392 U.S. 183 (1968), 742, Maryland v. Wirtz

Docket Nº:No. 742
Citation:392 U.S. 183, 88 S.Ct. 2017, 20 L.Ed.2d 1020
Party Name:Maryland v. Wirtz
Case Date:June 10, 1968
Court:United States Supreme Court
 
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Page 183

392 U.S. 183 (1968)

88 S.Ct. 2017, 20 L.Ed.2d 1020

Maryland

v.

Wirtz

No. 742

United States Supreme Court

June 10, 1968

Argued April 23, 1968

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

Syllabus

The Fair Labor Standards Act, as enacted in 1938, required every employer to pay each of his employees "engaged in commerce or in the production of goods for commerce" certain minimum wages and overtime pay. The definition of employer excluded States and their political subdivisions. In 1961, the Act's coverage was extended beyond employees individually connected to interstate commerce to include all employees of certain "enterprises" engaged in commerce or production for commerce. In 1966, the Act was amended to cover certain hospitals, institutions, and schools, and to modify the definition of employer to remove the exemption of the States and their subdivisions with respect to employees of hospitals, institutions, and schools. Appellants, 28 States and a school district, sought to enjoin enforcement of the Act as it applies to schools and hospitals operated by the States or their subdivisions. They argued that the "enterprise concept" of coverage and the inclusion of state-operated hospitals and schools were beyond Congress' power under the Commerce Clause, that the remedial provisions of the Act, if applied to the States, would conflict with the Eleventh Amendment, and that school and hospital enterprises do not have the statutorily required relationship to interstate commerce. A three-judge district court declined to issue a declaratory judgment or an injunction, and concluded that the adoption of the "enterprise concept" and the extension of coverage to state institutions do not, on the face of the Act, exceed Congress' commerce power. That court declined to consider the Eleventh Amendment and statutory relationship contentions.

Held:

1. The "enterprise concept" of coverage is clearly within the power of Congress under the Commerce Clause. Pp. 188-193.

(a) A rational basis for Congress' finding the scheme necessary to the protection of commerce was the logical inference that the pay and hours of employees of an interstate business who are not production workers, as well as those who are, affect an

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employer's competition with companies elsewhere. United States v. Darby, 312 U.S. 100, followed. Pp. 188-191.

(b) Another rational basis is the promotion of labor peace by the regulation of wages and hours, subjects of frequent labor disputes. Pp. 191-192.

(c) The class of employers subject to the Act, approved in Darby, supra, was not enlarged by the addition of the "enterprise concept." P. 193.

2. The commerce power provides a constitutional basis for extension of the Act to state-operated schools and hospitals. Pp. 193-199.

(a) Congress has "interfered with" state functions only to the extent that it subjects a State to the same minimum wage and overtime pay limitations as other employers whose activities affect commerce. Pp. 193-194.

(b) Labor conditions in schools and hospitals can affect commerce, and are within the reach of the commerce power. Pp. 194-195.

(c) Where a State is engaging in economic activities that are validly regulated by the Federal Government when engaged in by private persons, the State may be forced to conform its activities to federal regulation. United States v. California, 297 U.S. 175. Pp. 195-199.

3. Questions concerning the States' sovereign immunity from suit and whether particular state-operated institutions have employees handling goods in commerce are reserved for appropriate concrete cases. Pp. 199-201.

269 F.Supp. 826, affirmed.

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HARLAN, J., lead opinion

MR. JUSTICE HARLAN delivered the opinion of the Court.

As originally enacted,1 the Fair Labor Standards Act of 1938 required every employer to pay each of his employees "engaged in commerce or in the production

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of goods for commerce"2 a certain minimum hourly wage, and to pay at a higher rate for work in excess of a certain maximum number of hours per week. The Act defined the term "employer" so as to exclude "the United States or any State or political subdivision of a State. . . ."3 This case involves the constitutionality of two sets of amendments to the original enactment.

In 1961, Congress changed the basis of employee coverage: instead of extending protection to employees individually connected to interstate commerce, the Act now covers all employees of any "enterprise" engaged in commerce or production for commerce, provided the enterprise also falls within certain listed categories.4 In 1966, Congress added to the list of categories the following:

(4) is engaged in the operation of a hospital, an institution primarily engaged [88 S.Ct. 2019] in the care of the sick, the aged, the mentally ill or defective who reside on the premises of such institution, a school for the mentally or physically handicapped or gifted children, an elementary or secondary school, or an institution

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of higher education (regardless of whether or not such hospital, institution, or school is public or private or operated for profit or not for profit).5

At the same time, Congress modified the definition of "employer" so as to remove the exemption of the States and their political subdivisions with respect to employees of hospitals, institutions, and schools.6

The State of Maryland, since joined by 27 other States and one school district, brought this action against the Secretary of Labor to enjoin enforcement of the Act insofar as it now applies to schools and hospitals operated by the States or their subdivisions. The plaintiffs made four contentions. They argued that the expansion of coverage through the "enterprise concept" was beyond the power of Congress under the Commerce Clause. They contended that coverage of state-operated hospitals and schools was also beyond the commerce power. They asserted that the remedial provisions of the Act,7 if applied to the States, would conflict with the Eleventh Amendment. Finally, they urged that, even if their constitutional arguments were rejected, the court should declare that schools and hospitals, as enterprises, do not have the statutorily required relationship to interstate commerce.

A three-judge district court, convened pursuant to 28 U.S.C. § 2282, declined to issue a declaratory judgment or an injunction.8 Three opinions were written. Judges Winter and Thomsen, constituting the majority, concluded for different reasons that the adoption of the "enterprise concept" of coverage and the extension of coverage to state institutions could not be said, on the

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face of the Act, to exceed Congress' power under the Commerce Clause. Both declined to consider the Eleventh Amendment and statutory contentions. Judge Northrop dissented, concluding that the amendments exceeded the commerce power because they transgressed the sovereignty of the States.

We noted probable jurisdiction of the plaintiffs' appeal, 389 U.S. 1031. For reasons to follow, we affirm the judgment of the District Court.

I

We turn first to the adoption in 1961 of the "enterprise concept." Whereas the Act originally extended to every employee "who is engaged in commerce or in the production of goods for commerce," it now protects every employee who "is employed in an enterprise engaged in commerce or in the production of goods for commerce."9 Such an enterprise is defined as one which, along with other qualifications, "has employees [88 S.Ct. 2020] engaged in commerce or in the production of goods for commerce. . . ."10 Thus, the effect of the 1961 change was to extend protection to the fellow employees of any employee who would have been protected by the original Act, but not to enlarge the class of employers subject to the Act.

In United States v. Darby, 312 U.S. 100, this Court found the original Act a legitimate exercise of congressional power to regulate commerce among the States. Appellants accept the Darby decision, but contend that the extension of protection to fellow employees of those originally covered exceeds the commerce power. We conclude, to the contrary, that the constitutionality of the "enterprise concept" is settled by the reasoning of Darby itself, and is independently established by principles stated in other cases.

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Darby involved employees who were engaged in producing goods for commerce. Their employer contended that, since manufacturing is itself an intrastate activity, Congress had no power to regulate the wages and hours of manufacturing employees. The first step in the Court's answer was clear: "[Congress may] by appropriate legislation regulate intrastate activities where they have a substantial effect on interstate commerce."11

The next step was to discover whether such a "substantial effect" existed. Congress had found that substandard wages and excessive hours, when imposed on employees of a company shipping goods into other States, gave the exporting company an advantage over companies in the importing States. Having so found, Congress decided as a matter of policy that such an advantage in interstate competition was an "unfair" one, and one that had the additional undesirable effect of driving down labor conditions in the importing States.12 This Court was, of course, concerned only with the finding of a substantial effect on interstate competition, and not with

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the consequent policy decisions. In accepting the congressional finding, the Court followed principles of judicial review only recently rearticulated in Katzenbach v. McClung, 379 U.S. 294, 303-304:

Of course, the mere fact that Congress has said when particular...

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