Home > Supreme Court Drama > National Labor Relations Board v. Jones & Laughlin Steel Corp.

Appellant: National Labor Relations Board

Appellee: Jones & Laughlin Steel Corporation

Appellant's Claim: That Congress has the constitutional authority under the Commerce Clause to pass legislation protecting the rights of organized labor.

Chief Lawyers for Appellant: U.S. Attorney General Homer S. Cummings, U.S. Solicitor General Stanley F. Reed, and J. Warren Madden

Chief Lawyer for Appellee: Earl F. Reed

Justices for the Court: Louis D. Brandeis, Benjamin N. Cardozo, Chief Justice Charles Evans Hughes, Owen Josephus Roberts, Harlan Fiske Stone

Justices Dissenting: Pierce Butler, James Clark McReynolds, George Sutherland, Willis Van Devanter

Date of Decision: April 12, 1937

Decision: Ruled in favor of the National Labor Relations Board by finding that Congress has authority under the Commerce Clause to regulate labor relations.

Significance: The landmark ruling signaled a radical change in the Supreme Court's acceptance of Congressional power to regulate economic matters.

The right of workers to ban together seeking better working conditions was not traditionally recognized in U.S. history. For decades Supreme Court decisions supported a laissez-faire form of economy in which businesses operate with minimal government interference, letting the marketplace guide economic growth. The Commerce Clause in Article I, Section 8, of the Constitution did give Congress power to "regulate Commerce . . . among the several states." But the clause was typically interpreted very narrowly by the Court, restricting the power of the federal government in economic matters.

Likewise, the courts did not interfere with the freedom of an employer to contract for labor with his employee. According to the courts, employers and employees had the right to bargain free of government interference under the Due Process Clause of the Fifth Amendment. The clause states that "No person shall be . . . deprived of life, liberty, or property, without due process of law." In addition the Contract Clause in Article I reads, "No State shall . . . make any . . . Law impairing the Obligation [responsibility] of Contracts." Therefore, the Court used the Fifth's Due Process Clause to limit federal regulation of business activities and the Contract Clause to limit state regulation.

Employers were free to take a variety of actions to discourage employees from joining organizations, such as labor unions. Labor unions are groups of workers who have joined together to seek better work conditions. One of the more common means to discourage an employer from forming a labor union was known as yellow-dog contracts. Employers forced employees to sign these contracts agreeing to not join unions, or to quit unions if already a member. Employees could be fired if they did not comply with the contract. The Supreme Court ruled in Adair v. United States (1908) that yellow-dog contracts were legal under the "liberty of contract" concept.

Labor and the New Deal

With major economic problems plaguing the nation during the Great Depression of the 1930s, Congress passed various laws designed to guide social and economic reform. The laws, collectively known as the New Deal, gave Congress unprecedented control of the nation's economy. Authority for New Deal legislation largely drew from the Commerce Clause.

In 1935 Congress passed the National Labor Relations Act, more commonly known as the Wagner Act. The act, for the first time, recognized the right of workers to organize and bargain collectively with their employers. Collective bargaining is when an employer and a representative of his employees negotiate an agreement concerning work conditions, including wages, hours, and safety. Considered one of the more dramatic pieces of New Deal legislation, the bill was introduced by Senator Robert F. Wagner, a Democrat from New York. President Franklin D. Roosevelt (1933–1945) first feared that strong labor organizations might interfere with the nation's economic recovery. But, he became a supporter of the proposed act when passage became evident. In fact, fear that labor unrest might slow the flow of interstate commerce and economic recovery led, in part, to its passage. The act applied to all businesses conducting interstate commerce (business conducted across state lines) or who were affected by interstate commerce.

The Wagner Act created the National Labor Relations Board (NLRB) to enforce its provisions (parts), The new federal agency was charged with resolving disputes between employees and employers. The NLRB hears cases involving charges of unfair labor practices and makes decisions which may be appealed to the federal court of appeals.

The Wagner Act outlawed various employer practices aimed at discouraging union participation by its employees including yellow dog contracts. It was now illegal for a company to fire employees because they belonged to unions. It also required employers to bargain with unions chosen by their employees. The act recognized as lawful strikes and other peaceful actions taken by employees to pressure employers into agreement. The act also set up procedures for workers to organize and elect representatives by secret ballot to conduct negotiations.

The idea of a law protecting labor unions seemed in direct conflict with the prevailing mood of the Court. Prior to 1937 the Court had overturned almost every important piece of New Deal legislation. Angry, Roosevelt unsuccessfully led a charge to change the Court. However, Roosevelt's threats and public pressure finally led two justices to retire and two others to alter their attitudes. New justices aapointed by Roosevelt held views supportive of government regulation.

Jones & McLaughlin

Jones & Laughlin Steel Corporation produced steel and shipped it across state lines. In a climate of social unrest throughout the nation in the mid-1930s, relations between Jones & Laughlin and employees at its Aliquippa, Pennsylvania plant deteriorated. Employees decided to form a bargaining unit affiliated with the national American Federation of Labor (AFL) labor union to represent their interests. The company wanted to keep more employees from joining. In July of 1935, four days after President Roosevelt signed the Wagner Act into law, Jones & McLaughlin fired ten workers who were union leaders at the plant. Local 200 of the Amalgamated Association of Iron, Steel, and Tin Workers of America filed a complaint with the NLRB accusing the company of engaging in unfair labor practices by firing union members. The NLRB upheld the complaint by finding that Jones & Laughlin's actions violated the Wagner Act. The Board ordered the company to reinstate the men and provide back pay for their time off. When the company refused to comply, the NLRB filed a petition with the Fifth Circuit Court of Appeals to enforce the order. The appeals court, finding the act unconstitutional, ruled in favor of Jones & Laughlin and refused to enforce the order. The NLRB appealed the decision to the U.S. Supreme Court.

Protecting Interstate Commerce

Before the Court, Jones & Laughlin again argued that Congress did not have authority under the Commerce Clause to regulate labor relations between workers and their employers. They also contended the act violated the Due Process Clause of the Fifth Amendment protecting the "liberty of contract." They claimed federal government had no power to interfere with the rights of the private property owners and their employees.

Chief Justice Charles E. Hughes wrote the opinion for the majority in a close 5-4 decision in favor of the NLRB. Hughes found that the act neither went beyond Congress' powers under the Commerce Clause nor violated due process. He wrote,

The congressional authority to protect interstate commerce from burdens and obstructions is not limited to transactions which can be deemed to be an essential part of a "flow" of interstate or foreign commerce. Burdens and obstructions may be due to injurious action springing from other sources . . . That power may be exerted to protect interstate commerce no matter what the source of the dangers which threaten it.

Hughes believed that labor unrest could lead to strikes which in turn could lead to disruption of interstate commerce. Such interference would be particularly harmful to the nation during such a time of economic crisis.

Most importantly, Hughes found that workers held a "fundamental right" to organize. The Wagner Act paid a particularly beneficial role by requiring employers to negotiate agreements with their workers. This requirement actually increased the employees' protection under the law by having power to negotiate with employers through democratically elected representatives.

Union Power

The landmark ruling gave labor unions the power to organize and negotiate with employers. The Jones ruling also proved to be the major turning point in the battle between Roosevelt and the Supreme Court over federal powers. The Court finally supported Roosevelt's belief that the federal government had authority to regulate the nation's economic affairs by

broadening its interpretation of the Commerce Clause. With passage of the Wagner Act and the favorable ruling in Jones, union membership grew from 4.7 million in 1936 to 8.2 million in 1939 and continued to increase into the early 1970s. At the end of the twentieth century the Wagner Act remained the most important piece of labor legislation passed in the U.S. history.