Fry v. United States 8212 822

• Citation: 95 S.Ct. 1792,421 U.S. 542,44 L.Ed.2d 363
• Decision Date: 27 May 1975
• Docket Number: No. 73,73
• Parties: Ernest FRY and Thelma Boehm, Petitioners, v. UNITED STATES. —822
• Court: United States Supreme Court

421 U.S. 542

95 S.Ct. 1792

44 L.Ed.2d 363

Ernest FRY and Thelma Boehm, Petitioners,

v UNITED STATES.

No. 73—822.

Argued Nov. 11, 1974.

Decided May 27, 1975.

Syllabus

The Economic Stabilization Act of 1970 authorized the President to stabilize wages and salaries at certain levels, and the Pay Board was created to oversee the controls. The Government filed this action to enjoin Ohio and its officials from paying state statutory wage and salary increases to state employees above the amount authorized by the Pay Board. The Temporary Emergency Court of Appeals, on certification from the District Court, construed the Act as applying to state employees, upheld its constitutionality, and enjoined payment of the increases. Held:

1. The Act's language contemplating general stabilization of 'prices, rents, wages, salaries, dividends, and interest' and providing that the controls should 'call for generally comparable sacrifices by business and labor as well as other segments of the economy,' and its legislative history showing that Congress had rejected an amendment exempting state employees, make it clear that the Act was intended to apply to employees generally, including state employees. That the Act did not expressly refer to the States warrants no inference that controls could not extend to their employees. Pp. 545-546.

2. The Act was constitutional as applied to state employees. Pp. 547-548.

(a) General raises to state employees, even though purely intrastate in character, could significantly affect interstate commerce, and thus could be validly regulated by Congress under the Commerce Clause. P. 547.

(b) States are not immune from all federal regulation under the Commerce Clause merely because of their sovereign status. Maryland v. Wirtz, 392 U.S. 183, 88 S.Ct. 2017, 20 L.Ed.2d 1020. Here, where the Act did not appreciably intrude on state sovereignty but was an emergency measure to counter severe inflation, the effectiveness of federal action would have been drastically impaired if wage increases to state and local governmental employees (who at the time the wage freeze was activated composed 14% of the Nation's work force) were left outside the Act's reach. Pp. 547-548.

(c) Since the Ohio wage legislation conflicted with the Pay Board's ruling, the State must yield under the Supremacy Clause to the federal mandate. P. 548.

United States v. State of Ohio (Em.App., 1973), 487 F.2d 936, affirmed.

John A. Brown, Columbus, Ohio, for petitioners.

Jewell S. Lafontant, Deputy Solicitor General, Washington, D.C., for respondent.

Mr. Justice MARSHALL delivered the opinion of the Court.

The Economic Stabilization Act of 1970¹ authorized the President to issue orders and regulations to stabilize wages and salaries at levels not less than those prevailing on May 25, 1970. By Executive Order, the President created the Pay Board to oversee wage and salary controls imposed under the Act's authorization. Exec. Order No. 11627, 3 CFR 218 (1971 Comp.), note following 12 U.S.C. § 1904 (1970 ed., Supp. I). In implementing the wage stabilization program, the Pay Board issued regulations that limited annual salary increases for covered employees to 5.5% and required prior Board approval for all salary adjustments affecting 5,000 or more employees.² The State of Ohio subsequently enacted legislation providing for a 10.6% wage and salary increase, effective January 1, 1972, for almost 65,000 state employees.³ The State applied to the Pay Board for approval of the increases, and a public hearing was held. In March 1972, the Board denied the application for an exemption to the extent that it exceeded salary increases of 7% for the 1972 wage year.⁴ Petitioners, two state employees, sought a writ of mandamus in state court to compel Ohio officials to pay the full increases provided in the state pay act. The Ohio Supreme Court granted the writ and ordered the increases to be paid. State ex rel. Fry v. Ferguson, 34 Ohio St.2d 252, 298 N.E.2d 129 (1973).

After the State Supreme Court decision, the United States filed this action in the District Court to enjoin Ohio and its officials from paying wage and salary increases in excess of the 7% authorized by the Pay Board. The District Court certified to the Temporary Emergency Court of Appeals the question of the applicability of federal wage and salary controls to state employees. See § 211(c) of the Economic Stabilization Act, note following 12 U.S.C. § 1904 (1970 ed., Supp. I).

The Court of Appeals construed the Act as applying to state employees and as thus construed upheld its constitutionality. United States v. Ohio, 487 F.2d 936 (1973). Relying on the decisions of this Court in Maryland v. Wirtz, 392 U.S. 183, 88 S.Ct. 2017, 20 L.Ed.2d 1020 (1968), and United States v. California, 297 U.S. 175, 56 S.Ct. 421, 80 L.Ed. 567 (1936), the court concluded that the interference with state affairs incident to the uniform implementation of federal economic controls was of no consequence since Congress had a rational basis upon which to conclude that the state activity substantially affected commerce. The Court of Appeals accordingly enjoined the payment of wage and salary increases in excess of the amount authorized by the Pay Board. We affirm.

I

At the outset, it is contended that Congress did not intend to include state employees within the reach of the Economic Stabilization Act and that the Pay Board therefore did not have the authority to regulate the compensation due state employees.⁵ We disagree. The language and legislative history of the Act leave no doubt that Congress intended that it apply to employees throughout the economy, including those employed by state and local governments. The Act contemplated general stabilization of 'prices, rents, wages, salaries, dividends, and interest,' § 202, note following 12 U.S.C. § 1904 (1970 ed., Supp. I), and it provided that the controls should 'call for generally comparable sacrifices by business and labor as well as other segments of the economy.' § 203(b)(5). It contained no exceptions for employees of any governmental bodies, even at the federal level.⁶ The failure of the Act to make express reference to the States does not warrant the inference that controls could not be extended to their employees. See Case v. Bowles, 327 U.S. 92, 99, 66 S.Ct. 438, 442, 90 L.Ed. 552 (1946); United States v. California, 297 U.S., at 186, 56 S.Ct. 421, 425. Indeed, in framing the Act, Congress specifically rejected an amendment that would have exempted employees of state and local governments. 117 Cong.Rec. 43673 43677 (1971). And the Senate Committee Report makes it plain that the Committee considered and rejected a proposed exemption for the same group. S.Rep. No. 92—507, p. 4 (1971), U.S.Code Cong. & Admin.News 1971, p. 2283. It is clear, then, that Congress intended to reach state and local governmental employees. The only remaining question is whether it could do so consistent with the constitutional limitations on its power.

II

Petitioners acknowledge that Congress' power under the Commerce Clause is very broad. Even activity that is purely intrastate in character may be regulated by Congress, where the activity, combined with like conduct by others similarly situated, affects commerce among the States or with foreign nations. See Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 255, 85 S.Ct. 348, 356, 13 L.Ed.2d 258 (1964); Wickard v. Filburn, 317 U.S. 111, 127—128, 63 S.Ct. 82, 90—91, 87 L.Ed.2d 122 (1942). There is little difficulty in concluding that such an effect could well result from large wage increases to 65,000 employees in Ohio and similar numbers in other States; e.g., general raises to state employees could inject millions of dollars of purchasing power into the economy and might exert pressure on other segments of the work force to demand comparable increases.

Petitioners do not appear to challenge Congress' conclusion that unrestrained wage increases, even for employees of wholly intrastate operations, could have a significant effect on commerce. Instead, they contend that applying the Economic Stabilization Act to state employees interferes with sovereign state functions and for that reason the Commerce Clause should not be read to permit regulation of all state and local governmental employees.⁷

On the facts of this case, this argument is foreclosed by our decision in Maryland v. Wirtz, 392 U.S. 183, 88 S.Ct. 2017, 20 L.Ed.2d 1020 (1968), where we held that the Fair Labor Standards Act could constitutionally be applied to schools and hospitals run by a State. Wirtz reiterated the principle that States are not immune from all federal regulation under the Commerce Clause merely because of their sovereign status. 392 U.S., at 196—197, 88 S.Ct. 2017, 2023—2024. We noted, moreover, that the statute at issue in Wirtz was quite limited in application. The federal regulation in this case is even less intrusive. Congress enacted the Economic Stabilization Act as an emergency measure to counter severe inflation that threatened the national economy. H.R.Rep. No. 91—1330, pp. 9—11 (1970). The method it chose, under the Commerce Clause, was to give the President authority to freeze virtually all wages and prices, including the wages of state and local governmental employees. In 1971, when the freeze was activated, state and local governmental employees composed 14% of the Nation's work force. Brief for United States 20. It seems inescapable that the effectiveness of federal action would have been drastically impaired if wage increases to this sizeable group of employees were left outside the reach of these emergency federal wage controls.

We conclude that the Economic Stabilization Act was constitutional as applied to state and local governmental employees. Since the Ohio wage legislation conflicted with the Pay Board's ruling, under the Supremacy Clause the State must yield to the Federal mandate. See Public...