ERIE R. CO. V. WILLIAMS, 233 U. S. 685 (1914)

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U.S. Supreme Court

Erie R. Co. v. Williams, 233 U.S. 685 (1914)

Erie Railroad Company v. Williams

No. 274

Argued April 27, 1914

Decided May 25, 1914

233 U.S. 685


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

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