While it is a fundamental principle that personal liberty
includes the power to make contracts, the liberty of making
contracts is subject to conditions in the interest of the public
welfare, and whether that principle or those conditions shall
prevail cannot be defined by any precise or universal formula. Each
case must be determined by itself.
Each act of legislation has the presumption that it has been
enacted in the public interest, and the burden is on him who
attacks it.
The burden of the party attacking a police regulation as
unconstitutional under the due process clause is not sustained by
the mere principle of liberty of contract; it can only be sustained
by showing
Page 233 U. S. 686
that the statute conflicts with some constitutional restraint or
does not subserve the public welfare.
The legislature is the judge in the first instance of whether a
police regulation is necessary; judicial review is limited, and
even an earnest conflict of public opinion does not bring the
question of necessity within the range of judicial cognizance.
Cost and inconvenience to the party affected must be very great
in order to justify the courts in declaring void the action of the
state in exercising its reserved power over charters or its police
power.
The effect of the reservation of the power to amend and alter
charters of corporations is to make a corporation, from the moment
of its creation, subject to the legislative power in those respects
as a corporate body, and questions of expediency are for the
legislature, and not for the courts, so long as the amendments or
alterations do not defeat or substantially impair the object of the
grant or rights vested thereunder.
Alteration of the manner or time of payment of employees does
not defeat or substantially impair the object of the charter
granted to a railroad corporation, and a state statute, otherwise
valid, regulating such time and manner is not unconstitutional as
impairing such charter.
Whether a statute imposes an unjust burden depends upon its
validity, and whether the public welfare is subserved thereby is,
in the first instance, to be determined by the legislature, whose
action the courts will not review unless unmistakably and palpably
in excess of legislative power.
McLean v. Arkansas,
211 U. S. 539.
In determining time and manner of payment of wages of employees
the legislature can consider the fact that to those who work for a
living, there is an advantage in the ready purchasing power of cash
over deferred payments involving the use of credit.
Where Congress has not acted on the subject, and there is no
prohibition on interstate commerce, a state may regulate matters
within its police power although incidentally affecting interstate
commerce.
Congress has not, as yet, acted in regard to the time and manner
of payment of wages of employees of interstate carriers.
A state statute regulating periods of payment of wages of
railroad employees which is limited to the employees wholly within
that state or whose duties take them from that state to other
states and which is not applicable to those employed in other
states is not a direct burden on interstate commerce.
An employer cannot be heard to attack a state statute relating
to payment of wages on the ground that it denies to some of his
employees
Page 233 U. S. 687
the equal protection of the law because they are not within its
protection.
The provision of the Labor Law of New York of 1907 requiring
semi-monthly payments in cash of wages of employees of certain
specified industries, including railroads, is not unconstitutional
as denying due process of law, or, as to a railroad company
incorporated in that state, as impairing the obligation of the
charter contract, nor is it, as it has been construed by the
highest court of that state, a direct burden on interstate
commerce, but, as so construed, it is a valid exercise of the
police power of the state.
Judgment based on 199 N.Y. 108, 525, affirmed.
Suit brought by plaintiff in error, the Erie Railroad Company
(as it was plaintiff below, we shall so designate it) to restrain
the defendant in error (herein called defendant) from instituting
actions to recover penalties for noncompliance with the provisions
of the Labor Law of the State of New York which required plaintiff
to pay its employees semi-monthly and in cash.
The object of the suit is to test the constitutionality of the
law.
The bill is very elaborate, and alleges with much detail the
following facts: plaintiff is a New York corporation, and defendant
is Commissioner of Labor of the state. Plaintiff maintains a
railroad in New York which extends into other states, and operates
car floats and other floating equipment, navigating the navigable
waters of the United States. These and other equipment are used in
the business of plaintiff as a common carrier of persons and
property under and in compliance with tariffs duly promulgated and
filed under the laws of the state and of the United States, and
plaintiff is also a carrier of the United States mails. As a rule,
the trains of plaintiff run over an operating division without
change of employees. Some of the divisions are interstate and some
wholly within the State of New York.
Page 233 U. S. 688
Plaintiff, in carrying out its functions, has in its service
upon that portion of its road lying east of Meadville,
Pennsylvania, upwards of 15,000 men who are employed either wholly
within or partially within the State of New York, and nearly all of
them are employed in the movement of interstate commerce. The great
majority of these employees render service in more than one state,
and many of them who reside in Pennsylvania or New Jersey render a
part of their service in New York, and many who reside in the
latter state render service in the other two states. The contracts
of employment of many of them were made, and in the future must be
made, in states other than New York, in which states they must
reside.
By the laws of New York, plaintiff was vested with its powers as
a railroad and to contract and be contracted with for the
employment of persons to conduct its operations and enterprises at
and for such wages and upon such terms of payment as should or
might be mutually agreed on, and thereunder it has been its custom
to pay its employees monthly, and thus pay them prior to or on the
20th day of each month the wages earned during the preceding
month.
The great majority of plaintiff's employees were in its service
prior to January 1, 1908, and all accepted such service with full
knowledge of its general and uniform custom so to pay its employees
monthly.
Prior to January 1, 1908, there existed and has since existed a
contract between plaintiff and its employees that the latter should
be paid monthly as stated, and so to pay them, as distinguished
from payment twice a month, is not inconsistent with the public
interest, or hurtful to the public order, or detrimental to the
common good.
Section 4 of Article I of the Labor Law of the state makes it
malfeasance in office for any officer, agent, or employee of the
state to violate or evade his duty under
Page 233 U. S. 689
the law, or knowingly permit the violation or evasion of the
act, and he is subject to removal from office.
Section 9
* provides that
every railroad company and
Page 233 U. S. 690
certain other companies shall pay their employees in cash, and
no such company shall pay its employees in script, commonly known
as store money orders.
Section 10 requires the payment of employees' wages
semi-monthly.
Section 11 imposes a penalty of $50 for each failure to so pay,
to be recovered by the factory inspector in his name of office in a
civil action, and limits the defenses to the action to a valid
assignment of such wages, a valid set-off against the same, or the
absence of such employee from his regular place of labor at the
time of the payment, or an actual tender at the time of the
payment, or a breach of contract by such employee, or a denial of
the employment.
The Commissioner of Labor is required to enforce the provisions
of the law, and notified plaintiff of his intention to do so, and
to sue for the penalties imposed by the act. He expressed his
opinion of the act to be that each failure to pay the wages of each
employee constituted a separate offense, and that the aggregate of
the penalties would be $250,000. Plaintiff believes, unless that
officer is restrained, that he will exercise his authority under
the act.
The employees of plaintiff are distributed over more than 1,819
miles, and the making of the payment of their wages in money
semi-monthly instead of monthly will impose upon and subject
plaintiff to an increased cost and expense of several thousand
dollars each month.
The difficulty of semi-monthly payments is described, and it is
alleged that the drastic and enormous penalties are, by reason of
their necessarily aggregate character and effect, so excessive as
to evidence legislative intention to unduly limit or prevent
judicial inquiry, and practically constrain plaintiff to submit to
the statute, rather than, by contesting its validity, to take the
chances of the penalties it imposes.
That the statute, by its terms, prevents plaintiff from
Page 233 U. S. 691
setting up in defense the contracts existing between it and its
employees for the payment of their wages once a month, and that the
statute violates, when applied to plaintiff, various provisions of
the constitution of the state and of the United States, and thereby
is repugnant to Article III of the Constitution of the United
States and Article VI of the Constitution of the State of New York,
in that it is an invasion by the legislative of the judicial power,
and it is also repugnant to § 1 of Article XIV of the
Constitution of the United States, and § 6, Article I, of the
Constitution of the State of New York, in that it deprives
plaintiff of property without due process of law, and violates
§ 10, Article I, of the Constitution of the United States, in
that it impairs the obligation of contracts. The act in its other
provisions deprives plaintiff of property without due process of
law and of the equal protection of the laws. It also interferes
with and impairs plaintiff's performance and discharge of its
duties as a common carrier in interstate commerce, is not a valid
exercise of the police power, and is illegal and unenforceable and
void under articles of the Constitution of the state and of the
United States, which are enumerated.
By the enforcement of the act, plaintiff will be subjected to
enormous penalties, a multiplicity of suits, and to great and
irreparable damage, and plaintiff has no adequate remedy at
law.
The answer of the defendant admitted the allegations of the
complaint as to the statute, and alleged that he intended to give
such notice to plaintiff as to enforcing such penalties as he was
required by the law to give and enforce. He denied that he had any
knowledge or information sufficient to form a belief regarding the
truth of the other allegations of the complaint.
A stipulation of facts was entered into by the parties upon
which the court entered judgment dismissing the complaint. The
judgment was successively affirmed by
Page 233 U. S. 692
the appellate division of the supreme court and by the Court of
Appeals.
The facts stipulated practically sustain the allegations of the
answer, and detail the manner of the payment by plaintiff of its
employees. The plaintiff also introduced in evidence an exhibit
which classified its employees and showed the number of days' work,
total compensation, and average compensation per day as per
payrolls for the year ending June 30, 1908. Its materiality was
contested.
Page 233 U. S. 697
MR. JUSTICE McKENNA, after stating the case as above, delivered
the opinion of the Court.
The contention of plaintiff is that the Labor Law is repugnant
to the Fourteenth Amendment,
"in that it deprives the company of property, and specifically
deprives the company, and those of its employees to whom it
applies, of liberty without due process of law."
The contention may be limited at the outset to the rights of the
company. It cannot complain for its employees, and before
considering the contention thus limited, it is well to see what
meaning or extent the Court of Appeals gave to the law.
The court decided that the law operates not only to require the
railroads to pay their employees semi-monthly, but prohibits them
from making contracts with their employees which shall vary the
time of payment. If this were not the meaning of the law, the court
said, neither railroads nor their employees would have any ground
of complaint,
"as both master and servant would be left at liberty to make any
contract they pleased in regard to the time when the servant's
wages should be payable and the medium in which they should be
paid."
This liberty not existing, the court stated the contention of
the plaintiff to be that the law deprives it "of the right to make
contracts with its employees on advantageous terms, and that this
was beyond the power of the legislature." The plaintiff also
contended that it was denied the equal protection of the laws.
Page 233 U. S. 698
The opposing contentions were stated to be: (1) the legislation
is a proper exercise of the power reserved by the Constitution of
the state to amend corporate charters; (2) it constitutes a
legitimate exercise of the police power of the state.
The court rejected both contentions of plaintiff, and sustained
the law as an exercise of the power over plaintiff's charter, and,
adverting to the objection that the requirement of semi-monthly
payments was an unconstitutional interference with interstate
commerce, the court said: "It is to be observed that it [the law]
is not in conflict with any legislation by Congress, nor does it
affect interstate commerce directly." And, exhibiting the extent of
the operation of the law, it was further said:
"It relates to the wages of railway servants employed wholly
within the State of New York, as well as to the wages of those
whose duties take them from this state into others. The subject is
one upon which Congress has not undertaken to act."
How far the reserved power of the state over the charters of its
corporations was helped out by its police power the court gave no
indication. Indeed, it may be said that, in its reference to the
reserved power in reviewing the decisions of other states, the sole
ground of its decision was the possession and exercise of such
power by the state. The court said:
"There is an irreconcilable conflict in the decisions in
different jurisdictions as to the constitutional validity of labor
legislation fixing the medium and time of payment of the wages of
those who work for corporations. After the foregoing review of the
leading cases, I find no difficulty in sustaining our New York
statute on the ground which has been stated. It does not confiscate
corporate property directly or indirectly. It does impose a greater
future burden upon the corporations to which it relates, but that,
I think, is within the power of the legislature to the extent to
which it has been exercised in this case. "
Page 233 U. S. 699
The legislation having been passed in the exercise of the
reserved power of the state, is it valid notwithstanding it
prohibits both the plaintiff and its employees from contracting
against its provisions? Plaintiff asserts the negative, and
attempts to sustain the assertion by a very comprehensive argument
in which a number of decisions of this Court and of other courts
are cited and reviewed. They illustrate by various instances the
fundamental and indisputable principle that personal liberty
includes the power to make contracts. But liberty of making
contracts is subject to conditions in the interest of the public
welfare, and which shall prevail -- principle or condition --
cannot be defined by any precise and universal formula. Each
instance of asserted conflict must be determined by itself, and it
has been said many times that each act of legislation has the
support of the presumption that it is an exercise in the interest
of the public. The burden is on him who attacks the legislation,
and it is not sustained by declaring a liberty of contract. It can
only be sustained by demonstrating that it conflicts with some
constitutional restraint, or that the public welfare is not
subserved by the legislation. The legislature is, in the first
instance, the judge of what is necessary for the public welfare,
and a judicial review of its judgment is limited. The earnest
conflict of serious opinion does not suffice to bring it within the
range of judicial cognizance.
C., B. & Q. R. Co. v.
McGuire, 219 U. S. 549,
219 U. S. 562;
German Alliance Ins. Co. v. Kansas, ante, page
233 U. S. 389.
In considering the competency of the legislative judgment and
the power the courts have to review it, we may inquire, what is
here complained of? What does the Labor Law of New York do that
seriously affects the liberty of plaintiff? It requires cash
payments. That requirement is not now resisted. It requires
semi-monthly payments. Plaintiff now pays monthly. The extent of
its grievance, therefore, is two payments a month instead of one,
with
Page 233 U. S. 700
the consequence of expense and inconvenience. It is hardly
necessary to say that cost and inconvenience (different words,
probably, for the same thing) would have to be very great before
they could become an element in the consideration of the right of a
state to exert its reserved power or its police power.
New York
& N.E. R. Co. v. Bristol, 151 U.
S. 556;
United States v. Un. Pac. Ry. Co.,
160 U. S. 1;
St.
Louis, I. M. &c. Ry. Co. v. Paul, 173 U.
S. 404;
Wisconsin &c. R. Co. v. Jacobson,
179 U. S. 287.
See also Balt. & Ohio R. Co. v. Interstate Commerce
Commission, 221 U. S. 612.
Putting cost and inconvenience to one side, there would would
remain only an abstract right. Taking them into consideration, they
constitute the detriment to which plaintiff is subjected by not
being able to make the forbidden contracts. It may be admitted an
advantage is taken away from plaintiff, or, to put it another way,
a burden is imposed upon it. Is it within the power of the state to
impose the burden by virtue of its reserved control over plaintiff?
The question must be answered as if the requirement of the law was
part of the charter of plaintiff, and in such case it would seem
certainly that a liberty of contract tract could not be asserted
against it, for it would be a part of the contract accepted and
binding on plaintiff -- a liberty exercised precluding a liberty to
be exercised -- and it would seem necessarily to be the very
essence of the right of amendment reserved that what could have
been put in the charter originally, whatever its consequence, can
be added to the charter, whatever the consequence of the addition.
Of course, we mean what was and is competent for the state to
impose, and we are brought to the narrow question whether a
regulation of the time and manner of payment by a railroad of its
employees is within the competency of the state to require. A
negative answer is contended for, the argument urged to support the
contention being that a contract right of dealing with its
employees
Page 233 U. S. 701
is conferred by plaintiff's charter, which right the Labor Law
takes away, and plaintiff is deprived of property because of the
expense to which it is subjected, which, it is contended, is not
justified by a corresponding public benefit. It would seem,
therefore, to be the contention of plaintiff that it acquired by
its charter a vested right to deal with its employees according to
its own judgment, and, as alleged in its answer, that it was vested
with its powers as a railroad and to contract and be contracted
with, for the employment of persons to conduct its operations and
enterprises at and for such wages and upon such terms of payment as
might or should be agreed on. In other words, it is the contention
that the rights asserted are of the very essence of its grant,
giving it the rights of a natural person, and investing it with the
same immunity from control, whether exercised under the police
power or the reserved power of amendment. We may, in answering the
contention, put aside the rights of natural persons and the rights
which might exist under a constitution which did not reserve
control in the state. The effect of the control reserved was to
make plaintiff, from the moment of creation, subject to the
legislative power of alteration, and, if deemed expedient, of
absolute extinguishment as a corporate body.
Spring Valley
Water Works v. Schottler, 110 U. S. 347,
110 U. S. 352.
And whether expedient or not is a question for the legislature, not
for the courts.
Id., 110 U. S. 357.
In other cases, the effect of the reserved power of amendment is
said to be to make any alteration or amendment of a charter subject
to it which will not defeat or substantially impair the object of
the grant or any right vested under the grant.
Lake Shore
&c. Ry. Co. v. Smith, 173 U. S. 684,
173 U. S.
697-698;
Looker v. Maynard, 179 U. S.
46,
179 U. S. 52.
Surely the manner or time of paying employees does not come within
such limitation. It is a matter of pure administration, not
comparable in its burden to those sustained in the cases which we
have already cited.
Page 233 U. S. 702
In
St. Louis, Iron Mt. & S. Ry. Co. v. Paul,
173 U. S. 404, a
law of Arkansas was sustained as an exercise of the reserved power
of the state which required a railroad company discharging with or
without cause, or refusing to employ, any servant or employee, to
pay him his unpaid wages, then earned at the contract rate without
abatement or deduction to the date of his discharge, and providing
that, if the same be not paid on such day, then, as a penalty for
nonpayment, his wages shall continue at the same rate until
paid.
In
New York & N.E. Railroad Co. v. Bristol,
151 U. S. 556, the
railroad company was required to remove various grade crossings at
its own expense.
In the
Sinking Fund Cases, 99 U. S.
700, legislation requiring the creation of a sinking
fund was sustained under the reserved power of amendment, and,
after reviewing the cases, the Court said
"that whatever rules Congress might have prescribed in the
original charter for the government of the corporation in the
administration of its affairs, it retained the power to establish
by amendment."
Many other cases might be cited, but to cite them would be to
accumulate authorities on a proposition which might well be taken
at this late date to be incontestable. Indeed, the contention of
defendant that the legislation under review might be supported
under the police power of the state has justification in cases.
In
Knoxville Iron Co. v. Harbison, 183 U. S.
13, a law of the State of Tennessee which required all
persons and corporations to redeem in money evidences of
indebtedness given to their laborers or employees, in the hands of
their laborers, employees, or a
bona fide holder, came up
for consideration. The Knoxville Coal Company paid its employees in
cash and in coal orders. It made money by the practice. There was
no proof of an express agreement between the company and its
employees that the orders should be paid only in coal, except as
implied from
Page 233 U. S. 703
accepting the orders, and no proof of an implied agreement
except as drawn from the face of the orders and the custom of the
company. There was no proof of compulsion except that, if the
employees did not accept pay in coal orders, they had to submit to
be in arrears about twenty days, but the company paid in coal
orders the whole wages due at the end of each month. Harbison
purchased a number of the coal orders and demanded their payment in
cash, which was refused. He then brought suit against the company,
relying on the statute. The supreme court gave him judgment, which
was affirmed by this Court on the ground that the law was a proper
exercise of the police power of the state. This Court, by Mr.
Justice Shiras, commenting on
St. Louis, Iron Mt. & S. Ry.
Co. v. Paul, supra, said that in that case, stress was laid
upon the reserved power of amendment which the state had,
"but it is also true that, inasmuch as the right of contract is
not absolute in respect to every matter, but may be subjected to
the restraints demanded by the safety and welfare of the state and
its inhabitants, the police power of the state may, within definite
limitations, extend over corporations outside of and regardless of
the power to amend charters."
Atchison, Topeka & Santa Fe Railroad v. Matthews,
174 U. S. 96. The
ruling was followed in
Dayton Coal & Iron Company v.
Barton, 183 U. S. 23,
although the Dayton Company was not incorporated under the laws of
Tennessee.
In
McLean v. Arkansas, 211 U.
S. 539, a law of Arkansas required, where miners were
employed at quantity rates and more than ten were employed, that
they should be paid by the weight of coal mined by them as it comes
from the mine and before it was passed over a screen of any kind.
One of the grounds of attack on the law was that it was an
unwarranted invasion of the right of contract secured by the
Fourteenth Amendment, the argument being that the law prevented the
miners from contracting
Page 233 U. S. 704
for wages upon the basis of screened coal instead of the weight
of the coal as originally produced at the mine. The law was
sustained as a proper exercise of the police power of the
state.
It is, however, contended by plaintiff, that the law under
review cannot be sustained either as an exertion of the police
power or as an alteration of the charter of plaintiff unless the
court can say from a comparison of the systems of payment --
monthly and semi-monthly -- that the former affects adversely the
general welfare or public good, and the latter "remedies that evil
or condition, and of itself does not constitute an unjust burden
upon the employer." But whether the law imposes an unjust burden
depends upon its validity, and whether the public welfare is
subserved by one system or the other is, as we have said, in the
first instance, for the legislature to determine, and its judgment
will not be reviewed unless "unmistakably and palpably in excess of
legislative power."
McLean v. Arkansas, supra. The Labor
Law of New York cannot be so characterized.
There are certainly advantages of cash payment over deferred
payments, and an advantage to those who work for a living of a
ready purchasing power for their needs over the use of credit. This
is found as a fact by the trial court, and even if there is no
affirmative evidence of it, it is the expression of experience.
The next contention of plaintiff is that the cost of paying
twice a month is a direct burden on interstate commerce. It is not
necessary to review and compare the cases in which this Court has
pointed out the difference between a direct and indirect burden of
state legislation upon interstate commerce, or the power of the
states in the absence of regulation by Congress. It is enough to
say in the present case that Congress has not acted, and there is
not, therefore, that impediment to the law of the state, nor is
there prohibition in the character of the burden. The
Page 233 U. S. 705
effect of the provision is merely administrative, and so far as
it affects interstate commerce, it does so indirectly. The Court of
Appeals, as we have seen, considered that the law relates to the
wages of railway servants employed wholly within the state, and to
those whose duties take them from the state into other states. In
other words, did not make it applicable to those employed in other
states, and it therefore does not embrace all of the employees of
plaintiff, and the contention based upon its application to all is
without foundation.
The last contention of plaintiff is that the statute violates
the Fourteenth Amendment "in that it denies to the employees of the
Erie Railroad Company the equal protection of the laws."
Considerable argument is made to support the contention, in which a
comparison is made between the employees -- mechanics, workmen, and
laborers -- to whom the law applies, and the other employees of the
company, and it is declared that all, if any, suffer from monthly
payments, and all are entitled therefore to receive the benefit of
semi-monthly payments. But, as we have said, employees are not
complaining, and whatever rights those excluded may have plaintiff
cannot invoke.
Judgment affirmed.
*
"SECTION 9. Cash payment of wages. -- Every manufacturing,
mining, quarrying, mercantile, railroad, street railway, canal,
steamboat, telegraph and telephone company, every express company,
every corporation engaged in harvesting and storing ice, and every
water company, not municipal, and every person, firm, or
corporation engaged in or upon any public work for the state or any
municipal corporation thereof, either as a contractor or a
subcontractor therewith, shall pay to each employee engaged in his,
their, or its business the wages earned by such employee in cash.
No such company, person, firm, or corporation shall hereafter pay
such employees in script, commonly known as store money
orders."
As amended by Laws 1908, c. 443.
"SECTION 10. When wages are to be paid. -- Every corporation or
joint stock association, or person carrying on the business thereof
by lease or otherwise, shall pay weekly to each employee the wages
earned by him to a day not more than six days prior to the date of
such payment. But every person or corporation operating a steam
surface railroad shall, on or before the first day of each month,
pay the employees thereof the wages earned by them during the first
half of the preceding month, ending with the 15th day thereof, and
on or before the 15th day of each month pay the employees thereof
the wages earned by them during the last half of the preceding
calendar month."
As amended by Laws 1908, c. 442.
"SECTION 11. Penalty for violation of preceding sections. -- If
a corporation or joint stock association, its lessee or other
person carrying on the business thereof, shall fail to pay the
wages of an employee, as provided in this article, it shall forfeit
to the people of the state the sum of fifty dollars for each such
failure, to be recovered by the factory inspector in his name of
office in a civil action; but an action shall not be maintained
therefor unless the factory inspector shall have given to the
employer at least ten days' written notice that such an action will
be brought if the wages due are not sooner paid as provided in this
article."
"On the trial of such action, such corporation or association
shall not be allowed to set up any defense, other than a valid
assignment of such wages, a valid set-off against the same, or the
absence of such employee from his regular place of labor at the
time of payment, or an actual tender to such employee at the time
of the payment of the wages so earned by him, or a breach of
contract by such employee, or a denial of the employment."
