NLRB v. Jones & Laughlin Steel Corp.

From the 1870s through the mid-1930s the U.S. Supreme Court was generally hostile to federal legislation that sought to regulate business through the use of the Constitution's COMMERCE CLAUSE. A conservative judiciary believed that the free market should govern economic activities; consequently laws that attempted to regulate labor relations were overturned. The Great Depression of the 1930s led to the presidential election in 1932 of FRANKLIN D. ROOSEVELT, who advocated an aggressive role for the federal government in national economic affairs. Congress consistently turned Roosevelt's legislative agenda into law yet the Supreme Court ruled these new laws unconstitutional. However, in the landmark case of NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893 (1937), the Court reversed course, paving the way for NEW DEAL legislation and a new judicial attitude toward the Commerce Clause.

For generations LABOR UNIONS had confronted a business community that was hostile to the concept of COLLECTIVE BARGAINING. Therefore, the passage of the National Labor Relations Act (NLRA or WAGNER ACT) of 1935 (29 U.S.C.A. § 151 et seq.) was a dramatic recognition of workers' rights. The law gave workers the right to organize unions and to require employers to negotiate with a certified union. An elaborate administrative process was also established, headed by the National Labor Relations Board (NLRB). The NLRB was create to review complaints about alleged violations of the law and issue administrative sanctions against employers for retaliatory discharges based on union membership or organization activities. Employers vowed to test the constitutionality of the NLRA and the actions of the NLRB.

In July 1935, 13 employees of the Jones and Laughlin Steel Corporation plant in Aliquippa, Pennsylvania, were discharged for minor infractions of company rules. Most of these workers had been actively involved in a union. The union filed with the NLRB a charge of UNFAIR LABOR PRACTICES against the steel company, claiming that the discharges were because of union membership. At a subsequent NLRB hearing, Jones & Laughlin argued that the NLRA was unconstitutional because it regulated labor relations and not interstate commerce. Therefore, Congress had no authority to regulate labor relations. The NLRB rejected the argument and found that the company was the fourth largest steel producer in the United States and was clearly involved in interstate commerce. It ordered the workers reinstated and directed Jones & Laughlin to cease and desist from these labor practices. Jones & Laughlin appealed, confident that the Supreme Court would overturn what was viewed as the most radical piece of New Deal law.

In a stunning reversal of precedent the Court upheld the constitutionality of the NLRA on a 5–4 vote. Previous decisions striking down New Deal legislation had also come on 5–4 votes, with Chief Justice CHARLES EVANS HUGHES joining four conservative justices to constitute a majority. In this case Hughes joined the four liberal justices and wrote the majority opinion. The tenor of Hughes' opinion was significant, for he abandoned Court precedent that had considered labor relations outside the stream of interstate commerce. The previous year Hughes had embraced this idea, but in the present case he looked at the world differently. He concluded that DUE PROCESS and liberty of contract concerns were irrelevant.

The Court's decision made clear that the federal government had the constitutional authority to regulate labor relations. Hughes reasoned that labor strife, including strikes, affected interstate commerce. He stressed that the Commerce Clause was broad enough to permit Congress to extend its regulations to both interstate commerce and to any activity that affected commerce, directly or indirectly. What was important was the "effect upon commerce, not the source of the injury."

The Court concluded that the NLRA went no further than to "safeguard the right of employees to self-organization and to select representatives of their own choosing for collective bargaining." This was "a fundamental right." This declaration reversed over 100 years of judicial thinking about labor unions and endorsed the authority of Congress to protect this right.

This decision was a bitter defeat for the four conservatives justices: GEORGE SUTHERLAND, PIERCE BUTLER, WILLIS VAN DEVANTER, and JAMES MCREYNOLDS. In their dissents they argued that the NRLA violated the liberty of contract between an individual employee and an employer. Moreover, they held fast to the "stream of commerce" line of precedent. They could not see how the discharge of a few employees in a city in Pennsylvania had any connection to the sale and distribution of steel through the channels of interstate commerce.

Jones changed the face of labor relations by requiring employers to treat unions and union workers fairly. It also signaled an end to the Supreme Court's striking down New Deal laws that sought to reshape the national economy. From Jones onward the Court permitted the federal government to take a dominant role in matters of commerce. The balance of power between the federal government and state governments shifted dramatically in the years following this decision.

This decision also empowered Congress to apply the Commerce Clause to federal civil right legislation. The CIVIL RIGHTS ACT OF 1964 contains provisions banning segregated public accommodations that are a part of interstate commerce. Congress used the Commerce Clause as its authority because the Fourteenth Amendment's due process and EQUAL PROTECTION rights only apply to state and local government actions. Therefore, if the state does not mandate segregated facilities, the private discriminatory actions would be exempt from the FOURTEENTH AMENDMENT. Therefore, Congress claimed that segregated public accommodations affected interstate commerce. The Supreme Court, in Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S. Ct. 348, 13 L. Ed. 2d 258 (1964), applied the Jones reasoning. It noted that 75 percent of the Heart of Atlanta Motel's clientele came from out of state and that it was strategically located near several interstate highways. Therefore, the business clearly affected interstate commerce. The Court upheld the constitutionality of this landmark legislation.