Supreme Court Decision
Adkins v. Children's Hospital
The Supreme Court's laissez-faire attitude towards the free-enterprise system, originating in the late nineteenth century, may have reached its zenith in the (former President) Taft Court. It was during this period that the doctrine of freedom of contract -- the inherent right of two consenting parties to enter into a contract without government interference -- took form. This case was a landmark in that doctrine, and in many respects mirrors the issues in Adair (1908), which dealt with union activities.
The issue in Adkins was a 1918 federal law which prohibited women from working for less than the established minimum wage, specifically in the District of Columbia. In promulgating the law, local authorities maintained that it would "protect the health and morals of women from degrading living conditions", etc. The counter was that it was simply a wage-fixing scheme, probably meant to reduce wage competition in the general workforce. As such, its detractors viewed it as an encroachment on private property rights and due process guaranteed by the Fifth Amendment, and as an intrusion into freedom of contract.
Following on Justice Harlan's finding in Adair, Justice George Sutherland, writing for the Court, agreed that the law was an encroachment on the freedom of contract guaranteed by the Due Process Clause of the Fifth Amendment and was, therefore, invalid.
Going even further into the basic precepts of a free society (and a bit ahead of his time in the equality of the sexes), Sutherland further noted that, especially given the recent passage of the Nineteenth Amendment, women could not be subjected to more strenuous or less free regulation than men, and that the minimum wage law arbitrarily saddled employers with a public welfare function more properly belonging to society at large. In a statement that ought to reverberate much more today than it would ever be allowed to, he further noted that minimum wage laws disregard "the moral requirement implicit in every contract of employment", that the value of labor and wages should be equal, and that said value can and should find its own level in a free market.
Chief Justice William Howard Taft, who as President had been a strong supporter of business, to the rue of former mentor Theodore Roosevelt, dissented in favor of Congress' ability to regulate conditions of work under their police power. Justice Oliver Wendell Holmes went further to claim that all laws impede men's freedom, the freedom of contract, if it actually existed constitutionally, being no different.
At the heart of the dissent seemed to be the underlying issue of whether the law were truly promulgated to "protect the health and morals of women" -- or any other segment of society -- as opposed to an attempt to manage the economic balance of the free market.
In any event, like Adair before it, this case provided precedent for the Court's continued light-handed approach to economic issues into the midst of the New Deal era. By the late 1930's, all of the concepts of freedom, including the freedom of contract, inherent in these decisions had been pretty much washed away by the wave of New Deal social policy.
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Other decisions pertaining to Freedom of Contract:
Adair v. United States [208 U.S. 161 (1908)] Fuller Court
Allgeyer v. Louisiana [165 U.S. 578 (1897)] Fuller Court
Dartmouth College v. Woodward [17 U.S. 518 (1819)] Marshall Court
Hepburn v. Griswold [75 U.S. 603 (1870)] Chase Court