “The Federal Constitution and the Constitutions of the various states” were originally adopted to guarantee “the larger freedom enjoyed in this country… in comparison with conditions in the earlier days of the common law, when it was found necessary to prevent extortion and oppression by royal proclamation or otherwise, and to establish reasonable compensation for labor.” The principal threat to liberty was political; constitutional limits on the exercise of public power protected the individual's “right … to use his faculties in all lawful ways, to live and work where he will.”Footnote ¹⁵⁰

Industrialization and economic concentration, however, dramatically altered the circumstances that underwrote contractual liberty. “The legislature,” wrote Eakin, “seems to have acted on the idea that conditions have changed, or that private enterprises have become so crowded that their demands amount to unreasonable exactions from women and children.”Footnote ¹⁵¹ The traditional limits imposed on public authority and guaranteed by the constitution failed to address this new threat to liberty. To the contrary, freedom of contract now sanctioned the power to exploit: employer's counsel “fails to take note that by reason of this larger freedom the tendency is to return to the earlier conditions of long hours and low wages, so that some classes in some employments seem to need protection from the same conditions for which royal proclamation was found necessary.” The law must adapt to remedy this wrong: “the legislature has evidently concluded that in certain localities these conditions prevail even in Oregon; that there are many women employed at inadequate wages—employment not secured by the agreement of the worker at satisfactory compensation, but at a wage dictated by the employer. The worker in such a case has no voice in fixing the hours or wages, or choice to refuse it, but must accept it or fare worse.”Footnote ¹⁵²

Justice Eakin retained the moral vision of the neutral state. Government's intervention in the marketplace could not show unfair favoritism. In the current circumstances, however, inaction was equivalent to partiality, allowing unscrupulous employers to take undue advantage of a vulnerable population. He drew on the Supreme Court's opinion in Muller v. Oregon (1908), sustaining a maximum hours law for women, in which the Court justified the reasonableness of singling this class for special protection because a woman's “physical structure and her position in the economy of the race renders her incapable of competing with man either in strength or in endurance.”Footnote ¹⁵³ But Eakin pointed to a different argument: that women need protection not because they are the weaker sex, but because they are poorer. He endorsed the report by the Massachusetts Commission, finding that “women in general are working because of dire necessity, and in most cases the combined income of the family is not more than adequate to meet the family's cost of living. In these cases it is not optional with the woman to decline low-paid employment. Every dollar added to the family income is needed to lighten the burden which the rest are carrying.”Footnote ¹⁵⁴ This argument was made more explicitly by the Minnesota Supreme Court in Williams v. Evans (1917), sustaining a similar minimum wage statute for women: “There is a notion, quite general, that women in the trades are underpaid, that they are not paid so well as men are paid for the same service, and that in fact in many cases the pay they receive for working during all the working hours of the day is not enough to meet the cost of reasonable living. Public investigations by publicly appointed commissions have resulted in findings to the above effect.”Footnote ¹⁵⁵

The Oregon law came before the U.S. Supreme Court in Stettler v. O'Hara (1917), where eight Justices divided equally, thereby affirming it and leaving the issue open. Justice Brandeis, recently appointed to the Court, would have supplied the fifth supporting vote, but recused himself because he had earlier participated in the litigation as counsel for the state.Footnote ¹⁵⁶ Several state courts followed the Oregon court's lead in rejecting due process attacks on laws establishing minimum wages for women.Footnote ¹⁵⁷ These progressive legal victories were interrupted in 1923, when the Supreme Court, in Adkins v. Children's Hospital, struck the District of Columbia's minimum wage law.

The District's statute, like Oregon's, created a minimum wage board, authorizing it to investigate women's pay and prescribe minimum standards “to supply the necessary cost of living … to maintain them in good health and to protect their morals.”Footnote ¹⁵⁸ Frankfurter's brief defended the act as a legitimate exercise of Congress's power to safeguard public welfare in the District.Footnote ¹⁵⁹ He argued that labor legislation was consistent with freedom of contract. Substantive due process was the chief “obstruction” to the act. “And the only point for consideration is whether the deprivation of ‘liberty’ or ‘property’ which is involved is ‘without due process of law’.” Due process bars exploitation: it embodies “a standard of fair dealing to be applied to the myriad variety of facts that are involved in modern legislation…. In the application of the varying facts to the test of fair dealing the ultimate question in this Court is, does legislation, or its actual operation, ‘shock the sense of fairness the Fourteenth Amendment was intended to satisfy in respect to state legislation’?” Government intervention was neither wanton nor arbitrary when it served a public end or protected vulnerable classes from harm. This was the logic of laws regulating the employment contract, both the time and manner statutes sustained by the high court, and the minimum wage laws upheld by several state courts. Women were at an economic disadvantage in the labor market: minimum wage statutes “rest upon a realization of the fact that the mass of women workers cannot secure terms of employment needful from the point of view of public welfare without the weight of legislation being thrown into the scales.” Under these circumstances, Frankfurter suggested, inequality impaired contractual liberty. “Congress legislated in the light of actual industrial conditions which denied the abstract equality of bargaining power among women. Congress found that women, in substantial numbers, were under a handicap because they were women. Therefore by legislation it sought to fill the gaps caused by the ignorance or helplessness of women workers, and the ignorance or avarice of some employers.”

The measure of women's exploitation was the difference between what a public standard of well-being required—a wage sufficient for a decent livelihood—and their current wages set in the competitive market. Congress “found that alarming public evils had resulted … from the widespread existence of a deficit between the essential needs for decent life and the actual earnings of large numbers of women workers of the District.” The act “involved a prohibition of the use of women's labor for less than its cost.” Unscrupulous employers were thus prevented from externalizing the harms caused by inadequate living standards, taking unfair advantage of the public: “A contract for labor below its cost must inevitably rely upon a subsidy from outside or result in human deterioration. To the extent of the subsidy or the deterioration the public is necessarily concerned. The employer has no constitutional right to such an indirect subsidy or to cause such deterioration.”

Justice Sutherland, writing for the majority in Adkins, rejected Frankfurter's argument, invalidating the statute as an unconstitutional interference with freedom of contract. Recent appointments had sharpened positions on the Court.Footnote ¹⁶⁰ Scholars suggest that the Lochner era entered its most conservative phase beginning in the 1920s.Footnote ¹⁶¹ The Court's conservatism should not be exaggerated.Footnote ¹⁶² Sutherland affirmed decisions that sustained time and manner of payment and maximum hours legislation. He drew the line at laws regulating wage rates. Acts prohibiting scrip and establishing maximum hours “deal with incidents of … employment that have no necessary effect upon the heart of the contract.”Footnote ¹⁶³ The burden of Sutherland's opinion, and the core of his disagreement with Frankfurter with Chief Justice Taft's dissent, is his understanding of the market's fairness. For Sutherland, buyers and sellers owe one another the competitive price for goods and services, which is what justice requires. When two parties voluntarily conclude a contract, the presumption is that they both benefitted from it. The District's statute, however, “forbids two parties having lawful capacity—under penalties as to the employer—to freely contract with one another in respect of the price for which one shall render service to the other in a purely private employment where both are willing, perhaps anxious, to agree, even though the consequence may be to oblige one to surrender a desirable engagement and the other to dispense with the services of a desirable employee.”Footnote ¹⁶⁴ Markets are flexible, adjusting wages to the conditions of the business and the value of the worker's labor. The minimum wage law provides a one-size-fits-all measure that wrongs everyone by fixing a price having no relation to the particular business, the value of a worker's service, or her own material needs.Footnote ¹⁶⁵ Moreover, the District's statute amounts to unjust favoritism: “the law takes account of the necessities of only one party to the contract…. Within the limits of the minimum sum, [the employer] is precluded … from adjusting compensation to the differing merits of his employees. It compels him to pay at least the sum fixed … because the employee needs it, but requires no service of equivalent value from the employee.” By ignoring a business owner's “ability … to sustain the burden” of the larger wage bill, the law has the perverse consequence of “generously leaving him … the privilege of abandoning his business as an alternative for going on at a loss.”Footnote ¹⁶⁶

Sutherland is not unsympathetic to the plight of the poor. But he contends that the injustice of poverty lies in the background circumstances of the economy, for which the employer is not responsible. He is doing business in the world as he finds it, paying the market rate for wages, which is fair and calibrated to the value of the service. There is no reason to condemn much less prevent such transactions. “Certainly the employer by paying a fair equivalent for the service rendered, though not sufficient to support the employee, has neither caused nor contributed to her poverty. On the contrary, to the extent of what he pays he has relieved it.”Footnote ¹⁶⁷ Sutherland distinguished the minimum wage from previous labor legislation. The “tendency and purpose” of time and manner of payment statutes, upheld in McLean and Knoxville, “was to prevent unfair and perhaps fraudulent methods in the payment of wages.”Footnote ¹⁶⁸ Their specific wrong was that the employer used means of determining miners' pay or a monopoly over the stores in which workers were required to redeem their scrip to drive the value of wages below their market price.Footnote ¹⁶⁹ Similarly, the direct causal relation between the physical demands of the job and workers' health justified maximum hours laws for women and for men in particularly hazardous employments.Footnote ¹⁷⁰

This causal relation is missing in the instant case. Sutherland suggests that the employer takes advantage of the unfairness of poverty, but he does not take unfair advantage of it.Footnote ¹⁷¹ “The feature of this statute which … more than any other puts upon it the stamp of invalidity is that it exacts from the employer an arbitrary payment for a purpose and upon a basis having no causal connection with his business, or the contract or the work the employee engages to do.”Footnote ¹⁷² To hold the employer responsible is unjust; he is not wrongly gaining at the worker's expense, paying her less than she is due, which is her market value. The obligation to redress poverty is collective, not individual: “To the extent that the sum fixed exceeds the fair value of the services rendered, it amounts to a compulsory exaction from the employer for the support of a partially indigent person, for whose condition there rests upon him no peculiar responsibility, and therefore … arbitrarily shifts to his shoulders a burden which, if it belongs to anybody, belongs to society as a whole.”Footnote ¹⁷³

Chief Justice Taft's dissent retained the conceptual framework of substantive due process jurisprudence. He was unwilling to join Justice Holmes's separate dissent removing constitutional safeguards for contractual prerogatives.Footnote ¹⁷⁴ In Taft's view, the majority's opinion “appears to … exaggerate the importance of the wage term of the contract of employment as more inviolate than its other terms.”Footnote ¹⁷⁵ Taft was prepared to assimilate workers' pay within the traditional police power, subject to the government's reasonable authority to protect their health, safety, and morals. He characterized the minimum wage law as a natural extension of Court decisions sustaining statutes regulating the employment contract, citing the major landmarks upholding limits on hours (Holden, Muller and Bunting, overruling Lochner “sub silentio”), and regulation of time and manner of payment (McLean and Knoxville).Footnote ¹⁷⁶ Congress established a public measure of the minimum pay workers were due, exceeding in some instances labor's market price, based on its understanding of what a decent living standard required.

Taft maintained that the Constitution protected contractual freedom; it did not sanction hard bargains. He moved to distinguish the market in commodities from the market in labor on the ground that the latter put workers at a decided disadvantage in negotiating with their employers. “Legislatures in limiting freedom of contract between employee and employer by a minimum wage proceed on the assumption that employees, in the class receiving least pay, are not upon a full level of equality of choice with their employer and in their necessitous circumstances are prone to accept pretty much anything that is offered. They are peculiarly subject to the overreaching of the harsh and greedy employer. The evils of the sweating system and of the long hours and low wages which are characteristic of it are well known.”Footnote ¹⁷⁷ Employment of women at “a sweating wage” had a “great and direct … tendency” to injure their “health and morals.”Footnote ¹⁷⁸ The minimum wage law did not unjustly transfer a portion of the employers' wealth to workers. Rather, “sweating employers are prevented from paying unduly low wages by positive law … abating that part of their profits, which were wrung from the necessities of their employees.”Footnote ¹⁷⁹ Whether the minimum wage was a reasonable remedy for poverty, or would make matters worse by driving marginal employers out of business, was properly a question for Congress and not the Court.Footnote ¹⁸⁰

Changes in the Court's personnel opened the way for overturning Adkins. President Hoover's appointments, Chief Justice Hughes and Justice Roberts, provided the deciding votes in West Coast Hotel v. Parrish, upholding a Washington State minimum wage law virtually identical to the act struck in Adkins. But changes in personnel did not mean a change in the Court's jurisprudence. Rather, it signaled the final demise of free labor ideology: the claim that markets, operating efficiently, generated wage levels consistent with fairness. Cushman has persuasively shown that the Court's evolving treatment of the legal category of “businesses affected with a public interest” played the critical role in paving the way for its decision in Parrish. Footnote ¹⁸¹ The Court had distinguished businesses implicating the public's concern, allowing legislatures broader latitude in regulating them, from purely private businesses, subjecting their regulation to significantly stricter scrutiny. “If, however,” argues Cushman, “the category of ‘business affected with a public interest’ were removed as an initial obstacle to wage legislation—if, in other words, all businesses were affected with a public interest, these broad public interest rationales might be invoked to support the constitutionality of minimum wage legislation.”Footnote ¹⁸² The critical case in this vein was Nebbia v. New York (1934), in which Justice Roberts, writing for the majority, eliminated the distinction between public and private businesses, opening the market more widely to legislative intervention.Footnote ¹⁸³

The cases addressing businesses affected with a public interest, however, were also noteworthy because they made significant inroads into free labor assumptions. Justice Taft, writing for a unanimous Court in Wolff Packing (1923), distinguished three different categories of public enterprises:

The third category, Taft pointed out, normally involved practical monopolies: “the thing which gave the public interest was the indispensable nature of the service and the exorbitant charges and arbitrary control to which the public might be subjected without regulation.”Footnote ¹⁸⁵ Monopolies are instances of market failure: they are able to charge more than the equilibrium price for the good or service they control. In Wolff Packing, the Court located meatpacking outside the category of a business affected with the public interest because, wrote Taft, prices “in the preparation of foods … are … fixed by competition throughout the country at large.”Footnote ¹⁸⁶

Taft's narrow definition of a business affected with the public interest protected wages from regulation except in a small category of enterprises.Footnote ¹⁸⁷ Eliminating the inviolable character of the wage term required a more thorough confrontation with the ideology of free labor. Employers in competitive labor markets pay the full market value for labor, which may nevertheless be inadequate to meet publically established standards of well-being. The premise underlying minimum wage laws is that dynamic capitalist economies leave too many individuals and families in desperate circumstances that they did not create and cannot solve on their own. Justice Stone, appointed to the bench in 1925, took the lead in expanding the definition of market failure beyond virtual control of an essential service to encompass more broadly any systemic disharmonies in the distribution of goods and services. Dissenting in Ribnik v. McBride (1928), Stone confronted the idea that monopoly exhausted the meaning of market failure. The Court struck a New Jersey law regulating the fees charged by employment agencies because their business was not affected with a public interest. Stone countered by redefining the category to include “any combination of circumstances [that] seriously curtails the regulative force of competition, so that buyers or sellers are placed at such a disadvantage in the bargaining struggle that a legislature might reasonably anticipate serious consequences to the community as a whole.”Footnote ¹⁸⁸ Stone's dissent, joined by Brandeis and Holmes, concluded that “the economic disadvantage of a class and the attempt to ameliorate its condition may alone be sufficient to give rise to the ‘public interest’ and to justify the regulation of contracts with its members.”Footnote ¹⁸⁹ Employment agencies gain unfairly at wage workers' expense even if their fee structure is driven by economic competition, because they “deal with a necessitous class, the members of which are often dependent on them for opportunity to earn a livelihood, are not free to move from place to place, and are often under exceptional economic compulsion to accept such terms as the agencies offer.”Footnote ¹⁹⁰

The Court, in Nebbia, took the critical step of eliminating the distinction between public and private firms. But this case also revealed that a majority of the justices were now persuaded that malfunctions in private ordering gave legislatures far broader latitude to intervene to achieve traditional police power ends. Roberts argued that “under our form of government the use of property and the making of contracts are normally matters of private and not of public concern.”Footnote ¹⁹¹ Legislatures were nevertheless authorized to act whenever “the normal law of supply and demand was insufficient to correct maladjustments detrimental to the community.”Footnote ¹⁹² The specific breakdown of the dairy market was not primarily the exploitation of a vulnerable class, but a collective action problem caused by the unwillingness of retailers to shoulder their share of the burden of carrying surplus milk. The shopkeepers were free riders: they inflicted losses by failing to contribute to a service others provide and they enjoy.Footnote ¹⁹³ “Milk is perishable and cannot be stored,” explained Roberts. “The fact that the larger distributors find it necessary to carry large quantities of surplus milk, while the smaller distributors do not, leads to price-cutting and other forms of destructive competition. Smaller distributors, who take no responsibility for the surplus,” force milk prices below the costs of production of larger distributors and smaller farmers, who are indeed least able to protect themselves.Footnote ¹⁹⁴ “A satisfactory stabilization of prices for fluid milk,” he argued, “requires that the burden of surplus milk be shared equally by all producers and all distributors in the milk-shed.”Footnote ¹⁹⁵ Due process, concluded Roberts, does not prevent legislatures from intervening in the private economy whenever “the conditions or practices in an industry make unrestricted competition an inadequate safeguard of the consumer's interests, produce waste harmful to the public, threaten ultimately to cut off the supply of a commodity needed by the public, or portend the destruction of the industry itself.”Footnote ¹⁹⁶

The understanding by a majority of the justices that market failure extended beyond monopoly control of a vital service paved the way for Stone to confront the authority of Adkins directly. His dissent in Morehead v. Tiplado (1936) elaborated his view that the wage term could properly be regulated under the police power whenever “circumstances, beyond the control of the parties, had so seriously curtailed the regulative power of competition as to place buyers or sellers at a disadvantage in the bargaining struggle.”Footnote ¹⁹⁷ “There is grim irony,” argued Stone, “in speaking of the freedom of contract of those who, because of their economic necessities, give their services for less than is needful to keep body and soul together. But if this is freedom of contract no one has ever denied that it is freedom which may be restrained, notwithstanding the Fourteenth Amendment, by a statute passed in the public interest.”Footnote ¹⁹⁸ The Court overturned Adkins a year later.

The chief justice wrote the majority opinion in Parrish, and it remained firmly committed to the principles of police power jurisprudence. Hughes contended that Parrish was consistent with the history of rulings upholding employment legislation, culminating in the Adkins dissent.Footnote ¹⁹⁹ He was not being disingenuous. Alternative understandings of the market's fairness, not inimical conceptions of due process, continued to divide the justices. Sutherland, now writing in dissent, did not disagree that “there was no such thing as absolute freedom of contract, but that it was subject to a great variety of restraints.”Footnote ²⁰⁰ He concurred, furthermore, that “this court from time to time had upheld statutory interference with the liberty of contract,” including “statutes prescribing the character, methods and time for payment of wages and … statutes fixing the hours of labor” in private industries.Footnote ²⁰¹ Sutherland's dissent reiterated the opinion of the Adkins majority. The market determined “the fair value of the services rendered.” The wage fixing law was therefore a “compulsory exaction” from A's (employers) private property, giving it to B (wage-working women), without compensation and for purely private ends: to redress conditions of poverty employers neither contributed to nor caused.Footnote ²⁰²

Hughes pointed to an “array of precedents and … principles” whereby the judiciary had established the two preconditions authorizing regulation of the employment contract.Footnote ²⁰³ First, state and federal courts upheld legislation limiting contractual prerogatives to protect classes whose economic disadvantage rendered them defenseless in the marketplace. “The point that has been strongly stressed that adult employees should be deemed competent to make their own contracts was decisively met nearly forty years ago in Holden v. Hardy … where we pointed out the inequality in the footing of the parties.”Footnote ²⁰⁴ Overruling Adkins did not require a revolution in substantive due process. The same principle had governed time and manner of payment and maximum hours legislation. Second, Hughes rejected the measure of fairness adopted by the Adkins majority: the just price for labor was established not by market competition, but rather by a public conception of an adequate livelihood. “In dealing with the relation of employer and employed, the legislature has necessarily a wide field of discretion in order that there may be suitable protection of health and safety, and that peace and good order may be promoted through regulations designed to insure wholesome conditions of work and freedom from oppression.”Footnote ²⁰⁵ Judged from the standpoint of a decent living standard, employers paying only the market price for labor are exploiters. Accordingly, “the legislature … was clearly entitled to consider the situation of women in employment, the fact that they are in the class receiving the least pay, that their bargaining power is relatively weak, and that they are the ready victims of those who would take advantage of their necessitous circumstances. The legislature was entitled to adopt measures to reduce the evils of the ‘sweating system,’ the exploiting of workers at wages so low as to be insufficient to meet the bare cost of living, thus making their very helplessness the occasion of a most injurious competition.”Footnote ²⁰⁶

Hughes's claim that the state legislature had reasonably established a decent livelihood as a public standard of the minimum pay workers were due was decisive in countering Sutherland's objection that the statute unjustly held employers responsible for circumstances they had not created. Hughes adopted the argument, made by the Oregon court in Stettler and by Frankfurter's brief in Adkins, that “unscrupulous and overreaching employers” externalized the deficit between the market price of labor and “a minimum wage fairly fixed in order to meet the very necessities of existence.” Employers who pressed their advantage gained unfairly at the expense of employers paying a living wage, of necessitous workers, and of the public, whose taxes provided succor for the poor.