By ruling that minimum wage legislation was unconstitutional, the U.S. Supreme Court declared its support of laissez-faire policy and upheld the doctrine of freedom of contract.
On April 9, 1923, the U.S. Supreme Court ruled five to three in the case of Adkins v. Children’s Hospital that minimum wage laws violated the freedom of contract between employers and workers as well as the due process clause of the Fifth Amendment to the U.S. Constitution. The Court’s decision, surprising to many, was consistent with established laissez-faire
Massachusetts had adopted a minimum wage law in 1912, which was quickly followed by similar laws in several other states. The Adkins case stemmed from a 1918 federal law that created the Minimum Wage Board
In 1920, the Minimum Wage Board determined that the cost of the “necessaries of life” had risen to a minimum of $16.50 a week and that many of the women working in the district’s hotels, restaurants, and hospitals were being paid less, often much less, than the estimated living wage. The Children’s Hospital, which employed a large proportion of women, refused to pay the wage set by the board. The hospital, along with others, brought suit to challenge the authority of the board to set wages.
The case was argued before the Court by Harvard Law School professor Felix Frankfurter in collaboration with the National Consumers League (Frankfurter would later take a seat on the Court as an associate justice in 1939). In his argument, Frankfurter stressed that the law had not harmed local industry or reduced the level of employment and in fact had improved the welfare of the district’s women and children. He and his supporters submitted a large volume of documentary evidence in support of their arguments, but they ultimately failed to convince the Court that minimum wage legislation was valid. The opponents of the legislation held to a basic conservative argument of the need to protect private property and stressed the importance of freedom of contract.
Writing for the majority, Associate Justice George Sutherland held that the 1918 law not only disrupted the right of a private contract but also violated the right of property protected by the due process clause of the Fifth Amendment. He asserted that the right of private contracts could be restrained only in exceptional cases and that in the view of the Court, at least for the time being, labor relations were largely beyond the police powers and regulatory powers of the states, Congress, and the courts.
Because in earlier rulings the Court had given mixed signals about when and where it was appropriate to set maximum work hours, the opinion in Adkins drew a sharp distinction between minimum wage laws and maximum hour laws. In Adkins, the Court held that contractual wages are appropriately set by the value of labor in the free market and that any attempt to fix wages places a burden on private employers concerning what in fact is a social issue. In the 1908 case of Muller v. Oregon,
Chief Justice William Howard Taft, normally fairly conservative, issued a rare written dissent to the Court’s decision in Adkins. Taft contended that laws could, in certain situations, be enacted to limit freedom of contract. It was, for example, within the police powers of the states, or Congress, to set maximum hours as well as to establish minimum wages. His dissent questioned the majority’s distinction between wages and hours as a test of the liberty of contract,
Also dissenting in the Adkins decision was Associate Justice Oliver Wendell Holmes, Jr., who accepted the notion that Congress had the power to establish minimum wage rates for women in the District of Columbia but then questioned the constitutionality of liberty of contract. As Holmes noted, laws exist to forbid people from doing things they want to do. He questioned why labor contracts should be singled out for exemption, and he listed several cases in which liberty of contract had been limited by statute with validation by the Court. Holmes’s attempt to get the Court to abandon its doctrine of liberty of contract would not be accepted by a majority of the Court for some years, but in his dissent he expressed the differences in approach among the justices concerning economic issues and labor relations. In Holmes’s view, an appointed board could be held to reasonably determine a standard for a living minimum wage. Such a standard need not come from the operations of a free market.
The Court’s decision in Adkins demonstrates the impact that laissez-faire policies had on judicial temperaments, the economy, and the citizens of the United States in the 1920’s and 1930’s. The decision reflected popular, although not universal, attitudes toward labor relations in the late nineteenth and early twentieth centuries. A direct impact of the Adkins decision was its use throughout the 1920’s and early 1930’s to overturn several states’ minimum wage laws and other early New Deal legislation. The times and opinions were changing, however, and the Court’s earnest endorsement of freedom of contract in Adkins would be overturned in 1937.
Initial reactions to the Court’s ruling in Adkins were mixed. Those who favored a free and open market hailed it as an important and necessary endorsement of private property and the protection of freedom of contract under the due process clause. Those who favored direct regulation of economic and social conditions attacked it as a shameful example of inhumanity. The New Republic, for example, ran an editorial stating that the Court had in effect endorsed the legal right to starve.
Regardless of whether one agrees with the Court’s ruling in Adkins, the case makes it clear that wages and prices are central to the operation of an economy. For that reason, various groups followed the case very closely. Groups opposed to minimum wage legislation had long stressed that such laws were potentially harmful not only to industry but also to labor itself, as unemployment would rise in response to higher legislated wages. Rising labor costs would be imposed on business and passed along to consumers, and labor groups themselves would have diminished ability to bargain. Those in favor of minimum wage legislation attempted to refute these claims. They argued that such laws protect the weak, raise standards of living, improve the general health and welfare, improve workers’ bargaining power, and provide benefits to employers by increasing morale and worker efficiency.
Others debated the significance of an absolute power to fix wages. Did, for example, the right to set a minimum wage then also imply the ability to set a maximum wage? Was it feasible to determine and then fix a workable wage or a living wage? How would work performed at home be legislated? How would the enforcement of a minimum wage be handled?
Because of the importance it placed on freedom of contract, the Court’s decision in Adkins was a major setback to the progressive labor movement. During the early decades of the twentieth century, progressive groups sought legislative remedies for many of the inequities and other problems they believed existed in labor relations. The gains made by these groups were, at least for the time being, stalled by this ruling. The Court had ruled in essence that the free marketplace and not mandated regulation would guide the decisions of society. Because minimum wage legislation was seen as a means to regulate as well as to prohibit certain labor practices, progressive groups had hoped that the Court would rule to uphold the minimum wage as a means of protecting the health and welfare of women and children. Conservatives saw minimum wage legislation simply as an unconstitutional intrusion into private affairs between employers and employees.
The Court’s ruling in this case, among others, provides a good deal of insight into the role of women and children in the American economy during the early years of the twentieth century. Minimum wage legislation often specified that the health and welfare of women and children were to be protected by a minimum living wage. This emphasis can be explained by the fact that gender- and age-specific legislation was more likely to be accepted, or, alternatively, that women and children were employed in less productive industries, had lower wages, and had less bargaining power in the market, thus legislation on their behalf was necessary.
By ruling minimum wage legislation unconstitutional, the Court demonstrated a belief in the merits of a marketplace free from government intervention. The decision in Adkins affirmed the Court’s belief that the freedom of contract doctrine remained, at least for the time, paramount to the operation of the free market. Moreover, if the freedom of contract doctrine were broadly applied, the nation, the economy, and labor relations would remain dominated by laissez-faire policies. The significance of this was made obvious in the West Coast Hotel v. Parrish decision, which upheld a Washington State minimum wage law and overturned Adkins. In that decision, Chief Justice Charles Evans Hughes dismissed the primacy of freedom of contract and instead argued that due process was of paramount importance to the interests of the community.
With the repudiation of the Adkins decision and abandonment of a laissez-faire approach to social and economic problems, the roles of federal, state, and local governments clearly changed. The relative impact of the legislation that followed in the wake of the Court’s later ruling remains a matter of considerable debate in the early twenty-first century.
-
Brandeis, Louis D., and Josephine Goldmark. Women in Industry. Reprint. New York: Arno Press, 1969. A summary of the Supreme Court’s decision upholding the constitutionality of the ten-hour workday. Helps to place labor issues and the debate on gender and the workplace in the context of the early twentieth century. -
Hall, Kermit L., ed. The Oxford Companion to the Supreme Court of the United States. New York: Oxford University Press, 1992. A useful guide to the history of the Court, its major decisions, every justice who has served on the Court, and doctrines that have guided and influenced the Court since its founding in 1789. Concise yet detailed entries help to make landmark cases and legal terms accessible to a variety of users. -
_______. The Oxford Guide to United States Supreme Court Decisions. New York: Oxford University Press, 1999. Collection of essays on more than four hundred significant Court decisions, with supporting glossary and other aids. -
Levin-Waldman, Oren M. The Case of the Minimum Wage: Competing Policy Models. Albany: State University of New York Press, 2001. Discusses the evolution of minimum wage policy and law in the United States, focusing on how the nature of arguments concerning a minimum wage has changed over time as the strength of organized labor has declined. Includes tables and figures, bibliography, and index. -
Nichols, Egbert Ray, and Joseph H. Baccus, eds. Selected Articles on Minimum Wages and Maximum Hours. New York: H. W. Wilson, 1936. Outlines and defines the debate on whether Congress has the power to fix minimum wages and maximum hours for workers. Reprints of editorials and other commentary offer a variety of legal, political, and economic interpretations. -
Nordlund, Willis J. The Quest for a Living Wage: The History of the Federal Minimum Wage Program. Westport, Conn.: Greenwood Press, 1997. Traces the process through which the U.S. government has attempted to develop a fair method of ensuring that workers receive a living wage. Discusses the theories behind minimum wage programs and gives an overview of the first fifty years of the operation of the Fair Labor Standards Act. Includes tables and figures, bibliography, and index. -
Stigler, George J. “The Economics of Minimum Wage Legislation.” American Economic Review 36 (June, 1946): 358-365. Concise and nontechnical discussion of the relative efficiencies of minimum wage legislation. Provides and uses evidence on employment and wages in Minnesota in the late 1930’s. -
Welch, Finis. Minimum Wages: Issues and Evidence. Washington, D.C.: American Enterprise Institute for Public Policy Research, 1978. A reexamination of the issues forty years after the enactment of the federal minimum wage law.
U.S. Supreme Court Strikes Down Maximum Hours Law
Massachusetts Adopts the First Minimum Wage Law in the United States
Supreme Court-Packing Fight
Fair Labor Standards Act