Economic Liberties - Constitutional Analysis

In Calder, the Court considered a Connecticut law that set aside the decision of a probate court that had denied inheritance to those designated as beneficiaries under a will. The Court rejected the contention that this amounted to an ex post facto law, holding that the ex post facto clause applied only to criminal law. But Chase, J., made clear that we would be willing in an appropriate to strike down similar legislation in the future, without regard to explicit constitutional limitations:

I cannot subscribe to the omnipotence of a State Legislature, or that it is absolute and without control; although its authority should not be expressly restrained by the Constitution, or fundamental law of the State. *** An act of the legislature … contrary to the great first principles of the social compact cannot be considered a rightful exercise of legislative authority. [For example,] a law that punished a citizen for an innocent action; a law that destroys, or impairs, the lawful private contracts of citizens; a law that makes a ma a Judge in his own cause; or a law that takes property from A and gives it to B: It is against all reason and justice for a people to entrust a Legislature with SUCH powers; and therefore, it cannot be presumed that they have done it.

Iredell, J., disagreed:

If … the Legislature of the Union [or a State] shall pass a law within the general scope of their constitutional power, the Court cannot pronounce it to be void, merely because it is, in their judgment, contrary to the principles of natural justice. The ideas of natural justice are regulated by no fixed standard; the ablest and purest men have differed on the subject …

In Lochner, the Court declared unconstitutional a New York law that set the maximum hours that bakers could work. The Court held that the law did not serve a valid police purpose, and ran afoul of the due process clause of the Fourteenth Amendment because it interfered with the freedom to contract. The Court’s holding reflects the propositions, for which the case and the Lochner-era are famous for: (1) freedom to contract is a basic right protected under the due process clause; (2) the government can only interfere with freedom of contract to serve a valid police purpose: to protect the public safety, public health, or public morals; and (3) it is the Court’s responsibility to carefully scrutinize legislation interfering with the freedom of contract to ensure that it serves a valid police purpose.

The Court also emphasized the need to determine with a stated police purpose was pretextual: “It is impossible for us to shut our eyes to the fact that many laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare are, in reality, passed for other motives.” The Court concluded that, in this case, the state’s justification was pretextual: “The act is not, within any fair meaning of the term, a health law, but is an illegal interference with the rights of individuals …”

In dissent, Harlan, J., argued that the liberty of contract could be subjected to regulations designed to promote the general welfare, and that, “in determining the question of power to interfere with the liberty... the court may inquire whether the means devised by the State are germane to an end which may be lawfully accomplished.” And he found it “impossible… to say that there [was] no real or substantial relation between the means employed by the State and the end sought to be accomplished by its legislation.” In his view, it was “enough for the determination of this case that the question is one about which there is room for debate and for an honest difference of opinion.” Thus, Harlan would have employed a review standard much closer to rational basis review than the sort of searching review employed by the majority.

Holmes, J., argued that “a constitution is not intended to embody a particular economic theory. It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution.” Notably, Holmes did not totally reject substantive due process; he would employ substantive due process to strike down a law that “a rational and fair man necessarily would admit … would infringe fundamental principles as they have been understood by the traditions of our people and our law.”

In Nebbia, the Court upheld a New York law that set prices for milk, in an initial shift away from Lochner. The Court wrote that “neither property rights nor contract rights are absolute; for government cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm.” “The guaranty of due process demands only that the law shall not be unreasonable, arbitrary, or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained.” The Court suggested that a more deferential approach was appropriate: “A state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare …”

McReynolds, J., dissenting, objected that the Court’s decision took away the liberty of 12 million consumers to buy a necessity of life on the open market.

In West Coast Hotel, the Court sustained a state minimum wage law for women. The Court held that the legislature was entitled to adopt measures to protect women workers from exploitation. “What these workers lose in wages the taxpayers are called upon to pay. *** The community is not bound to provide what is in effect a subsidy to unconscionable employers.” Rather, the government is allowed to regulate to equalize bargaining power. Further, “the Constitution does not speak of freedom of contract, [nor does it] recognize an absolute and uncontrollable liberty. Liberty under the Constitution is necessarily subject to the restraints of due process, and...