The New Deal: N.L.R.B. v. Jones & Laughlin Steel Corporation

Supreme Court Cases

301 U.S. 1

April 12, 1937

(Opinion of the Court)

HUGHES, C. J.  In a proceeding under the National Labor Relations Act of 1935, the National Labor Relations Board found that the petitioner, Jones & Laughlin Steel Corporation, had violated the Act by engaging in unfair labor practices affecting commerce.  The proceeding was instituted by the Beaver Valley Lodge No. 200, affiliated with the Amalgamated Association of Iron, Steel and Tin Workers of America, a labor organization.  The unfair labor practices charged were that the corporation was discriminating against members of the union with regard to hire and tenure of employment, and was coercing and intimidating its employees in order to interfere with their self-organization.  The discriminatory and coercive action alleged was the discharge of certain employees.

The National Labor Relations Board, sustaining the charge, ordered the corporation to cease and desist from such discrimination and coercion, to offer reinstatement to ten of the employees named, to make good their losses in pay, and to post for thirty days notices that the corporation would not discharge or discriminate against members, or those desiring to become members, of the labor union.  As the corporation failed to comply, the Board petitioned the Circuit Court of Appeals to enforce the order.  The court denied the petition, holding that the order lay beyond the range of federal power.  83 F. (2d) 998.  We granted certiorari.

The scheme of the National Labor Relations Act may be briefly stated.  Respondent, appearing specially for the purpose of objecting to the jurisdiction of the Board, filed its answer.  Respondent admitted the discharges, but alleged that they were made because of inefficiency or violation of rules or for other good reasons and were not ascribable to union membership or activities.  As an affirmative defense respondent challenged the constitutional validity of the statute and its applicability in the instant case.

Contesting the ruling of the Board, the respondent argues (1) that the Act is in reality a regulation of labor relations and not of interstate commerce; (2) that the Act can have no application to the respondent's relations with its production employees because they are not subject to regulation by the federal government; and (3) that the provisions of the Act violate Section 2 of Article III and the Fifth and Seventh Amendments of the Constitution of the United States.

The facts as to the nature and scope of the business of the Jones & Laughlin Steel Corporation have been found by the Labor Board and, so far as they are essential to the determination of this controversy, they are not in dispute.  The Labor Board has found: The corporation is organized under the laws of Pennsylvania and has its principal office at Pittsburgh.  It is engaged in the business of manufacturing iron and steel in plants situated in Pittsburgh and nearby Aliquippa, Pennsylvania.  It manufactures and distributes a widely diversified line of steel and pig iron, being the fourth largest producer of steel in the United States.  With its subsidiaries -- nineteen in number -- it is a completely integrated enterprise, owning and operating ore, coal and limestone properties, lake and river transportation facilities and terminal railroads located at its manufacturing plants.  It owns or controls mines in Michigan and Minnesota.  It operates four ore steamships on the Great Lakes, used in the transportation of ore to its factories.  It owns coal mines in Pennsylvania.  It operates towboats and steam barges used in carrying coal to its factories.  It owns limestone properties in various places in Pennsylvania and West Virginia.  It owns the Monongahela connecting railroad which connects the plants of the Pittsburgh works and forms an interconnection with the Pennsylvania, New York Central and Baltimore and Ohio Railroad systems.  It owns the Aliquippa and Southern Railroad Company which connects the Aliquippa works with the Pittsburgh and Lake Erie, part of the New York Central system.  Much of its product is shipped to its warehouses in Chicago, Detroit, Cincinnati and Memphis, to the last two places by means of its own barges and transportation equipment.  In Long Island City, New York, and in New Orleans it operates structural steel fabricating shops in connection with the warehousing of semi-finished materials sent from its works.  Through one of its wholly-owned subsidiaries it owns, leases and operates stores, warehouses and yards for the distribution of equipment and supplies for drilling and operating oil and gas mills and for pipe lines, refineries and pumping stations.  It has sales offices in twenty cities in the United States and a wholly-owned subsidiary which is devoted exclusively to distributing its product in Canada.  Approximately 75 percent. of its product is shipped out of Pennsylvania.

Summarizing these operations, the Labor Board concluded that the works in Pittsburgh and Aliquippa "might be likened to the heart of a self-contained, highly integrated body.  They draw in the raw materials from Michigan, Minnesota, West Virginia, Pennsylvania in part through arteries and by means controlled by the respondent, they transform the materials and then pump them out to all parts of the nation through the vast mechanism which the respondent has elaborated.”

To carry on the activities of the entire steel industry, 33,000 men mine ore, 44,000 men mine coal, 4,000 men quarry limestone 16,000 men manufacture coke, 343,000 men manufacture steel, and 83,000 men transport its product.  Respondent has about 10,000 employees in its Aliquippa plant, which is located in a community of about 30,000 persons.

Practically all the factual evidence in the case, except that which dealt with the nature of respondent's business, concerned its relations with the employees in the Aliquippa plant whose discharge was the subject of the complaint.  These employees were active leaders in the labor union.

While respondent criticizes the evidence and the attitude of the Board, which is described as being hostile toward employers and particularly toward those who insisted upon their constitutional rights, respondent did not take advantage of its opportunity to present evidence to refute that which was offered to show discrimination and coercion.  In this situation, the record presents no ground for setting aside the order of the Board so far as the facts pertaining to the circumstances and purpose of the discharge of the employees are concerned.  Upon that point it is sufficient to say that the evidence supports the findings of the Board that respondent discharged these men "because of their union activity and for the purpose of discouraging membership in the union.”  We turn to the questions of law which respondent urges in contesting the validity and application of the Act.

The Act is challenged in its entirety as an attempt to regulate all industry, thus invading the reserved powers of the States over their local concerns.  It is asserted that the references in the Act to interstate and foreign commerce are colorable at best; that the Act is not a true regulation of such commerce or of matters which directly affect it but on the contrary has the fundamental object of placing under the compulsory supervision of the federal government all industrial labor relations within the nation.  The argument seeks support in the broad words of the preamble and in the sweep of the provisions of the Act, and it is further insisted that its legislative history shows an essential universal purpose in the light of which its scope cannot be limited by either construction or by the application of the separability clause.

If this conception of terms, intent and consequent inseparability were sound, the Act would necessarily fall by reason of the limitation upon the federal power which inheres in the constitutional grant, as well as because of the explicit reservation of the Tenth Amendment.  Schechter Corporation v. United States, 295 U. S. 495.  The authority of the federal government may not be pushed to such an extreme as to destroy the distinction, which the commerce clause itself establishes, between commerce "among the several States” and the internal concerns of a State.  That distinction between what is national and what is local in the activities of commerce is vital to the maintenance of our federal system.

But we are not at liberty to deny effect to specific provisions, which Congress has constitutional power to enact, by superimposing upon them inferences from general legislative declarations of an ambiguous character, even if found in the same statute.  The cardinal principle of statutory construction is to save and not to destroy.  We have repeatedly held that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the act.  Even to avoid a serious doubt the rule is the same.

We think it clear that the National Labor Relations Act may be construed so as to operate within the sphere of constitutional authority.  The jurisdiction conferred upon the Board, and invoked in this instance, is found in Section 10 (a), which provides:

Sec. l (a). The Board is empowered, as hereinafter provided, to prevent any person from engaging in any unfair labor practice (listed in Section 8) affecting commerce.

The critical words of this provision, prescribing the limits of the Board's authority in dealing with the labor practices, are "affecting commerce.”  The Act specifically defines the "commerce” to which it refers (Sec. 2 (6)).

There can be no question that the commerce thus contemplated by the Act (aside from that within a Territory or the District of Columbia) is interstate and foreign commerce in the constitutional sense.  The Act also defines the term "affecting commerce” (Sec. 2 (7)).

This definition is one of exclusion as well as inclusion.  The grant of authority to the Board does not purport to extend to the relationship between all industrial employees and employers.  Its terms do not impose collective bargaining upon all industry regardless of effects upon interstate or foreign commerce.  It purports to reach only what may be deemed to burden or obstruct that commerce and, thus qualified, it must be construed as contemplating the exercise of control within constitutional bounds.  It is a familiar principle that acts which directly burden or obstruct interstate or foreign commerce, or its free flow, are within the reach of the congressional power.  Acts having that effect are not rendered immune because they grow out of labor disputes.  It is the effect upon commerce, not the source of the injury, which is the criterion.  Whether or not particular action does affect commerce in such a close and intimate fashion as to be subject to federal control, and hence to lie within the authority conferred upon the Board, is left by the statute to be determined as individual cases arise.  We are thus to inquire whether in the instant case the constitutional boundary has been passed.

The unfair labor practices found by the Board are those defined in Section 8 subdivisions (1) and (3).  These provide:

Sec. 8.  It shall be an unfair labor practice for an employer --

(1) To interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.

(3) By discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization.

Section 8, subdivision (1), refers to Section 7, which is as follows:

Sec. 7.  Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in concerted activities, for the purpose of collective bargaining or other mutual aid or protection.

Thus, in its present application, the statute goes no further than to safeguard the right of employees to self-organization and to select representatives of their own choosing for collective bargaining or other mutual protection without restraint or coercion by their employer.

That is a fundamental right.  Employees have as clear a right to organize and select their representatives for lawful purposes as the respondent has to organize its business and select its own officers and agents.  Discrimination and coercion to prevent the free exercise of the right of employees to self-organization and representation is a proper subject for condemnation by competent legislative authority.  Long ago we stated the reason for labor organizations.  We said that they were organized out of the necessities of the situation; that a single employee was helpless in dealing with an employer; that he was dependent ordinarily on his daily wage for the maintenance of himself and family; that if the employer refused to pay him the wages that he thought fair, he was nevertheless unable to leave the employ and resist arbitrary and unfair treatment; that union was essential to give laborers opportunity to deal on an equality with their employer.  American Steel Foundries v. Tri‑City Central Trades Council, 257 U. S. 184.  We reiterated these views when we had under consideration the Railway Labor Act of 1926.  Fully recognizing the legality of collective action on the part of employees in order to safeguard their proper interests, we said that Congress was not required to ignore this right but could safeguard it.  Congress could seek to make appropriate collective action of employees an instrument of peace rather than of strife.  We said that such collective action would be a mockery if representation were made futile by interference with freedom of choice.  Hence the prohibition by Congress of interference with the selection of representatives for the purpose of negotiation and conference between employers and employees, "instead of being an invasion of the constitutional right of either, was based on the recognition of the rights of both.”  We have reasserted the same principle in sustaining the application of the Railway Labor Act as amended in 1934.

Respondent says that whatever may be said of employees engaged in interstate commerce, the industrial relations and activities in the manufacturing department of respondent's enterprise are not subject to federal regulation.  The argument rests upon the proposition that manufacturing in itself is not commerce.

The government distinguishes these cases.  The various parts of respondent's enterprise are described as interdependent and as thus involving "a great movement of iron ore, coal and limestone along well-defined paths to the steel mills, thence through them, and thence in the form of steel products into the consuming centers of the country -- a definite and well-understood course of business.”  It is urged that these activities constitute a "stream” or "flow” of commerce, of which the Aliquippa manufacturing plant is the focal point, and that industrial strife at that point would cripple the entire movement.  Reference is made to our decision sustaining the Packers and Stockyards Act.  The Court found that the stockyards were but a "throat” through which the current of commerce flowed and the transactions which there occurred could not be separated from that movement.

Respondent contends that the instant case presents material distinctions.

We do not find it necessary to determine whether these features of defendant's business dispose of the asserted analogy to the "stream of commerce” cases.  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.  The fundamental principle is that the power to regulate commerce is the power to enact "all appropriate legislation” for "its protection and advancement,” to adopt measures "to promote its growth and insure its safety”; "to foster, protect, control and restrain.”  That power is plenary and may be exerted to protect interstate commerce "no matter what the source of the dangers which threaten it.”  Although activities may be intrastate in character when separately considered, if they have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to exercise that control.  Undoubtedly the scope of this power must be considered in the light of our dual system of government and may not be extended so as to embrace effects upon interstate commerce so indirect and remote that to embrace them, in view of our complex society, would effectually obliterate the distinction between what is national and what is local and create a completely centralized government.  The question is necessarily one of degree.

That intrastate activities, by reason of close and intimate relation to interstate commerce, may fall within federal control is demonstrated in the case of carriers who are engaged in both interstate and intrastate transportation.  There federal control has been found essential to secure the freedom of interstate traffic from interference or unjust discrimination and to promote the efficiency of the interstate service.  It is manifest that intrastate rates deal primarily with a local activity.  But in rate-making they bear such a close relation to interstate rates that effective control of the one must embrace some control over the other.  Under the Transportation Act, 1920, Congress went so far as to authorize the Interstate Commerce Commission to establish a state-wide level of intrastate rates in order to prevent an unjust discrimination against interstate commerce.  Other illustrations are found in the broad requirements of the Safety Appliance Act and the Hours of Service Act.  It is said that this exercise of federal power has relation to the maintenance of adequate instrumentalities of interstate commerce.  But the agency is not superior to the commerce which uses it.  The protective power extends to the former because it exists as to the latter.

The close and intimate effect which brings thesubject within the reach of federal power may be due to activities in relation to productive industry although the industry when separately viewed is local.  This has been abundantly illustrated in the application of the federal Anti-Trust Act.

Upon the same principle, the Anti-Trust Act has been applied to the conduct of employees engaged in production.

It is thus apparent that the fact that theemployees here concerned were engaged in production is not determinative.  The question remains as to the effect upon interstate commerce of the labor practice involved.

Fourth:  Effects of the Unfair Labor Practice in Respondent's Enterprise

Giving full weight to respondent's contention with respect to a break in the complete continuity of the "stream of commerce” by reason of respondent's manufacturing operations, the fact remains that the stoppage of those operations by industrial strife would have a most serious effect upon interstate commerce.  In view of respondent's far-flung activities, it is idle to say that the effect would be indirect or remote.  It is obvious that it would be immediate and might be catastrophic.  We are asked to shut our eyes to the plainest facts of our national life and to deal with the question of direct and indirect effects in an intellectual vacuum.  Because there may be but indirect and remote effects upon interstate commerce in connection with a host of local enterprises throughout the country, it does not follow that other industrial activities do not have such a close and intimate relation to interstate commerce as to make the presence of industrial strife a matter of the most urgent national concern.  When industries organize themselves on a national scale, making their relation to interstate commerce the dominant factor in their activities, how can it be maintained that their industrial labor relations constitute a forbidden field into which Congress may not enter when it is necessary to protect interstate commerce from the paralyzing consequences of industrial war?  We have often said that interstate commerce itself is a practical conception.  It is equally true that interferences with that commerce must be appraised by a judgment that does not ignore actual experience.

Experience has abundantly demonstrated that the recognition of the right of employees to self-organization and to have representatives of their own choosing for the purpose of collective bargaining is often an essential condition of industrial peace.  Refusal to confer and negotiate has been one of the most prolific causes of strife.  This is such an outstanding fact in the history of labor disturbances that it is a proper subject of judicial notice and requires no citation of instances.  But with respect to the appropriateness of the recognition of self-organization and representation in the promotion of peace, the question is not essentially different in the case of employees in industries of such a character that interstate commerce is put in jeopardy from the case of employees of transportation companies.  And of what avail is it to protect the facility of transportation, if interstate commerce is throttled with respect to the commodities to be transported!

These questions have frequently engaged the attention of Congress and have been the subject of many inquiries.  The steel industry is one of the great basic industries of the United States, with ramifying activities affecting interstate commerce at every point.  The government aptly refers to the steel strike of 1919-1920 with its far-reaching consequences.  The fact that there appears to have been no major disturbance in that industry in the more recent period did not dispose of the possibilities of future and like dangers to interstate commerce which Congress was entitled to foresee and to exercise its protective power to forestall.  It is not necessary again to detail the facts as to respondent's enterprise.  Instead of being beyond the pale, we think that it presents in a most striking way the close and intimate relation which a manufacturing industry may have to interstate commerce and we have no doubt that Congress had constitutional authority to safeguard the right of respondent's employees to self-organization and freedom in the choice of representatives for collective bargaining.

Respondent asserts its right to conduct its business in an orderly manner without being subjected to arbitrary restraints.  What we have said points to the fallacy in the argument.  Employees have their correlative right to organize for the purpose of securing the redress of grievances and to promote agreements with employers relating to rates of pay and conditions of work.  Restraint for the purpose of preventing an unjust interference with that right cannot be considered arbitrary or capricious.

The Act does not compel agreements between employers and employees.  It does not compel any agreement whatever.  It does not prevent the employer "from refusing to make a collective contract and hiring individuals on whatever terms the employer may by unilateral action determine.”  The Act expressly provides in Section 9 (a) that any individual employee or a group of employees shall have the right at any time to present grievances to their employer.  The theory of the Act is that free opportunity for negotiation with accredited representatives of employees is likely to promote industrial peace and may bring about the adjustments and agreements which the Act in itself does not attempt to compel.  As we said in Texas & N.O.R. Co. v. Railway Clerks, supra, and repeated in Virginian Railway Co. v. System Federation, No. 40, the cases of Adair v. United States, 208 U. S. 161, and Coppage v. Kansas, 236 U. S. 1, are inapplicable to legislation of this character.  The Act does not interfere with the normal exercise of the right of the employer to select its employees or to discharge them.  The employer may not, under cover of that right, intimidate or coerce its employees with respect to their self-organization and representation, and, on the other hand, the Board is not entitled to make its authority a pretext for interference with the right of discharge when that right is exercised for other reasons than such intimidation and coercion.  The true purpose is the subject of investigation with full opportunity to show the facts.  It would seem that when employers freely recognize the right of their employees to their own organizations and their unrestricted right of representation there will be much less occasion for controversy in respect to the free and appropriate exercise of the right of selection and discharge.

The Act has been criticized as one-sided in its application; that it fails to provide a more comprehensive plan.  But we are dealing with the power of Congress, not with a particular policy or with the extent to which policy should go.  We have frequently said that the legislative authority, exerted within its proper field, need not embrace all the evils within its reach.  The Constitution does not forbid "cautious advance, step by step,” in dealing with the evils which are exhibited in activities within the range of legislative power.  The question in such cases is whether the legislature, in what it does prescribe, has gone beyond constitutional limits.

Our conclusion is that the order of the Board was within its competency and that the Act is valid as here applied.  The judgment of the Circuit Court of Appeals is reversed and the cause is remanded for further proceedings in conformity with this opinion.