Erie Railroad Company v. Williams/Opinion of the Court

The contention of plaintiff is that the labor law is repugnant to the 14th 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 semimonthly, 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.

Messrs. Frederic D. McKenney and George F. Brownell for plaintiff in error.

Messrs. Joseph A. Kellogg, Wilber W. Chambers, and Mr. Thomas Carmody, Attorney General of New York, for defendant in error.

[Argument of Counsel from pages 693-698 intentionally omitted]

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 semimonthly 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.' [New York, C. & H. R. R. Co. v. Williams, 199 N. Y. 123, 35 L.R.A.(N.S.) 549, 139 Am. St. Rep. 850, 92 N. E. 404.]

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.' 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. Chicago, B. & Q. R. Co. v. McGuire, 219 U.S. 549, 562, 55 L. ed. 328, 336, 31 Sup. Ct. Rep. 259; German Alliance Ins. Co. v. Lewis, 233 U.S. 389, 58 L. ed. , 34 Sup. Ct. Rep. 612.

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 semimonthly payments. Plaintiff now pays monthly. The extent of its grievance, therefore, is two payments a month instead of one, with 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, 38 L. ed. 269, 14 Sup. Ct. Rep. 437; United States v. Union P. R. Co. 160 U.S. 1, 40 L. ed. 319, 16 Sup. Ct. Rep. 190; St. Louis, I. M. & S. R. Co. v. Paul, 173 U.S. 404, 43 L. ed. 746, 19 Sup. Ct. Rep. 419; Wisconsin, M. & P. R. Co. v. Jacobson, 179 U.S. 287, 45 L. ed. 194, 21 Sup. Ct. Rep. 115. See also Baltimore & O. R. Co. v. Interstate Commerce Commission, 221 U.S. 612, 55 L. ed. 878, 31 Sup. Ct. Rep. 621.

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 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 Waterworks v. Schottler, 110 U.S. 347, 352, 28 L. ed. 173, 175, 4 Sup. Ct. Rep. 48. And whether expedient or not is a question for the legislature, not for the courts. Id. 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 & M. S. R. Co. v. Smith, 173 U.S. 684, 697, 698, 43 L. ed. 858, 864, 19 Sup. Ct. Rep. 565; Looker v. Maynard, 179 U.S. 46, 52, 45 L. ed. 79, 81, 21 Sup. Ct. Rep. 21. 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.

In St. Louis, I. M. & S. R. Co. v. Paul, 173 U.S. 404, 43 L. ed. 746, 19 Sup. Ct. Rep. 419, 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. R. Co. v. Bristol, 151 U.S. 556, 38 L. ed. 269, 14 Sup. Ct. Rep. 437, the railroad company was required to remove various grade crossings at its own expense.

In the Sinking Fund Cases, 99 U.S. 700, 25 L. ed. 496, 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, 46 L. ed. 55, 22 Sup. Ct. Rep. 1, 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 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, I. M. & S. R. 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, T. & S. F. R. Co. v. Matthews, 174 U.S. 96, 43 L. ed. 909, 19 Sup. Ct. Rep. 609. The ruling was followed in Dayton Coal & I. Co. v. Barton, 183 U.S. 23, 46 L. ed. 61, 22 Sup. Ct. Rep. 5, although the Dayton Company was not incorporated under the laws of Tennessee.

In Mclean v. Arkansas, 211 U.S. 539, 53 L. ed. 315, 29 Sup. Ct. Rep. 206, 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 14th Amendment, the argument being that the law prevented the miners from contracting 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 semimonthly-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 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 14th 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 semimonthly payments. But, as we have said, employees are not complaining, and whatever rights those excluded may have, plaintiff cannot invoke.

Judgment affirmed.