Popular Law-making
by
Frederic Jesup Stimson
Part 4 out of 8
methods they continued to use.
The Federal statute was indeed necessary to this extent, that,
although the common law was unquestioned, as there is no Federal
common law in the absence of statute, and as interstate commerce
cannot be controlled by State law, either common or statute, it was
necessary for Congress to declare that the principles of the common
law should apply to interstate commerce. It was also doubtless wise to
remind the public of the existence of this body of law and to affix
definite prohibitions and penalties. To this extent the anti-trust
legislation, both State and Federal, is fully justified. Nevertheless,
it is noteworthy that the older States, where both the legislatures
and the bar had presumably a higher degree of legal education, rarely
found it necessary to enact statutes against trusts. There has
never been, for instance, any anti-trust law in Massachusetts or in
Pennsylvania, or for a long time in New York, for the first statute
of that State against trusts was made intentionally futile by being
applied only to a trust which secured a complete--_i.e._, one hundred
per cent.--monopoly of its trade.
The economic consideration of all such legislation we do not propose
to consider; whether it was wise to forbid all forestalling, for
instance--which at the common law meant buying at a definite distance
as well as at a distant time; that is to say, a person who bought
all the leather in Cordova was guilty of forestalling as well as the
person who bought all the sherry that was to be made in Spain in the
ensuing year--what we call the buying of futures. This is certainly
very unpopular, and we find most of our States legislating against it;
yet, of course, many economists argue that it is only by allowing
such contracts that the price of any article can be made stable and a
supply stored in years of plenty against years of famine. The first
historical example of forestalling and engrossing is to be found in
the book of Genesis. Joseph was not, I believe, a regrator, but he
was one of the most successful forestallers and engrossers that ever
existed, and made a most successful corner in corn in Egypt; and his
case is cited as a precedent in the Great Case of Monopolies above
mentioned. James C. Carter tells us[1] that all these laws are
contrary to modern principles and were repealed a century ago. I
cannot find that such is the case. On the contrary, they were made
perpetual in the thirteenth year of Elizabeth, and we find perfectly
_modern_ trust legislation as early as Edward I, in 1285. In 1892 I
find legislation already in nineteen States and Territories; North
Dakota, indeed, having already a constitutional provision. Three
States at least, Kansas, Michigan, and Nebraska, seem to have been
before the Federal Act, their laws dating from 1889; while several
States have statutes in 1890, the year in which the Sherman Act was
enacted. There has hardly a year passed since without a good many
statutes aimed against trusts, though they have shown a tendency
to decrease of late years, and it is especially noticeable that
anti-trust legislation is apt to cease entirely in the years following
a panic, as if legislatures had learned the lesson that too much
interference is destructive of business prosperity; I find that by
1908 just about half the States had embodied a prohibition of trusts
in their organic law.[2]
[Footnote 1: "Law, Its Origin, History, and Function," N.Y., 1907.]
[Footnote 2: These provisions will be found digested in the writer's
"Federal and State Constitutions," pp. 339-341.]
One of the principal earlier objects of the trust was to evade the
corporation law. To-day they specially aim at becoming a legal
corporation. In like manner their earliest object and desire was to
escape all Federal supervision and interference by legislation or
otherwise; to-day they are desirous of such regulation under Federal
charters, for the purpose of escaping the more multifarious and
radical law-making of the forty-six different States. Before the
Industrial Commission in 1897-1900, all the heads of the great
"trusts"--Rockefeller, Archbold, Havemeyer--testified in favor of
Federal incorporation; almost all other witnesses, except one or two
New York or New Jersey corporation lawyers, against it.
In the article in the _Harvard Law Review_, above referred to, the
writer suggested that the evil might be cured by compelling trusts to
organize as corporations, thereby bringing them under the regulation
and control that the State exercises over corporations. That has come
to pass, but the remedy has not seemed adequate. In the early Sugar
Trust case, the New York Supreme Court decided that combinations to
sell through a common agent, thereby, of course, fixing the price,
with other common devices for controlling the market and preventing
competition, were illegal at the common law; and also that a
corporation which, in order to bring about such a combination, put
all its stock in the hands of trustees or a holding company, thereby
forfeited its charter, the only result of which decision was to drive
the Sugar Trust from its New York charters to a legal organization in
the State of New Jersey. It is noteworthy that one or two of the
most obvious remedies for this condition of things have never been
employed, possibly because they would be too effective. That is to
say, there might be legislation that a corporation should not act out
of the State chartering it--that a New Jersey corporation, holding no
property and doing no business in New Jersey, should not be used to
carry on business in New York. We also might have legislated, going
back to the strict principles of the common law, to forbid any
corporation, any artificial body, from holding shares in another
corporation. It is doubtful, to-day, whether this can be done under
the common law, and the authors of the Massachusetts corporation law
refused expressly to provide for it; on the other hand the proposed
Federal Incorporation Act expressly validates it. We do, however,
begin to see some legislation on this line of approach, notably in the
case of competing companies, several Western States at least having
statutes forbidding a corporation from holding stock in such
companies; and it was one of the recommendations of President Taft's
recent message, at least as to railroad companies not holding half of
such stock.
It will well repay us now to make a careful study of all these
anti-trust statutes, for the purpose of seeing whether they have
introduced any new principles into the law, and also in what manner
they express the old. Up to two or three years ago one might have said
that not a single case had been decided in the courts of any State or
of the Federal government against trusts or combinations, which might
not have been decided the same way under common-law principles had
there been no anti-trust legislation whatever. As is well known, the
great exception to this statement is the interpretation of the Federal
Act by the Supreme Court of the United States, declaring that any
contract in restraint of trade was unlawful under it, although it
would have been reasonable and proper at the common law. Later
indications are, as President Taft has said, that the courts will see
a way to modify this somewhat extravagant position by reintroducing
the common-law test, viz.: Whether the contract is done with the
_purport_ (or effect) of making a monopoly for destroying competition,
or whether such result is trivial and incidental to a reasonable and
lawful business arrangement. The earliest statutes, those of Michigan,
Kansas, and Nebraska, in 1889, denounce the following principles:
"All contracts, agreements, understandings, and combinations ... the
_purpose_ or object of which shall be to limit or control the output,
to enhance or regulate the price, to prevent or restrict free
competition in production or sale." This, the Michigan statute, merely
states the common law, but goes on to declare such contract, etc., a
criminal conspiracy, and any act done as part thereof, a misdemeanor,
and, in the case of a corporation, subjects it to forfeiture of its
charter. The law makes the exception, nearly universal in the Southern
and Western States, that this anti-trust legislation shall not apply
to agricultural products, live stock in the hands of the producer, nor
to the services of laborers or artisans who are formed into societies
or trades-unions--an exception which, of course, makes it
class legislation, and has caused the whole law to be declared
unconstitutional, so far as I know, by the highest court of every
State where it has been drawn in question, and under the Fourteenth
Amendment also by the Supreme Court of the United States; and in this
spirit President Taft has just acted in preventing a joint resolution
of Congress appropriating money to prosecute trusts from exempting
labor unions. The Kansas statute is substantially like the Michigan,
but more vague in wording (Kansas, 1889, 257). It denounces
arrangements, contracts, agreements, etc., which (also) _tend_ to
advance, reduce, or control the price or the cost to the producer or
consumer of any productions or articles, or the rate of insurance or
interest on money or any other service. The Maine law (Maine, 1889,
266, 1) is aimed only against the old-fashioned trust; that is to say,
the entering of firms or incorporated companies into an agreement or
combination, or the assignment of powers or stock to a central board,
and such trust certificates or other evidences of interest are
declared void. The Alabama statute of 1891 is to similar effect.
The Tennessee statute of 1891 is about the same as the Kansas statute
of 1889, above referred to, except that it adds the words "which tend
in any way to create a monopoly," and the Kansas statute makes trust
certificates unlawful, that being still the usual way of organizing a
trust at that time. The Nebraska law (Nebraska, 1889, 69) is much the
same, except that it also denounces combinations, etc., whereby
a common price shall be fixed and whereby any one or more of the
combining parties shall cease the sale or manufacture of such
products, or where the products or profits of such manufacture or
sale shall be made a common fund to be divided among parties to
the combination, and goes on to add that "pooling between persons,
partnerships, corporations ... engaged in the same or like business
for any purpose whatever, and the formation of combinations or common
understanding" between them is declared unlawful, and the persons are
made liable for the full damage suffered by persons injured thereby,
and each day of the continuance of any such pool or trust shall
constitute a separate offence; this, the doctrine of a continuing
conspiracy, being for the first time before the Supreme Court of the
United States at the time of writing. North Carolina the same year
(N.C., 1889, 374) defines a trust to be an arrangement, understanding,
etc. for the purpose of increasing or reducing the price beyond
what would be fixed by natural demand, and makes it a felony with
punishment up to ten years' imprisonment. Here for the first time
appears a statute against unfair competition. "Any merchant,
manufacturer ... who shall sell any ... goods ... for less than actual
cost for the purpose of breaking down competitors shall be guilty of
a misdemeanor." Tennessee the same year (Tennessee, 1899, 250) in its
elaborate statute, which is a fairly good definition of the law, also
denounces throwing goods on the market for the purpose of creating
an undue depression, whatever that may mean. In the next year, 1890,
there were many more State statutes, but we should first notice a
simple law of New York forbidding any stock corporation from combining
with any other corporation for the prevention of competition (N.Y.,
1890, 564, 7). The usual statute in other States of that year is
addressed against combinations to regulate or fix prices or limit
the output, but Texas (4847a, 1) and Mississippi (1890, 36, 1) have
elaborate laws, which, however, add hardly any new principles to the
common law. They define a trust to be a combination of capital, skill,
or acts, by two or more persons or corporations, (1) to create or
carry out restrictions in trade; (2) to limit or reduce the output, or
increase or reduce the price; (3) to prevent competition; (4) to fix
at any standard or figure whereby its price to the public shall be in
any manner controlled, any article intended for sale, etc.; (5) to
make or carry out any contract or agreement by which they are bound
not to sell or trade, etc., below a common standard figure, or to
keep the price at a fixed or graduated figure, or to preclude free or
unrestricted competition among themselves or others, or to pool or
unite any interest. To much the same effect is the statute of South
Dakota (1890, 154, 1), but it also denounces any combination which
tends to advance the price to the consumer of any article beyond the
reasonable cost of production or manufacture. The Louisiana (1890, 36)
and New Mexico laws (1891, 10) are aimed particularly at attempts
to monopolize, while the Oklahoma statute (6620) was aimed only at
corporations, and the broad wording of the Federal act passed this
year should be noted: "Every contract, combination, in the form of
trust or otherwise, or conspiracy in restraint of trade or commerce
among the several States or with foreign nations, is hereby declared
to be illegal" (U.S., 1890, 647, 1); and in the second section: "Every
person who shall monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons to monopolize, any part
of the trade or commerce among the several States, or with foreign
nations, shall be deemed guilty under this act." And in the third
section: "Every person who shall make any such contract, or engage
in any such combination or conspiracy, shall be deemed guilty of a
misdemeanor." The rest of the legislation provides penalties, manner,
and machinery for the enforcement of these laws by prosecuting
attorneys, etc., with a usual allowance to informants; and it may be
here noted that one great trouble has resulted from this machinery,
for it provided injunction remedies and dissolution, which may well
be too severe a penalty, and, furthermore, dispenses with a jury and
throws unnecessarily upon the court--even now, as in the Standard Oil
case, a distant high court of appeal--the burden of determining a
complicated and voluminous mass of fact. Our ancestors never would
have suffered such matters to be adjudged by the Chancellor!
South Dakota has an extraordinary statute making the agents for
agricultural implements, etc., guilty of a criminal offence when their
principals refuse to sell at wholesale prices to dealers in the State
(S.D., 1890, 154, 2). But beside these remedies, there is a frequent
statute dating from the earliest Kansas act of 1889, that debts for
goods sold by a so-called trust, contracts made in violation of
the law, will not be enforced in favor of the offending person or
corporation. That is to say, the person buying the goods of a trust
may simply refuse to pay for them; and the constitutionality of this
legislation has recently been sustained by a divided opinion in the
Supreme Court of the United States.[1] The possession or ownership
of trust certificates is in some States made criminal. Corporations
offending against the statute are to have their charters taken away,
or, if chartered in other States, to be expelled from the State. All
contracts or agreements in violation of any of these statutes are, of
course, made void.
[Footnote 1: Continental Wall Paper Co. _v_. Voight, 212 U.S. 227.]
There are special statutes in Kansas, Nebraska, and North Dakota
against trusts in certain lines of business, as, for instance, the
buying or selling of live-stock or grain of any kind.
In the twenty years that have elapsed since this early legislation
there has been considerable clarifying in the legislative mind; modern
statutes, and especially constitutional provisions, stating the
offence much more concisely, with a simple reliance upon the common
law, leaving it, in other words, for the courts to define. The
Southern State constitutions generally enact that the legislatures
shall enact laws to prevent trusts. New Hampshire says: "Full and fair
competition in the trades and industries is an inherent and essential
right of the people, and should be protected against all monopolies
and conspiracies which tend to hinder or destroy." Oklahoma provides
that "the legislature shall define what is an unlawful combination,
monopoly, trust, act, or agreement, in restraint of trade, and enact
laws to punish persons engaged in any unlawful combination, monopoly,
trust, act, or agreement, in restraint of trade, or composing any
such monopoly, trust, or combination." In Wyoming, monopolies and
perpetuities, in South Dakota and Washington, monopolies and trusts,
are "contrary to the genius of a free State and should not be
allowed." The constitutional provisions of North Dakota, Minnesota,
and Utah are again a mere repetition of the common law. The New
Hampshire statute grants "all just power ... to the general court to
enact laws to prevent operations within the State of ... trusts ...,"
or the operations of persons and corporations who "endeavor to raise
the price of any article of commerce or to destroy free and fair
competition ... through conspiracy, monopoly or any other unfair means
to control and regulate the acts of all such persons." This last
clause, though a clear statement of the common law, would, of course,
render hopeless Mr. Gompers's crusade in favor of the boycott, the
object of a boycott invariably being to control the acts of somebody
else. Alabama directs the legislature to provide for the prohibition
of trusts, etc., so as to prevent them from making scarce articles
of necessity, trade, or commerce, increasing unreasonably the cost
thereof, or preventing reasonable competition; and to much the same
effect in Louisiana.
We may well close this brief survey by a study of the volume of such
legislation. We have, for instance, in 1890, seven anti-trust laws;
in 1891, six; in 1892, one; in 1893, eight. In 1894, doubtless as a
consequence of the panic, anti-trust legislation absolutely ceased,
and in 1895 there is only one law, passed by the State of Texas, its
old law having been declared unconstitutional. In 1896, under the
influence of President Cleveland's administration, we find four such
statutes, and in 1897, with reviving prosperity, thirteen. Still,
we find no new principle, except, indeed, the somewhat startling
statement in Kansas that it is unlawful to handle goods made or
controlled by monopolies. The Illinois statute of that year permitted
combinations as to articles whose chief cost is wages when the object
or effect is to maintain or increase wages, a qualification which led
to the whole law's being declared unconstitutional. In Tennessee there
is a special statute penalizing combinations to raise the price of
coal, a statute with good old precedents in early English legislation.
By this time most of the States had adopted anti-trust statutes. In
1898 we find only one law, that of Ohio, giving the same five-fold
definition of the trust that we found above in Alabama, but it
adds the somewhat startling statement that "the character of the
combination may be established by proof of its general reputation as
such," and again it is made criminal to own trust certificates, with
double damages in all cases to persons injured. A constitutional
lawyer might well doubt whether a conviction under the last half of
this statute would be sustained. In 1899 eleven of the remaining
States adopted anti-trust laws. In 1900 there is a new statute in
Mississippi prohibiting, among other things, the pooling of bids for
public work, this again being a mere statement of the common law,
although a law which has possibly grown uncommon by being generally
forgotten.
In 1901 there are four statutes, that of Minnesota also including a
prohibition of boycotts, and the first piece of legislation upon the
subject in the old Commonwealth of Massachusetts--an ordinary statute
against exclusive dealing; that is to say, the making it a condition
of the sale of goods that the purchaser shall not sell or deal in the
goods of any other person. In 1902 both the Georgia and Texas laws
were declared unconstitutional because they exempted agricultural
pursuits. South Carolina has a statute actually prohibiting any sale
at less than the cost of manufacture, doubtless also unconstitutional.
In Ohio corporations are forbidden to own stock in competing
companies. The Illinois anti-trust act was declared unconstitutional
in 1903, while Texas amended its statute to meet the constitutional
objection, and followed South Carolina in prohibiting the sale of
goods at less than cost.
In 1904 there is no anti-trust legislation. In 1905 the South Carolina
law is held unconstitutional, and in 1906, that of Montana. In 1907,
however, under the Roosevelt administration, there was a decided
revival of interest, seventeen States adopting new statutes or
amendments, but still I can find no new principles. Kansas copies the
Massachusetts statute, and Massachusetts extends it to the sale
or lease of machinery or tools. Minnesota and North Carolina have
interesting statutes prohibiting discrimination between localities
in the sale of any commodity. Most of the States by this time have
statutes compelling persons to give testimony in litigation about
trusts and exempting them from prosecution therefor. North Dakota has
also a statute prohibiting unfair competition and discrimination as
against localities, while Tennessee makes it a misdemeanor to sell any
article below cost or to give it away for the purpose of destroying
competition. In 1908 Louisiana and Mississippi adopted the principle
forbidding discrimination against localities, and the new State of
Oklahoma comes into line with the usual drastic anti-trust statute,
and we may, perhaps, conclude this review of a somewhat unintelligent
legislative history by perhaps the most amusing example of all.
The Commonwealth of Massachusetts, which had so far refrained from
unnecessary legislation on this great question, thought it necessary
to adopt a statute making void contracts to create monopolies in
restraint of trade, which well shows the necessity of a legislative
reference bureau or professional draftsman, as discussed in a later
chapter. That is to say, it says literally: "Every contract, etc.,
in violation of the common law ... is hereby declared to be against
public policy, illegal, and void." As the law of Massachusetts is the
common law, and always has been the common law, this amounts to saying
that a contract which has always been void in Massachusetts is now
declared to be void. But, moreover, on a familiar principle of
hermeneutics, it might be argued to repeal the whole _criminal_ common
law of restraint of trade--doubtless the last thing they intended to
do!
As this is a book upon actual legislation, it would be out of place
to attempt a serious discussion of the problem that lies before us.
Suffice it to say that there are three possible methods of approaching
the question, as it is complicated with the interstate commerce power
of the Federal government. That is to say, either to surrender this
power to the States, at least so far as it may be necessary to enable
them to regulate or prohibit the actions of combinations in the
States, even when engaged In interstate commerce; or, second,
by perfecting the present dual system and establishing Federal
supervision over State corporations engaged in interstate commerce by
way of license and control; or, third, the most radical remedy of all,
apparently adopted by the present administration, of surrendering
entirely the State power over corporations to the Federal government,
at least as to such corporations as might choose to take advantage of
such legislation. This would result in a centralization of nearly all
business under the control of the Federal government, as well as the
removal of the great bulk of litigation from State to Federal courts.
If not carefully guarded it would deprive the States not only of their
power to tax corporations, but of their ordinary police powers over
their administration. Such a radical step was unanimously opposed by
the United States Industrial Commission in 1900, and by nearly all
their expert witnesses, and was then, at least, only favored by the
heads of the great trusts, Mr. Archbold, Mr. Rockefeller, and Mr.
Havemeyer.[1] But whichever way we look at it, there is no question
that the problem of the modern trust is that of the corporation, both
as to what laws shall regulate such a corporation, and whether they
shall be acts of Congress, or State statutes, or both.
[Footnote 1: For the full arguments on this most important question,
the reader may be referred to the article by Horace L. Wilgus in the
_Michigan Law Review_, February and April, 1904, and to the writer's
debate with Judge Grosscup, printed in the _Inter-Nation Magazine_ for
March, 1907.]
X
CORPORATIONS
The earliest trading or business corporation in the modern sense now
extant seems to have been chartered in England about the year 1600,
though Holt in the monopoly case dates the Muscovy Company from 1401,
and, despite the Roman civic corporations, has really no actual
precedent in economic history; that is to say, as a phenomenon under
which the greater part of business affairs was in fact conducted.
Whether derived historically from the guild or the monastic
corporation of the Middle Ages is a question merely of academic
importance, for the business corporation rapidly became a very
different thing from either; and, indeed, its most important
characteristic, that of relieving the members of responsibility for
the debts of the corporation, is an invention of very modern times
indeed, the first statute of that sort having been invented in the
State of Connecticut, enacted in May, 1818. These early English
corporations, such as the Turkey Company, the Fellowship of Merchant
Adventurers, chartered in 1643, or the Hudson Bay Company, usually
gave a monopoly of trade with the respective countries indicated, such
monopolies in foreign countries not being considered obnoxious.[1] The
wording of such early charters follows substantially the language of
a town or guild charter, and was doubtless suggested by them.
Unfortunately, it has never been the custom to print corporation
charters in the Statutes of the Realm, and it is practically
impossible to get a sight of the original documents if, indeed, in
many cases, they now exist. So far as I have been able to study them,
they always give the right to transfer shares freely, with the other
great right, perpetual succession; but no notion appears, for at least
two centuries, that the shareholders are relieved from any of the
legal obligations of the corporation.
[Footnote 1: The charter of the East India Company was attacked on
this ground and successfully defended by Holt on the ground that the
common law did not mind monopolies in trade with heathens!]
In order to understand this whole problem it is necessary to bear
in mind certain cardinal principles of our constitutional law. All
corporations, with the exception of national banks, two or three
railroad companies, and the Panama Canal, have been and are creatures
of the State, not, as yet, of the Federal government, which can only
create them for purposes specifically delegated to it and not merely
for private profit. The power to create corporations is essential to
sovereignty, and the sovereign may decline to recognize all but its
own corporations. Under the doctrine of comity, such corporations can
act in any other State with all the powers given them in the State
where they are created, except only they be expressly limited by a
statute of such other State. They may, however, be entirely excluded;
only not to the destruction of property rights once acquired. On the
other hand, corporations conducting interstate commerce may not be
excluded or such business interfered with by State legislation.
The writer was for four years counsel to the Industrial Commission at
Washington and one of the commissioners appointed to draw the present
business corporation law of Massachusetts. In both such capacities he
had the advantage of hearing the expert opinions of many witnesses.
There were two, and only two, broad theories of legislation about
private business corporations: One view, the older view, that they
should be carefully limited and regulated by the State at every point,
and that their solvency, or at least the intrinsic value of their
capital stock, should, as far as possible, be guaranteed by
legislation, to the public as well as to their creditors and
stockholders; and that for any fraud, or even defect of organization,
the stockholders, or at least the directors, should be liable. On the
other hand, the modern view, that it was no business of the public to
protect investors, or even creditors, and that the corporations should
be given as free a hand as possible, with no limitation as to their
size, the nature of business they are to transact, or the payment
in of their capital stock. This is the corporation problem. The
State-and-Federal problem may be called that other difficulty which
arises from the clashing jurisdictions of the States among themselves
and with the Federal government, their laws and their courts, as to
the corporations now created, particularly railroads and corporations
"engaged in interstate commerce" which may include all the "trusts,"
if the mere fact that they do business in many States makes them so.
Suppose you had a world where one man in every ten was gifted with
immortality and with the right not to be answerable for anything that
he did. You can easily see that the structure of society, at least
as to property, labor, and business affairs, would be very decidedly
altered. Yet this is what really happened with the invention of the
modern corporation; only we have got completely used to it. It would
be possible to have got on without any business corporations at all.
Striking as this may seem at first thought, one must remember that the
world got on very well without corporations for thousands of years,
and that it was by a mere historical accident and a modern invention
that the two great attributes of the corporation, immortality and
personal irresponsibility, were brought about. All business might
still be conducted, as it was in the Middle Ages, by individual men
or by partnerships, and still we should have had very great single
fortunes like that of Jacques Coeur in France, an early prototype of
Mr. J. Pierpont Morgan, or even vast hereditary fortunes kept in
one family, like the Fuggers of Augsburg, and based on a natural
monopoly--mineral salt--as is Mr. Rockefeller's upon mineral oil. Yet
as lives are short and abilities not usually hereditary, the great
corporation question of to-day would hardly have arisen. Nevertheless,
it is presumed that no one, not even the greatest radical, would now
propose to dispense with the invention of the business corporation
with limited liability.
A careful discussion of the two theories above referred to will be
found in pages 1 to 28 of the report of the Committee on Corporation
Laws to the legislature of Massachusetts, of January, 1903. The bill
for a business corporation law recommended by this committee was
enacted into law without substantial change, and has apparently been
satisfactory in the six years it has been in force, as the amendments
to it, except only as to the system of taxation of corporations, have
been few and trifling. I venture to quote from the report referred to
a few of the remarks of the commissioners upon the general question,
as it is now out of print:
The investigations of the committee, the results of which have
been briefly summarized, have led to the following conclusions:
_First_.--That the more important provisions of the present law
regulating the organization and conduct of business corporations
and the liability of its stockholders and officers are unsuited to
modern business conditions.
_Second_.--That the restrictions governing capitalization and the
payment of stock as shown in the piecemeal legislation enlarging
the classes of corporations which may organize under general laws
are arbitrary or impossible of execution.
_Third_.--That it is a general practice to organize under the laws
of other States corporations to carry on enterprises which are
owned and managed by citizens of Massachusetts, particularly where
a part or all the property is situated outside the State.
THEORY OF LEGISLATION RECOMMENDED
The history of corporations, as well as the logic of the case, shows
that there are possible two general theories as to the State's duty in
creating corporations: first, the old theory that, being creatures
of the State, they should be guaranteed by it to the public in all
particulars of responsibility and management; and the modern quite
opposite theory that, in the absence of fraud in its organization or
government, an ordinary business corporation should be allowed to do
anything that an individual may do. Under the old theory the capital
stock of a corporation was, in the law, considered to be a guarantee
fund for the payment of creditors, as well as affording a method of
conveniently measuring the interests of the individual owners of a
corporate enterprise. There resulted from this principle not only the
fundamental proposition that the capital stock, being in the nature of
a guarantee fund, should be paid up at its full par in actual cash,
but all the other provisions to protect creditors or other persons
having dealings with the corporation; such as, that the debts of a
corporation should not exceed its capital stock--designed primarily in
the interest of creditors and secondarily in that of the stockholders,
who were looked after as carefully as if they were the wards of the
State when dealing in corporation matters. Under the modern theory,
the State owes no duty, to persons who may choose to deal with
corporations, to look after the solvency of such artificial bodies;
nor to stockholders, to protect them from the consequences of going
into such concerns, the idea being that, in the case of ordinary
business corporations, the State's duty ends in providing clearly that
creditors and stockholders shall at all times be precisely informed of
all the facts attending both the organization and the management
of such corporations, and particularly that there should be full
publicity given to all details of the original organization thereof.
The committee has had little hesitation in determining which of these
theories it should adopt. The limit of capitalization both in amount
and in valuation to the net tangible assets of the corporation has
unquestionably had much to do with the arrest of corporate growth in
this commonwealth. Good-will, trade-marks, patents may unquestionably
be valuable assets, which, under our present method, may not be
capitalized. Admirable as this theory may have been, of payment of
capital stock in full in cash, the condition is so easily avoided
in practice that the result is that our existing law promises a
protection which, in reality, it does not afford, and is merely an
embarrassment to those who feel obliged to comply not only with the
letter but with the spirit of the law. It is no longer true that
persons dealing with corporations rely upon the State laws to
guarantee their solvency or their proper management. The attempts of
the commonwealth to do so by laws still remaining on its statute books
result, as we apprehend, only in a false sense of security; and we
believe that the act proposed, while giving up the attempt to do the
impossible thing, will really, by its greater attention to the details
of organization required to be made public by all corporations, result
in an advantage to stockholders and creditors more substantial than
the present partial attempt to enforce a principle impossible of
complete realization and which is, under existing laws, easily evaded.
It is impossible to reconcile or combine the two systems. Either the
old theory must be maintained, under which the State attempts though
vainly to guarantee both to stockholders and creditors that there is
one hundred dollars of actual value behind each one hundred dollars
of par value of capital stock, or some other system must be adopted
which, while not being chargeable with the vagueness and laxity of
the newer legislation of other States, will permit a share of capital
stock, although nominally one hundred dollars in value, to represent,
as the word implies, only a certain share or proportion, which may
be more or less than par, of whatever net assets the corporation may
prove to have. Under a system of this sort the State machinery will
only provide that the stockholders and, perhaps, the creditors, may at
all times have access to the corporation records or returns in such
manner as clearly to show, both at organization and thereafter, all of
the property or assets of which such share of capital stock actually
represents its proportion of ownership.
The question of monopoly the committee does not conceive to have
been left to its consideration. The limitations now existing on the
capitalization of business corporations are, no doubt, attributable
to the sentiment which has always existed against monopoly, but it
is clearly the policy of the commonwealth, as shown in its
recent legislation, to do away with the attempt to prevent large
corporations, simply because they are large. Moreover, it is
apprehended that the question of monopoly, or rather of the abuse of
the power of large corporations, does not result necessarily from the
size of corporations engaged in business throughout the United States.
In the opinion of the committee, some confusion has been created,
in the discussion of the form of so-called trust legislation, by a
failure to appreciate that its real object is not to protect the
investor, who can or should learn to take care of himself, or the
creditor who has already learned to do so. The real purpose of such
legislation is the protection of the consumer. In other words, there
is no reason for an arbitrary limitation of capitalization unless it
can be used as a means of creating a monopoly which will influence the
price of commodities. In the opinion of the committee, the question
of capitalization is not a contributing factor in the fight for a
monopoly. The United States Steel Company would have no greater and
no less a monopoly of the steel business if it were organized with
one-half of its present capitalization. The Standard Oil Company has
a very conservative capitalization, and yet it is the most complete
monopoly of any industrial corporation in this country.
It has not been the intention of the committee to draft a law which
will be favorable to the organization of large corporations popularly
known as "trusts." Inasmuch as the recommended law requires taxes to
be paid upon the full value of the corporate franchise, which is, at
least to some extent, measured by the amount of capitalization, there
will always be this very potent reason for keeping capitalization
at the lowest possible point. Indeed, it is apprehended that the
organization of a corporation large enough to control a monopoly of
any staple article is practically prohibited by the provisions of the
recommended law as to taxation, which will be referred to in greater
detail in part II of this report. At all events, it is no better for
the State to leave its citizens at the mercy of the large corporations
created by other less careful sovereignties, than to permit the
organization of corporations adequate to the demands of modern
business under its own laws, subject to its own more careful
regulation and control. Under our State and Federal system it is
practically impossible for any one State, by its own laws, to control
foreign corporations, but so far as possible at present the committee
has sought to subject them to the same safeguards of reasonable
publicity and accurate returns, both as to organization and annual
condition, as the State requires of its own corporations. The simple
requirement of an annual excise tax, based on the capitalization of
such foreign corporations, will serve to bring them under the control
of this State and the way will be open for their further regulation if
desirable. This annual tax has been levied upon the same principle
as the corresponding tax paid by home corporations. The State should
impose no greater burden on foreign corporations than on its own, but
should, so far as possible, subject them to its own laws.
The recommendations of the committee have, therefore, been controlled
by three principles, which may be summarized as follows:
_First_.--The relation of the State to the corporation.
The committee would repeat its opinion that, so far as purely business
corporations are concerned, and excluding insurance, financial and
public service corporations, the State cannot assume to act, directly
or indirectly, as guarantor or sponsor for any organization under
corporate form. It can and should require for itself and for the use
of all persons interested in the corporation, the fullest and most
detailed information, consistent with practical business methods,
as to the details of its organization, the powers and restrictions
imposed upon its stockholders and as to the property against which
stock is to be or has been issued. Provision is, therefore, made
in the law drafted by the committee for the organization of such
corporations for any lawful purpose other than for such purposes as
the manufacture and distilling of intoxicating liquors or the buying
and selling of real estate which it has been the consistent policy of
the commonwealth to except from incorporation under the general law.
Any desired capitalization above a minimum of one thousand dollars may
be fixed. Capital stock may be paid for in cash or by property. If it
is paid for in cash, it may be paid for in full or by instalments, and
a machinery has been created for protecting the corporation against
the failure of the subscribers to stock to pay the balance of their
subscriptions. If stock is paid for by property, the incorporators and
not the State are to pass upon its value. Before any stock, however,
can be issued for property, a description of the property sufficient
for purposes of identification, to the satisfaction of the
Commissioner of Corporations, must be filed in the office of the
Secretary of the Commonwealth. This document becomes a public record
and may be consulted by any one interested in the corporation. If the
officers of a corporation make a return which is false and which is
known to be false, they are liable to any one injured for actual
damages. If a full and honest description is made of property against
which stock is issued, a stockholder cannot complain because of his
failure to inform himself by personal examination or investigation of
the value of the property in which he is, or contemplates becoming, an
investor.
_Second_.--Duties of the State in regulating the relations between the
corporation and its officers and stockholders.
The second principle upon which the committee has acted in its
specific recommendations is this: that the State should permit the
utmost freedom of self-regulation if it provides quick and effective
machinery for the punishment of fraud, and gives to each stockholder
the right to obtain the fullest information in regard to his own
rights and privileges before and after he becomes the owner of stock.
Upon this theory the committee has recommended a law which permits the
corporation to determine the classes of its stock and the rights and
liabilities of its stockholders. The recommended law provides for
increasing or decreasing the amount of capital stock upon the
affirmative vote of a majority of its stockholders. For the protection
of a minority interest of stockholders it requires a two-thirds vote
to change the classes of capital stock or their voting power, to
change the corporate name or the nature of the business of the
corporation, or to authorize a sale, lease, or exchange of its
property or assets.
Directors are made liable, jointly and severally, for actual damages
caused by their fraudulent acts, but no director is made so liable
unless he concurs in the act and has knowledge of the fraud. The
liability of stockholders is limited to the payment of stock for
which they have subscribed, to debts to employees, and in cases of
a reduction of capital when they concur in the vote authorizing
a distribution of assets which results in the insolvency of the
corporation. An attempt has been made to give to the stockholder an
opportunity of securing for himself the fullest information on all
points touching his interest.
_Third_.--The relation of the State to foreign corporations.
The committee has been guided upon this subject by the theory that the
treatment of foreign corporations by the Commonwealth should, so far
as practicable, be the same as of its own, particularly so far as
concerns the liabilities of officers and stockholders, the statements
filed with the State authorities for the information of stockholders
or others as to their capitalization and the methods adopted of paying
in their stock, and the annual reports of condition required for
taxation purposes or otherwise. On the same principle a nominal
franchise tax is annually imposed corresponding to the tax imposed by
the State on its own corporations and made approximately proportional
in amount.
A few broad general principles are almost universal in American
legislation on the subject. Ordinary business corporations are now
almost universally created under general law, and indeed by the
constitutions of many States are forbidden to be created by special
charter.[1] There is generally, however, no limitation by constitution
on the size or capitalization, though the duration of corporations is
frequently limited to twenty, thirty, or fifty years; and there is
generally no limitation on the nature of the business that may be
done, except, in a large number of States, banking and insurance, and
except that there is in many States, as, notably, Massachusetts, a
prejudice against land companies, so that they may not be created
without a special charter.
[Footnote 1: See Stimson's "Federal and State Constitutions," pp. 295,
315, 316.]
The liability of stockholders is commonly limited to the shares of
stock actually held or such portion of them as may not have been paid
up by the stockholder in cash or property value. Massachusetts and the
more conservative States attempt to provide that the stock shall be
actually paid up in money or in property of the real value of money,
at par. New Jersey, New York, Maine, West Virginia, and the laxer
States, practically allow their directors to issue stock for anything
they choose--labor, contracts, property, or a patent right--and their
judgment on the value of such property is held to be final in the
absence of fraud. Corporations are usually taxed, like individuals,
on their tangible, visible property, real and personal, and in many
States there is also a franchise tax on their shares.[1] There is a
frequent limitation that the corporate indebtedness shall not exceed
the amount of the capital stock.[2] No States, except Vermont and
New Hampshire, seem now to have any limitation on the amount of the
capital stock, or if there be a limitation, as of one million dollars
at the time of formation, the corporation may subsequently increase
its stock to any amount.[3] Michigan, however, had a limitation of
five million dollars as to manufacturing or mercantile corporations,
and two million five hundred thousand dollars as to mines; while
Alabama and Missouri had a general limit of ten million dollars. The
general tendency is clearly to have no limitation whatever. Commonly
only a nominal proportion of the capital stock is to be paid in before
the company begins business, but the stockholders are always liable
to creditors for the amount unpaid. As already remarked, stock may
usually be paid up in property, labor, or services, or, indeed,
any legal consideration; and though most States provide that such
property, etc., shall be taken at its actual cash value, such laws,
except in Massachusetts, are not believed to be effectual.
[Footnote 1: A valuable report on this subject, brought down to 1903,
prepared by F.J. MacLeod, of Massachusetts, will be found in the
"Report of the Committee on Corporation Laws," above referred to, at
pp. 207-295.]
[Footnote 2: MacLeod, pp. 165-166.]
[Footnote 3: MacLeod, p. 169.]
That stockholders are individually liable to the extent of the unpaid
balance on their stock is merely a statutory statement of the ordinary
rule in equity. It is, therefore, law without statute. Apparently only
Indiana and Kansas now impose a double liability, the law in Ohio
having been recently altered by constitutional amendment. In several
States, however, they are liable for debts due for labor; in
California they are absolutely liable for such proportion of all
liabilities of the corporation as their stock bears to the total
capital stock, while in Nevada they are expressly exempted from any
liability whatever.
We can trace two other decided tendencies in recent legislation about
corporations. First, the increasing effort to bring about publicity of
all such matters as well as of the annual books and accounts, well
exemplified in the Massachusetts statute; second, the usual strong
prohibitions against consolidations to permit trusts or contracts to
further monopoly. There has also been a still more recent line of
legislation to prevent corporations from holding stock in other
corporations, or, at least, in competing companies; and to prevent alien
corporations from holding land.[1] Under the strict common law no
corporation could own or hold stock in another corporation or in itself.
This has been completely departed from in practice in this country, and
though not affirmatively recognized in most statutes--the Massachusetts
statute, for instance, carefully avoids providing that the corporation
may own stock in other companies--yet the practice has been universally
ratified by the courts, if not by the implications of legislation. This
new tendency to forbid it therefore is merely a return to common-law
doctrine. Thus,[2] in 1903 only five States--Connecticut, Delaware,
Maine, New Jersey, and Pennsylvania--provided generally that a
corporation might own stock in another corporation; two States--Indiana
and Minnesota--so provided as to manufacturing or mining companies. In
New York, Ohio, and other States, a corporation could only own stock in
another corporation engaged in a similar business, or a business useful
or subsidiary, or in a corporation (New York) with which it was legally
entitled to consolidate; but the tendency of recent legislation is
precisely opposite on this point, forbidding stockholding by all
corporations in similar or competing companies, or more specifically
forbidding stockholding in similar or competing companies, as well as
stockholding by railroads in railroad companies.
[Footnote 1: See below, chap. 16.]
[Footnote 2: MacLeod, p. 203.]
The practice of permitting the free holding of stock by corporations,
and especially by holding corporations, has been undoubtedly harmful
to the public, and to the public morals, and has been the main cause
making possible the speedy acquisition of immense private fortunes.
The stockholding trust or the device by which (as in the Rock Island
Railway system) a corporation is created for the purpose of holding
half the stock of the real corporation and then possibly a third
corporation, still to hold half the stock in the second, each of them
parting with the other half, obviously makes possible the control
of immense properties by persons having a comparatively small real
interest. It is a mere arithmetical proposition, for instance, in the
case mentioned, that whereas in one corporation it takes one-half of
the stock to control it, the first holding company will enable it
to be controlled by one-fourth and the second by one-eighth of the
original stock. Legislation should properly be much more drastic on
this point; but indeed our whole corporation legislation seems rather
to have been drawn by able lawyers with a view of protecting the
corporation or the person who profits by the abuse thereof, than with
a real desire to apply intelligent and practicable remedies to the
situation. Thus, until very recently, if now, there has been no
legislation along this great line of preventing the holding and
governing of corporations by such a system of Chinese boxes; nor has
there been up to date any legislation whatever along the other great
line of excluding objectionable corporations from doing business in
the State, which any State has, except as to interstate commerce
corporations, the unquestioned right to do. This right will, of
course, disappear entirely if the recommendation of the present
administration for a general Federal corporation law be adopted. The
invention of the corporate share enables a clever few to control the
many; a small minority to control the vast bulk of the real interest
of all property in the country; the problem has obviously proved too
great for popular intelligence, for so far little real legislation in
the people's interest has been effected. Like most ancient popular
prejudices, however, the blind instinct against corporations, common
among our Populists, has a strong historical basis; it comes directly
down from the prejudice against Mortmain, the dead hand, and from that
against the Roman law; for corporations were unknown to the common
law, and legislation against Mortmain dates from Magna Charta
itself.[1]
[Footnote 1: The legislation against trusts, as it existed up to 1900,
will be found at the back of vol. II of the "Reports of the United
States Industrial Commission."]
It would perhaps be possible for Congress to pass an act forbidding
any corporation to carry on its business outside of the State where it
is chartered, unless, of course, it got charters from other States;
certainly the States themselves might do so. This remedy also has
never been tried, and hardly, in Congress, at least, been suggested.
Yet it were a more constitutional and far safer thing to do than
to cut the Gordian knot by a Federal incorporation act, which will
forever securely intrench the trusts against State power. Even if New
Jersey or the Island of Guam goes on with its lax corporation laws,
permitting its creatures to do business all over the land without
proper regulation, this power could thus be instantly taken away from
it by such an act of Congress, even if the States themselves remained
unready or unwilling to act. Then no corporation could be "chartered
in New Jersey to break the laws of Minnesota," even if Minnesota
permitted it.
Trusts started as combinations and ended as corporations. They began
as State corporations, subject both to State and Federal control and
regulation; they may end as Federal corporations subject to no control
except by Congress. It is too early yet to predict the result, but
one assertion may be hazarded, that just as the original Sherman Act
against trusts compelled the formation of trusts, so this proposed
Federal legislation will compel the formation of Federal trusts, by
all but the most local of business corporations.
As to public-service corporations, both the legislation and the
principle on which it rests are, of course, quite different. There is
no serious difference of opinion that the stock should be paid up in
actual money at par nor that dividends at the expense of the public
should not be paid on watered stock. More and more the States are
putting this sort of legislation into effect. There is also the
general provision discussed in a former chapter that the rates or
charges of all such corporations may be regulated by law or ordinance;
and by far the most notable trend of legislation in this particular
has been that franchises of corporations should be limited in time and
should be sold at auction to the highest bidder. Thus, by a California
law of 1897, all municipal franchises must be sold for not less than
three per cent. of the gross receipts and after a popular vote or
referendum on the question. It has been matter of party platform for
some years that all franchises should thus be submitted to the local
referendum. That is, all exclusive franchises whereby rights in
the streets, or other rights of the public, are given away to a
corporation organized for purposes of gain. In Louisiana, street
railway franchises may only be granted on petition of a majority of
the abutters, and must be sold at auction for the highest percentage
of gross receipts, and so substantially in South Carolina. In
Washington, an elaborate statute against discrimination by
public-service corporations was passed by the initiative; but as the
statute itself omitted the enacting clause the law has been held to be
of no effect. Lastly, we will note as the most recent tendency, a
more intelligent limitation by the States themselves of corporations
organized in and by other States, frequently denying to such the right
of eminent domain or, as in Massachusetts, to do business or make
contracts without making full annual returns and submitting in all
respects to the State jurisdiction. Under recent decisions of the
Supreme Court, however, this power does not extend to any corporation
doing an interstate commerce business; and, of course, under the
Federal Incorporation Act, proposed by the present administration, the
States would be completely deprived of such power, except, possibly,
in so far as Congress may choose to relinquish it to them. How far,
independent of such permission by Congress, the ordinary police power
would extend, it will be almost impossible to define.
XI
LABOR LAWS
Much of the law affecting employers or combinations of capital has
its correlative, or rather equivalent, in combinations of labor; but
leaving the matter of combinations for the next chapter, and reserving
for this only statutes affecting the individual, we must again insist
upon that great cardinal liberty of labor under the English common
law, which already gives it a certain privilege and dispenses it from
the laws affecting ordinary contracts, that is to say: _the contract
of labor, alone of contracts under the English law, may not be
enforced_. When we say "enforced" we of course mean that the laborer
may not be compelled to carry it out; what, in the law, we call
specific performance. This is a matter of such essential importance
that it cannot be too strongly accentuated, as it is surprising how
ignorant still the popular mind is upon this subject, how little it
realizes labor's peculiar advantage in this particular. But it has
always been true of the English and American law, at least since that
early labor legislation sketched above in chapter 4 which came to
a final end at least as early as Elizabeth, that no man could be
compelled to work--except, of course, by way of punishment for
crime--and more than that, he could not even be compelled to work or
carry out a specific contract of labor to which he had bound himself
by all possible formality. "Specific performance" is the peculiar
process of a court of chancery, and at this point the resistance of
the freemen of England we have traced in earlier chapters became
absolutely effectual; that is to say, the court of chancery was never
allowed to extend its strong arm over the labor contract. Even that
famous first precedent of "government by injunction" discussed by us
above (page 74) was resisted in early times, the precedent was not
followed, it fell into complete desuetude, and it remained for the
case of Springhead Spinning Company _v_. Riley,[1] decided as late as
1868, to extend the injunction process to the prohibition of a strike.
And in more recent labor cases it has been found that the line between
prohibiting a man from leaving his employment, even under peculiar
circumstances, and ordering him to proceed with his contract
of employment and to carry it out, is extremely fine, if not
indistinguishable.[2]
[Footnote 1: L.R. 6 Eq. 551.]
[Footnote 2: For instance, the injunction against the employees of the
Southern California Railroad requiring defendants to perform all
their regular and accustomed duties "so long as they remain in the
employment of the company" (62 Fed. 796), has always been severely
criticised.]
Now, the reason of this great principle (peculiar, I think, to
Anglo-Saxon law) lies at its very root. It is the principle of
personal liberty again. To English notions, and to English courts,
indefinite labor continued for an indefinite time, or applied to an
indefinite number of services, is indistinguishable from slavery; and
compulsory labor even under a definite labor contract, such as to work
for a week or a month or a year, or in limited directions, as, for
instance, to work at making shoes or weaving cloth, when enforced by
the strong arm of the law, smacked too much of slavery to be tolerable
by our ancestors. Thus it is that, alone of all contracts, if a man
sign an agreement to work for us to-day, he may break it to-morrow and
will not be compelled to perform it; our only redress is to sue him
for damages, and this again because we can only act under the common
law. Chancery at this point at least is forbidden to take cognizance
of matters affecting personal liberty and labor; and the common law,
as has been said, "sounds only in damages." It is only chancery that
can compel a man to do or not to do some thing or to carry out a
contract.
The other basic principle affecting all questions of labor law is that
of freedom of trade or labor, correlative to the principle of freedom
of contract as to property right, and, indeed, embodying that notion
also. That is to say (perhaps I should say, to repeat) that an
Englishman, an American, has a right to labor where and for whom and
at what he will, and freely to make contract for such labor, and
freely to exercise all trades, and not to be combined against by
others, or competed with by a monopoly favored by the state. These
last two clauses, of course, belong to our next chapter. This right of
contract is not peculiar to the English law, as is the right not to be
compelled to personal service, and is much better understood; though
it is still earnestly argued by many advocates of union labor that
there is no real freedom of contract, or, at least, equality of
contract, between the employer and the employee; that therefore
"collective bargaining" should be allowed, and that therefore, and
furthermore, the wiser or the better organized should be permitted to
combine to control the contract or the labor of the individual. But if
we hold thoroughly these two principles before our mind we shall have
the key to the understanding of our labor legislation; and if we add
to that the third principle against conspiracy, we shall have the key
to our more complicated legislation against trusts and blacklists and
boycotts, and to an understanding of the more difficult questions,
affecting labor in combination and the regulation of labor unions.
That there has been a vast deal of interference, or attempted
interference, with these principles in modern American legislation
goes without saying. The motive or force behind such legislation has
pretty clearly two sources: First, the behest or desire of the "Labor
interest" or organized labor, the trades-unions themselves; and when
we analyze these and their constituents we shall find that it really
means only mechanical or industrial labor, not farm or agricultural
labor (which is still in numbers the greatest body of labor in the
United States), nor, as yet, domestic service labor, nor what the
census calls "personal service," which is probably next in numerical
importance, nor clerks; it is a comparatively small class in numbers,
this class of skilled mechanical or manufacturing labor, that has
brought about this immense mass of legislation of our modern States
aimed at improving their own labor conditions; and which therefore,
necessarily perhaps, interferes with personal liberty as to the labor
contract, or, at least, seeks to regulate it.
The other great influence is rather a motive than a source; we may
call it, for want of a better word, the sentimental or the altruistic
motive--the moral motive; the forces behind it being mainly of a
religious or moral origin, philanthropists, students of ethics, and
recently, to a great extent, the women and the women's clubs. The
activity of these great forces may be clearly traced through the
nineteenth century. It first belonged to the antislavery movement,
which directly and historically led to the women's suffrage movement,
owing to the fact that at a great antislavery convention in England
a woman delegate was refused a seat upon the platform, while her
husband, a comparatively obscure person, was recognized as the
leading representative from America; and ending of late years in
the prohibition movement, to regulate or prohibit the trade in
intoxicating liquors, and to exclude the canteen from the army. But in
the latest years, in these last very few years indeed, the forces of
this category have devoted a large proportion of their "categorical
imperative" to labor conditions and the labor contract.
These great forces are entirely impatient of constitutional principles
and somewhat indifferent as to the law, while always very desirous
of making new statutes themselves. But their combined influence is
enormous, so much so that almost any cause to which they devote
themselves will in the long run succeed; unless, indeed, their
attention is diverted to some other need, for it may be suggested that
they are somewhat fickle of purpose. For example, their success in
the antislavery movement makes the American history of the nineteenth
century; in the prohibition movement they were, in the middle decades
of that century, almost entirely successful, and while apparently
there was a set-back in the twenty years of individualistic feeling
which marked the growth of the Democratic party to an equality with
its great rival, the movement of late years seems to have taken on
renewed strength, probably on account of the so-called negro question
in the South. And while, as to votes for women, they seem to have made
no progress beyond the adoption twenty years ago of women's suffrage
in four new Western States and Territories, this last year, it must be
admitted, the movement has taken on a new strength in sympathy with
the agitation in England. There are now already symptoms of a fourth
cause--the reform of marriage, divorce and the laws regulating
domestic relations, and the control of children. It is possible that
these matters will be taken up actively in coming decades, and we,
therefore, reserve them for a future chapter; this new effort is
itself partly bound up with the women's suffrage movement, and in its
latest manifestation--that of proposing legislation preventing
men from marrying without permission from the state--it is a most
picturesque example of that absence of constitutional feeling we have
just adverted to.
Now this freedom-of-contract principle is one which, of course,
legislation attempting to regulate the labor contract is peculiarly
liable to "run up against"; and it is, for this reason, not only or
chiefly because "labor" is opposed to the Constitution or because the
courts are opposed to "labor," that so many statutes, passed at
least nominally in the interest of labor, have been by them declared
unconstitutional. For instance, it is a primary principle that an
English free man of full age, under no disability, may control his
person and his personal activities. He can work six, or four, or
eight, or ten, or twelve, or twenty-four, or no hours a day if he
choose, and any attempt to control him is impossible under the
simplest principle of Anglo-Saxon liberty. Yet there is possibly a
majority of the members of the labor unions who would wish to control
him in this particular to-day; and will take for an example that
under the police power the state has been permitted to control him in
matters affecting the public health or safety, as, for instance, in
the running of railway trains, or, in Utah, in labor in the mines. But
freedom of contract in this connection results generally from personal
liberty itself; although it results also from the right to property;
that is to say, a man's wages (or his trade, for matter of that) is
his property, and the right of property is of no practical use if you
cannot have the right to make contracts concerning it.
The only matter more important doubtless in the laborer's eye than the
length of time he shall work is the amount of wages he shall receive.
Now we may say at the start that in the English-speaking world there
has been practically no attempt to regulate the _amount_ of wages. We
found such legislation in mediaeval England, and we also found that
it was abandoned with general consent. But of late years in these
socialistic days (using again socialistic in its proper sense of that
which controls personal liberty for the interest of the community or
state) it is surprisingly showing its head once more. In Australasia
and more recently in England we see the beginning of a minimum wage
system which we must most carefully describe before we leave the
subject. There was in the State of Indiana a law that in ordinary
unskilled labor in public employment there should be a minimum wage of
fifteen cents per hour or twenty-five cents for a man and horse--since
declared unconstitutional by Indiana courts: while to-day such labor
receives a minimum of two dollars per day in California and Nebraska,
one dollar and a quarter in Hawaii, three dollars in Nevada, and
"the usual rate" in Delaware and New York,[1] and we are many of us
familiar with the practice of towns and villages in New England or New
York in passing a vote or town ordinance fixing the price of wages
at two dollars per day, or a like sum; but this practice, it must be
remarked, is in no sense a _law_ regulating wages; it is merely the
resolution or resolve of an employer himself, as a private citizen
might say that he would give his gardener fifty dollars a month
instead of forty. And, on the other hand, the Constitution of
Louisiana provides that the price of wages shall never be fixed by
law. Now it will be remembered that the Statutes of Laborers of the
Middle Ages, when they regulated the price of wages, led directly to
the result that they made all strikes, all concerted efforts to get an
increase of wages, unlawful and even criminal; in fact, it may be said
that this attempt to bind the workmen to a wage fixed by law was the
very cause of the notion that strikes were illegal, which, indeed, was
the English common law down to early in the last century. Moreover,
when an English mediaeval peasant refused to labor for his three pence
a day he might be sent to gaol by the nearest justice of the peace,
as, perhaps, some employers would like to do to-day in our South, and
which resulted--if not in slavery--in precisely that condition which
we call "peonage." Economically speaking, the attempt to regulate
wages was, of course, a mistake; politically speaking, it was
universally unpopular, and no class was more desirous than the working
class themselves of getting rid of all such legislation, which they
did in France at the French Revolution, and in England nearly two
centuries earlier. Only socialists should logically desire to go back
to the system, and in the one modern English-speaking State which is
largely socialistic--New Zealand--it is said that the minimum wage law
has had the effect that a similar resolve has had in Massachusetts
towns: to drive all the old men and all the weaker or less skilled out
of employment entirely, and into the poorhouse;[2] for, at a fixed
price, it is obvious that the employer will employ only the most
efficient labor, and the same argument causes some of their more
thoughtful friends to dissuade the women school-teachers in New York
from their present effort to get their wages or salaries fixed by law
at a price equal to that paid a man.[3]
[Footnote 1: See above, p. 161; below, p. 213.]
[Footnote 2: In the old town of Plymouth the chairman of the selectmen
asked what, he should do under vote of town meeting requiring him to
pay two dollars a day for all unskilled labor employed by the town.
"We have," he said, "about one hundred and twenty old men in Plymouth,
largely veterans of the Civil War. We have been in the habit of giving
them one dollar and a quarter per day. Under this two-dollar vote we
cannot do it without bankrupting the town." He was advised to go ahead
and still pay them the dollar and a quarter per day and take the
chance of a lawsuit, which he did, and so far as the writer knows no
lawsuit has ever been brought; but in all cases that would not be the
result.]
[Footnote 3: This is law in Utah; but nevertheless a letter from a
State government official informs me that women are willing to [and
do?] work for a smaller salary.]
A principle somewhat akin to that of a vote of a town fixing the rate
of wages is the recent constitutional amendment in the State of New
York (see above, p. 161) which validated the statute requiring that in
public work (that is to say, labor for the State, for cities, towns,
counties, villages, school districts, or any municipality of the
State), or _for contractors employed directly or indirectly by the
State or such municipality_, that rate shall be paid which is usual
at the time in the same trade in the same neighborhood. This was the
earliest statute, which was declared unconstitutional (see above, p.
161). The lack of interest in this tremendously important matter is
shown in the fact that not one-third of the voters took the trouble
to vote on the amendment at all, and that for three days after the
election no New York newspaper took notice of the fact that the
amendment had passed. Up to this constitutional amendment the courts
of New York, as well as those of California and even of the United
States, had resented with great vigor the attempt of statutes to make
a crime the permitting of a free American citizen to work over eight
hours if he liked so to do. But in New York at least (now followed
in Delaware, Maryland, and Oklahoma) it is now settled that so much
interference even with the rate of wages may be allowed, and as the
percentage of public employment is, of course, very large--covering as
it does not only all public contractors, but all labor in or for gaols
or public institutions--it will necessarily, it would seem, drag with
it a certain practical regulation of private industry corresponding to
the public rules.
In England, the New Zealand experiment has been tentatively begun;
that is to say, in the last radical Parliament, in the autumn of 1909,
the law was enacted, already referred to, for fixing wages by mixed
commission (see above, p. 159); but otherwise than as above there is
in the States and Territories of the United States, and in the United
States itself, no regulation of wages, even of women or children, and
no attempt, as yet, at a minimum wage law.
When we come to hours, the matter is very different. In the first
place, we must be reminded that without a constitutional amendment
you cannot have any direct or indirect legislation, as to general
occupations, on the hours of labor of a man of full age.[1] You can
have regulation of the hours of labor of a woman of full age
in general employments, by court decision, in three States
(Massachusetts, Oregon, and Illinois), the Massachusetts decision,
carelessly rendered in 1876, without citing any authority whatever,[2]
being based apparently on a vague notion of general sanitary reasons,
without argument or apparently due consideration of the historical and
constitutional law; but the Oregon case,[3] decided both by the State
Supreme Court and by the Federal Court in so far as the Fourteenth
Amendment was concerned, after most careful and thorough discussion
and reasoning, reasserted the principle that a woman is the ward of
the state, and therefore does not have the full liberty of contract
allowed to a man. Whether this decision will or will not be pleasing
to the leaders of feminist thought is a matter of considerable
interest. A similar statute in Illinois had been declared
unconstitutional twenty years before, largely on the ground that
to limit or prohibit the labor of woman would handicap her in her
industrial competition with man, pointing out also that the Illinois
Constitution itself prescribes and requires that the rights of the
sexes should in all respects be identical, save only in so far as jury
and militia service and political rights were concerned. A new statute
since the Oregon decision has been passed in Illinois and the law was
sustained, reversing the older case. On the other hand New York courts
take a position squarely contrary,[4] and so in Colorado.[5] The
constitutional justification of these decisions must probably be
that the health not only of the women themselves, but of the general
public, or at least of posterity, is concerned, for, as we shall find
more particularly when we discuss general legislation on the police
power, to justify an interference with personal liberty of freemen
there must, under English ideas, be a motive based upon the health,
safety, and well-being of all of the whole community, not merely
of the particular citizen concerned. He has the right to work in
unhealthy trades at unhealthy times, or under unhealthy conditions,
just as he has the right to consume unhealthy food and drink. If it be
prohibited, it must be prohibited when it has a direct relation to the
general welfare. For example, a railway engineer may be prohibited
from working continuously for more than sixteen hours, for that is
a direct danger to the safety of the public; but a man may not
be prohibited from taking service for long hours as stoker on a
steamship, although the life of a stoker be a short one and not over
merry. Apparently, however, a woman can be; and indeed there have for
a long time been laws prohibiting the labor of women in England and
regulating their hours. But then there are laws prohibiting women from
serving in immoral occupations, or occupations which are supposed to
be dangerous to their morals, as, for instance, many States have laws
against the serving of liquor, or even of food, by women or girls in
places or restaurants where liquor is served, or for certain hours, or
in certain places. Very conceivably a law might be passed prohibiting
women and girls from the selling of programmes, or attending upon dime
museums, or even selling newspapers, or being district messengers;
but, as we all know, there are women cabmen in Paris. Would
legislation prohibiting such employment to women be unconstitutional?
There is already a considerable amount of it. The cases are
conflicting, the earlier view, and the view taken in the South and in
at least one Federal court, being that such laws are unconstitutional.
The modern doctrine, backed up by that public opinion which we have
above described as the ethical force, would seem to sustain them. The
truth is probably that the legislature must be the sole judge of the
expediency of such legislation; where the court can see that it does
bear a direct relation to the morals of the young women concerned,
or the morals of the general community, it will be sustained as
constitutional under the police power, although to that extent
interfering with the personal liberty of women and with their means of
getting a livelihood.
[Footnote 1: Georgia and South Carolina have such law requiring
sixty-six and sixty hours a week respectively in cotton and woollen
manufacturing; but their constitutionality has never been tested. For
_public_ work, see below.]
[Footnote 2: Commonwealth _v._ Hamilton Manufacturing Co. 120 Mass.
383.]
[Footnote 3: Muller _v._ Oregon, 208 U.S. 412. So in Pennsylvania:
Commonwealth _v._ Beatty, 23 Penn. C.C. 300.]
[Footnote 4: People _v._ Williams, 81 N.E. 778.]
[Footnote 5: Bucher _v._ People, 93 Pac. 14.]
As to children there is, of course, no question. Laws limiting their
labor are perfectly constitutional, and some child-labor laws exist
already in all States and Territories except Nevada. The only dispute
on the child-labor question is whether such legislation should be
Federal, or rather whether the Constitution should be so amended as to
make Federal legislation possible. Practically this would meet with
a very much wider opposition than is commonly supposed. The writer,
acting as chairman of the National Conference of Commissioners on
Uniformity of Legislation appointed under laws of more than thirty
States of the Union and meeting in Detroit, Michigan, in 1895, brought
this matter up under a resolution of the Legislature of the State of
Massachusetts requesting him to do so. Nearly every Southern delegate
and most of those from the West and from the Middle States were on
their feet at once objecting, and the best he could do was to get
it referred to a committee rather than have the Commonwealth of
Massachusetts summarily snubbed. This committee, of course, never
reported.
Undoubtedly climatic effects, social conditions, and dozens of other
reasons make it difficult, if not unwise, to attempt to have the same
rules as to hours of labor in all the States of our wide country. Boys
and notably girls mature much earlier in the South than they do in
the North; schooling conditions are not the same, homes are not so
comfortable, the money may be more needed, the general level of
education is less. Doubtless there are still areas in the South where
on the whole it is better for a child of fourteen to be in a cotton
mill than anywhere else he is likely to go, schools not existing. The
Southern delegates resented interference with their State police power
for these reasons. The Massachusetts Legislature, on the other hand,
had in mind the competition of Southern mills, with cheap child labor,
quite as much as any desire to benefit the white or negro children
of the South; but the writer's experience convinced him that a
constitutional amendment on this point is impossible, although one has
been repeatedly proposed, notably by the late Congressman Lovering of
Massachusetts, and such an amendment is still pending somewhere in
that limbo of unadopted constitutional amendments for which no formal
cemetery seems to have been prepared.
Even as to men, the labor of the Southern States is notably different
from the labor of Lowell or Lawrence, Massachusetts, or even
Cambridge; while on the Panama Canal or in most tropical countries the
ordinary laborer likes to pretend that he is working eighteen hours
a day, although most of the time is spent in eating or sleeping.
Nevertheless, under the Federal law, all employees at Panama have
to be given the eight-hour day required by the Federal statute, the
Supreme Court having upheld that act as constitutional.
It is curious to note, in passing, the alignment of our courts upon
this subject of hours of labor and general interference with the
freedom of contract of employment. The Western and Southern States
are most conservative; that is to say, most severe in enforcing the
constitutional principles of liberty of contract as against any
statute. The courts of the North and East are more radical, and the
courts of Massachusetts and the United States most radical of all. I
account for this fact on the ground that where the legislatures are
over-radical, the courts tend to react into conservatism, and as the
Western legislatures try many more startling experiments than are
usually attempted in Massachusetts or New Jersey, the more intelligent
public opinion has to depend on the courts to apply the curb.
All this, of course, is a great mistake; for it forces undue
responsibility on the courts, at least tends to control in an improper
way the appointment of judges, and at best forces the most upright
judge into a position where he should not be put--that of being a kind
of king or lord chamberlain, with power to set aside improper or wrong
legislation.
With these preliminary remarks we are now prepared to examine the
legislation as it exists to-day (1910); cautioning our readers that
this subject, as indeed all others concerning labor legislation, is so
often tinkered in all our States as to make our statements of little
permanent value, except that restrictions once imposed are rarely
repealed. We may assume, therefore, that the law is at least as
radical as it is herein presented.
The hours of labor of _adults_, males, in ordinary industries remain
as yet unrestricted by law in any State of the Union; but several
States have laws making a certain number of hours a day's work in the
absence of contract;[1] and New York and a few other States have an
eight-hour day in "public" work--that is to say, work directly for
the State or any municipality or for a contractor undertaking such
work.[2]
[Footnote 1: Thus eight hours (California, Connecticut, Illinois,
Indiana, Missouri, New York, Ohio, Pennsylvania, Wisconsin); ten hours
(Florida, Maine, Michigan--with pay for overtime--Minnesota, Montana,
Maryland--for manufacturing corporations--Nebraska, New Hampshire,
Rhode Island, South Carolina--in cotton and woollen mills--in New
Jersey), fifty-five hours a week in factories; in Georgia eleven hours
in manufacturing establishments, or from sunrise to sunset by all
persons under twenty-one, mealtimes excluded (see below). But these
laws do not usually apply to agricultural or domestic employment or to
persons hired by the month.]
[Footnote 2: In public work, that is, work done for the State, or any
county or municipality or for contractors therefor, the eight-hour day
is prescribed (California, Colorado, Delaware, District of Columbia,
Hawaii, Idaho, Indiana, Kansas, Maryland, Massachusetts, Minnesota,
Montana, Nebraska, Nevada, New York, Oklahoma, Oregon, Pennsylvania,
Porto Rico, Utah, Washington, West Virginia, Wisconsin, Wyoming, and
the United States). But the provisions for overtime and compensation
for overtime differ considerably.]
The labor of women (in mechanical trades, factories and laundries in
Illinois, or in mercantile, hotel, telegraph, telephone, etc., as
well, in Oregon) for more than a limit of ten hours per day in
Illinois, or nine in Oregon, is prohibited and made a misdemeanor; and
both these statutes have been held constitutional. But in many
other States the hours of labor in factories or manufacturing
establishments, even of adult women, are now regulated; while the
labor of children, as we shall find, is regulated in nearly all. Thus,
Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Nebraska, New Hampshire, New York, North Dakota, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Virginia,
and Washington have a ten-hour day in all manufacturing or mechanical
employments for women of any age, which in Connecticut, Massachusetts,
Michigan, Minnesota, Missouri, Nebraska, Oregon, Pennsylvania, and
Washington extends to mercantile avocations also, in Louisiana only
to specified dangerous trades; in Wisconsin, eight hours; and in
Connecticut, Maine, Minnesota, New Hampshire there may not be more
than fifty-eight hours a week, or in Massachusetts and Rhode Island,
fifty-six, and in Michigan and Missouri, fifty-four. Arizona has an
eight-hour day in laundries.
And these laws are extended to specified occupations, viz., in
Connecticut to manufacturing, mechanical, and mercantile; in Illinois,
mechanical, factory, or laundry; in Louisiana, unhealthful or
dangerous occupations except agricultural or domestic; in Maine,
mechanical and manufacturing except of perishable products; in
Maryland, special kinds of manufactories; in Massachusetts,
manufacturing, mechanical, mercantile, and restaurants; in Michigan,
Minnesota, and Missouri, manufacturing, mechanical, and mercantile
or laundries; in Nebraska, manufacturing, mercantile, hotel, or
restaurant; in New Hampshire, New York,[1] North Dakota, Oklahoma,
Rhode Island, manufacturing and mechanical; in Tennessee and
Virginia, manufacturing only; in Washington and Oregon manufacturing,
mechanical, mercantile, laundry, hotel, or restaurant, and in
Wisconsin, mechanical or manufacturing. Georgia and South Carolina
regulate the labor of women as they do of adult men[2] in factories.
Such laws of course would not be unconstitutional or, if so, not for
the reason of sex discrimination.
[Footnote 1: Possibly unconstitutional. See above.]
[Footnote 2: See above.]
Now all these laws arbitrarily regulate the hours of labor of women
at any season without regard to their condition of health, and are
therefore far behind the more intelligent legislation of Belgium,
France, and Germany, which considers at all times their sanitary
condition, and requires a period of rest for some weeks before and
after childbirth. The best that can be said of them, therefore, is
that they are a beginning. No law has attempted to prescribe the
social condition of female industrial laborers, the bill introduced in
Connecticut that no married woman should ever be allowed to work in
factories having failed in its passage.
The hours of labor of minors, male and female, are limited in all
States, except Florida, Missouri, Montana, Nebraska, Nevada, New
Mexico, South Carolina, Texas, Vermont, Utah, Washington, West
Virginia, and Wyoming, particularly in factories and stores, usually
under an age limit of sixteen, to ten hours per day or fifty-eight
hours a week.[1] But in Alabama, Arkansas, and Virginia, the age is as
low as fourteen, and in California, Indiana,[2] Louisiana, Maine,[2]
Massachusetts, Michigan, North Carolina, Ohio,[2] Pennsylvania,[2] and
South Dakota,[2] it is eighteen. In California, Delaware, Idaho, and
New York, it is nine hours, and in Colorado, District of Columbia,
Illinois, Indiana, Kansas, New York,[3] North Dakota, Ohio, and
Oklahoma, it is as low as eight hours a day, though the laws in
several States, as in New York, are contrary and overlie each other. A
corresponding limit, but sometimes less, is fixed for the week; that
is, in the nine-hour States and some others, weekly labor may not
exceed fifty-four hours or less.[4]
[Footnote 1: Connecticut, Maine, Massachusetts (in manufacturing,
fifty-six), Mississippi, New Hampshire (nine hours, forty minutes),
Pennsylvania. In others, sixty hours a week (Alabama, Arkansas,
Indiana, Iowa, Kentucky, Maryland (in Baltimore only), Minnesota, New
York, Oregon, South Dakota, Tennessee, Wisconsin).]
[Footnote 2: As to females only (Indiana, Maine, Ohio, Pennsylvania,
South Dakota).]
[Footnote 3: In factories (New York).]
[Footnote 4: Fifty-four hours (Delaware, Idaho, Michigan, New York),
fifty-five hours (New Jersey), fifty-six hours (Massachusetts, Rhode
Island), forty-eight hours (District of Columbia, Illinois, Kansas,
Ohio, Oklahoma), sixty-six hours (North Carolina).]
Night work in factories, etc., is prohibited in nearly all the States
mentioned and in others.[1] Many States require working papers or
certificates of age of the person employed, and there are often also
certificates as to the required amount of schooling when necessary.
Indeed it may be said that we are on the way to the German system of
having time cards or certificates furnished by State machinery for all
industrial workers, and such a system will, of course, be absolutely
necessary should the State ever engage in old-age insurance, as has
been done in Germany and England; though the practical difficulty of
such a scheme would have been thought by our fathers insuperable
on account of our Federal and State system of government, and the
necessary free immigration of American workmen from one State into
another.
[Footnote 1: Thus, night labor in factories to minors under fourteen
(Arkansas, Georgia, Massachusetts, North Carolina, Texas, Virginia),
twelve (South Carolina), eighteen (New Jersey), or sixteen (Alabama,
California, Connecticut, Delaware, District of Columbia, Idaho,
Illinois, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota,
Mississippi, New York, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, Vermont, Wisconsin) is prohibited in
factories or mercantile establishments (Connecticut, Iowa, Kansas,
Michigan, New York), or any gainful occupation (Delaware, District
of Columbia, Idaho, Illinois, Kentucky, Louisiana, Minnesota, North
Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode
Island, Texas, Vermont, Wisconsin). In South Carolina the law
only protects children under twelve from night labor in mines and
factories. So in some as to all females only (Indiana), females
under eighteen (Louisiana, Michigan, Ohio, Oklahoma, Pennsylvania),
twenty-one (New York), and to any minor between 10 P.M. and 6 A.M.
(Massachusetts).]
These laws will be found summarized in full in _Legislative Review_,
No. 5, of the American Association for Labor Legislation, by Laura
Scott ("Child Labor"), and in No. 4, by Maud Swett ("Woman's Work").
It will be seen that in all respects practicable with our necessary
system of individual liberty, doubly guaranteed by the constitutions,
State and Federal, we are quite abreast of the more intelligent
legislation of European countries as to hours of labor, women's and
children's, except in a few States. But it should be remembered that
these are largely agricultural or mining States, and doubtless when
the abuse of child and woman labor presents itself it will be met as
frankly and fairly there as in others.
On the constitutionality, if not the economic wisdom of laws
regulating the hours of labor of women, at least of adult years, there
still is decided difference of opinion. Logically it would perhaps
seem as if those who believe in the "Woman's Rights" movement of
uniform function for women and men, should be opposed to all such
legislation; both on theoretical grounds as being a restraint of
personal liberty, and as unequal legislation handicapping woman in her
industrial competition with man. This was certainly the earlier
view; but under the influence of certain voluntary philanthropic
associations the tendency at present seems to be the other way.
The States which have laws prohibiting any labor of children whatever,
even, apparently, agricultural or domestic,[1] are: Arizona, Arkansas,
Connecticut, Colorado, Delaware, Florida, Idaho, Illinois, Kansas,
Kentucky, Maryland, Missouri, Massachusetts, Minnesota, Montana,
Nebraska, New York, North Dakota, Oregon, Washington, and Wisconsin.
[Footnote 1: The New York law applies to "any business or service,"
but I assume this cannot mean service rendered to the parents in the
house or on the farm; in fact it may be generally assumed that all
these laws, even when they do not say so, mean only employment for
hire; the Oregon and Wisconsin laws, to "any work for compensation";
the Washington law to "any inside employment, factory, mine, shop,
store, except farm or household work." Arkansas, Delaware, Idaho, and
Wisconsin, to "any gainful occupation"; Maryland, to "any business,"
etc., except farm labor in summer; Colorado, to labor for
corporations, firms, or persons; the other State laws to any work.]
And the age limit fixed for such general employment is (without regard
to schooling) under twelve, in Idaho and Maryland; under fourteen in
Delaware, Illinois, and Wisconsin; and under fourteen for boys and
sixteen for girls in Washington, if without permit, and under fifteen,
for more than sixty days without the consent of the parent or guardian
in Florida; in other States the prohibition rests on educational
reasons, and covers only the time of year during which schools are in
session; thus, under eight during school hours, or fourteen without
certificate (Missouri); under fourteen during the time or term of
school sessions (Connecticut, Colorado,[1] Massachusetts, Idaho,
Kansas, Kentucky, Minnesota, New York, North Dakota); or under
fourteen during actual school hours (Arizona,[2] Kentucky, Nebraska,
Oregon); or under fifteen in Washington,[1] and under sixteen as
to those who cannot read and write (Colorado, Connecticut,[3]
Illinois,[3],[4]) or have not the required school instruction (Idaho,
New York[1],[4]), or during school hours (Arkansas, Montana[1]), or
who have not a labor permit (Maryland, Minnesota, Wisconsin). This
resume shows a pretty general agreement on the absolute prohibition of
child labor under fourteen, or under sixteen as to the uneducated; and
the penalty is in most States only a fine inflicted on the employer,
or, in some cases, the parent; but in Florida and Wisconsin it may be
imprisonment; as it is in Alabama for a second offence.
[Footnote 1: Without schooling certificate.]
[Footnote 2: Without certificate of excuse.]
[Footnote 3: Unless the child attends a night school.]
[Footnote 4: Without age certificate.]
But more States fix a limit of age in the employment of children in
factories or workshops, and particularly in mines; not so usually,
however, in stores.[1] The age of absolute prohibition is usually
fixed at fourteen or at sixteen in the absence of a certain amount of
common-school education. These States are: Alabama,[2] Arkansas,[3,9]
California,[4,9] Colorado,[5] Connecticut,[5] Delaware,[5,6]
District of Columbia,[7,9] Florida,[3,9] Georgia,[8] Illinois,[5,9]
Indiana,[9,10] Iowa.[11,9] Kansas and Kentucky[8] forbid factory labor
for children under fourteen or between fourteen and sixteen without
an age certificate or an employment certificate; Louisiana[9] has the
usual statute, that is, absolute prohibition under fourteen and age
certificate required for those between fourteen and sixteen, or, in
the case of girls, between fourteen and eighteen, and the law applies
to mercantile occupations where more than five persons are employed;
the Maine statute is similar, but children above fifteen may work in
mercantile establishments without age or schooling certificate, which
is required of all those under sixteen in manufacturing or mechanical
employment; in Maryland,[12] the prohibition age is still twelve, and
the law applies to any business except farm labor in the summer; in
Massachusetts,[12] absolute prohibition below fourteen, fourteen
to sixteen without age or schooling certificate, and fourteen to
eighteen, who cannot read and write; in Michigan,[12] absolute
prohibition under fourteen, or sixteen without written permit; in
Minnesota, the same ages, but the law applies to any employment; in
Mississippi the ages are twelve and sixteen; in Missouri, absolute
prohibition under eight, or fourteen without school certificate. New
Hampshire[12] lags behind and has only an absolute prohibition to
children under twelve, or during school under fourteen, or under
sixteen without schooling certificate. In New Jersey, under fourteen,
or sixteen with medical certificate; Nebraska[l2] and New York,[12]
the usual absolute prohibition under fourteen, or under sixteen
without employment certificate; North Carolina, under twelve, with an
exception of oyster industries; North Dakota,[12] fourteen, or from
fourteen to sixteen without employment certificate. In Ohio,[12]
Oklahoma, Oregon,[12] Pennsylvania,[12] and Rhode Island,[12] the laws
are practically identical, fourteen, or sixteen with certificate of
schooling. South Carolina, absolute prohibition only under twelve, and
not even then in textile establishments if the child has a dependency
certificate. South Dakota,[12] under fifteen when school is in
session; Tennessee, absolute under fourteen; Texas, under twelve, or
under fourteen to those who cannot read and write unless the child has
a parent to support. Vermont's limitation is purely educational; no
child under sixteen can be employed in factories or mines who has not
completed nine years of study. In Virginia[12] from March 1, 1910,
there is absolute prohibition under fourteen except as to children
between twelve and fourteen with a dependency certificate; Washington,
under fifteen without schooling certificate, or in stores, etc.,
twelve. West Virginia, twelve, or fourteen when school is in session.
Utah and Wyoming have no legislation except as to mines, nor do
Colorado and Idaho protect women in them. Yet these are the four
woman-suffrage States.
[Footnote 1: The law does apply to "mercantile establishments"
(Alabama, Arkansas, California, District of Columbia, Florida,
Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts,
Michigan, Missouri, Nebraska, New York, North Dakota, Ohio, Oregon,
Pennsylvania, Rhode Island, Virginia, West Virginia).]
[Footnote 2: Absolute prohibition only under twelve. School and age
certificate from twelve to sixteen; age certificate from sixteen to
eighteen.]
[Footnote 3: The ages are fourteen and eighteen respectively, or
sixteen in stores during school hours; in Florida, twelve, or when
school is not in session, without an age, schooling, and medical
certificate.]
[Footnote 4: Absolute prohibition under twelve or from twelve to
fourteen during the school term or under sixteen to those who cannot
read and write, and the law applies to mercantile establishments,
hotel and messenger work, etc., making expressly the usual exemption
of agricultural or domestic labor.]
[Footnote 5: Absolute prohibition under fourteen; from fourteen to
sixteen without certificate (Connecticut, Illinois, Kansas, Kentucky),
and medical certificate if demanded (Delaware).]
[Footnote 6: Any gainful occupation under fourteen. Except canning
fruit, etc. (Delaware).]
[Footnote 7: Any business or occupation during school hours, except in
the United States Senate, and the age is absolute prohibition under
twelve; twelve to fourteen without a dependency permit, and fourteen
to sixteen without schooling certificate.]
[Footnote 8: Absolute under twelve; twelve to fourteen without
schooling certificate; fourteen to eighteen without age and schooling
certificate except as to those who have already entered into
employment. Does not apply to mines.]
[Footnote 9: This law applies to mercantile establishments, etc., as
well.]
[Footnote 10: Absolute under fourteen, or under sixteen to those who
cannot read and write.]
[Footnote 11: Prohibition is absolute under the age of fourteen, and
applies to employment in mercantile establishments as well, or stores
where more than eight people are employed.]
[Footnote 12: This law applies to mercantile establishments, etc., as
well.]
The laws as to labor in mines are naturally more severe; although in
some they are covered by the ordinary factory laws (Colorado, Florida,
Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, North Dakota,
Oregon, South Carolina, South Dakota, Tennessee, Vermont, Virginia,
Wisconsin). Female labor is absolutely forbidden in mines or works
underground in Alabama, Arkansas, Illinois, Indiana, Missouri, New
York, North Carolina, Oklahoma, Pennsylvania, Utah, Washington,
Wyoming, and West Virginia,--in short, in most of the States except
Idaho, Kansas, Iowa, Kentucky, Virginia, Wyoming, where mines exist;
and the limit of male labor is usually put at from fourteen. (Alabama,
Arkansas, Idaho, Indiana, Missouri, Ohio,[1] South Dakota, Tennessee,
Utah, Wyoming) to sixteen (Illinois, Missouri,[2] Montana, New York,
Oklahoma, Pennsylvania, Washington); or twelve (North Carolina,
South Carolina, West Virginia), even in States which have no such
legislation as to factories.
[Footnote 1: Fifteen during school year.]
[Footnote 2: Of those who can read and write.]
The laws as to elevators,[1] dangerous machinery,[2] or dangerous
employment generally,[3] are even stricter, and as a rule apply to
children of both sexes; the Massachusetts standard being, in the
management of rapid elevators, the age of eighteen, in cleaning
machinery in motion, fourteen, etc.; in other States, sixteen to
eighteen.[4] The labor of all women in some States, and of girls or
women under sixteen or eighteen in other States, is forbidden in
occupations which require continual standing.[5] Females,[6] or
minors,[7] or young children[8] are very generally forbidden from
working or waiting in bar-rooms or restaurants where liquor is sold,
and in a few States girls are prohibited from selling newspapers or
acting as messengers.[9] The Northern States have a usual age limit
for the employment of children in ordinary theatrical performances,
and an absolute prohibition of such employment or of acrobatic,
immoral, or mendicant employment. But in some States it appears there
is only an age limit as to these.[10]
[Footnote 1: Indiana, Massachusetts, New York, Rhode Island, Kansas,
Oregon.]
[Footnote 2: Connecticut, Iowa, Missouri, Oregon, Louisiana, New
York.]
[Footnote 3: Illinois, Kansas, Kentucky, Massachusetts, Michigan,
Minnesota, Missouri, Montana, New Jersey, New York, Ohio, Oklahoma,
Pennsylvania, Wisconsin.]
[Footnote 4: Indiana, Iowa, Louisiana, New Jersey, New York, South
Carolina.]
[Footnote 5: Illinois (under sixteen), Michigan (all), Minnesota
(sixteen), Missouri (all), New York (sixteen), Ohio (all), Oklahoma
(sixteen), Wisconsin (sixteen), Colorado (all over sixteen).]
[Footnote 6: Iowa, Louisiana, Michigan, Missouri, New Hampshire, New
York, Vermont, Washington (except the wife of the proprietor or a
member of the family).]
[Footnote 7: Arizona, Connecticut, Georgia, Pennsylvania, Idaho,
Maryland, Michigan, Missouri, New Hampshire, South Dakota, Vermont.]
[Footnote 8: Florida, Illinois, Massachusetts, Missouri, Nebraska.]
[Footnote 9: New York, Oklahoma, Wisconsin.]
[Footnote 10: California, Kentucky, Maine, Maryland, Michigan,
Missouri, Montana, New York, Oregon, Rhode Island, (sixteen years);
Colorado, District of Columbia, Florida, Illinois, Kansas, New
Hampshire, Virginia, Wisconsin, Wyoming (fourteen); Connecticut,
Georgia, (twelve); Delaware, Indiana, Louisiana, Massachusetts, West
Virginia (fifteen); Minnesota, New Jersey, Pennsylvania, Washington
(eighteen).]
The hours for railroad and telegraph operators are limited in several
States, but rather for the purpose of protecting the public safety
than the employees themselves.[1] The following other trades are
prohibited to women or girls: Boot-blacking,[2] or street trades
generally;[3] work upon emery wheels, or wheels of any description in
factories (Michigan), and in New York no female is allowed to operate
or use abrasives, buffing wheels, or many other processes of polishing
the baser metals, or iridium; selling magazines or newspapers in any
public place, as to girls under sixteen,[4] public messenger service
for telegraph and telephone companies as to girls under nineteen.[5]
[Footnote 1: Colorado, New York.]
[Footnote 2: District of Columbia, Wisconsin.]
[Footnote 3: District of Columbia, Wisconsin.]
[Footnote 4: New York, Oklahoma, Wisconsin.]
[Footnote 5: Washington.]
Leaving now the question of general employment, where no general laws
limiting time or price would seem to be constitutional, except in
certain cases as to the employment of women and in all cases that of
children, and going to special occupations, we shall find quite a
different principle; for in a special occupation known to be dangerous
or unhealthy, certainly if dangerous or unhealthy to the general
public, it has always been the custom and has always been
constitutional with us to control conditions by statute. The question
of what is a dangerous or unhealthy occupation to the public rather
than merely to the persons employed is, of course, a difficult one;
and the Supreme Court of the United States have split so closely
on this point that they have in Utah decided that mining was an
occupation dangerous to the public health, and in New York that
the baking of bread was not. That is to say, that the condition of
bakeshops bore no relation to the general health of the community. One
might, perhaps, have expected that they would have decided each case
the other way; but we must take our decisions as we get them from the
Supreme Court, reserving our dissent for the text-books. In any event,
it can be seen that the line is very close, certainly in the case of
adult male labor. The same statute as to mines existed in Colorado
that the United States Supreme Court sustained in Utah. The Colorado
Supreme Court had declared it unconstitutional, and after the decision
of the United States Supreme Court they continued to declare it
unconstitutional, simply saying that the United States Supreme Court
was wrong. Anyhow, it is obvious that in trades which involve a great
mass of the people, or affect the whole community, or particularly
where there are definite dangers, such as noxious vapors or
tuberculosis-breeding dust, it will be constitutional, as it is common
sense, to limit the conditions and even the hours of labor of women
or men, as well as children. Students interested in such matters will
find the universal legislation of the civilized world set forth in the
invaluable labor-laws collection of the government of Belgium; and he
will find that all countries of the world do regulate the hours of
labor as well as the conditions, in all such trades, and we should not
remain alone in refusing to do so.
The difficulty of regulating the hours of farm labor is, of course,
obvious, and so far as I know, no attempt has yet been made. The same
thing remains still true of domestic labor, though it has been more
questioned. It should be noted that both domestic labor and farm
labor belong to the class of what we call indefinite service. Now,
indefinite service must always be regulated very carefully as to the
length of the contract, which is never to be indefinite; that is to
say, if it be both indefinite in the services rendered and in the time
during which they are to last, it is in no way distinguishable from
slavery. For instance, in Indiana, many years before the Civil War,
there was an old negro woman who was induced to sign a contract to
serve in a general way for life; that, of course, was held to be
slavery. More recently the United States Supreme Court has held that a
contract imposed upon a sailor whereby he agreed to ship as a mariner
on the Pacific coast for a voyage to various other parts of the world
and thence back was a contract so indefinite in length of time as to
be unenforceable under free principles, although a sailor's contract
is one which in a peculiar way carries with it indefinite service. And
a contract "_a tout faire_" even for a week might be held void.
In all these matters the labor of women, and even that of children,
will very often control the hours of labor of men; for instance, in
the mills of New England, more than half the labor is not adult male;
yet when any large class of the mill's operatives stop, the whole
mill must stop; consequently, a law limiting the labor of women and
children to fifty-six hours a week will be in practice enforced upon
the adult males employed in the same mill.
Continental legislation has gone far beyond us in all these important
particulars. In most countries the conditions surrounding the labor of
women, particularly married women, are carefully regulated by law.
She is not allowed to go back to the mill for a certain period after
childbirth, and in many more particular respects her health is
carefully looked after. Such legislation would possibly be impossible
to enforce with our notions in America. The most interesting of all
is perhaps the attempt made in the State of Connecticut within a few
years to improve social conditions by providing that no married woman
should be employed in factories at all. The bill was not, of course,
carried, but it raises a most interesting sociological question.
Ruskin probably would have been in favor of it. He described as the
very last act of modern barbarism for the woman to be made "to shriek
for a hold of the mattock herself." It was argued in Connecticut that
the employment of married women injured the health of the children,
which is perfectly true. Indeed, the death-rate in England is very
largely determined by the fact whether their mothers are employed in
mills or not. It was also argued that her competition with man merely
halved his wages; that if no women were employed, the men would get
much higher wages. On the other side it was argued that the effect of
the law would be largely immoral because it would simply prevent women
from getting married. Knowing that after marriage they would get no
employment, they would simply dispense with the marriage ceremony; for
it is obvious that under such legislation a man living with a woman
unmarried could get double wages, which would be halved the moment he
made her his wife. This last was evidently the view which prevailed;
and so far as I know, no such law has in the civilized world yet been
enacted, though there is doubtless a much stronger social prejudice
against women entering ordinary employments in some countries than in
others.
The constitutional question underlying all this discussion was perhaps
best set forth by an experiment of the late Mr. Edward Atkinson, which
he always threatened to bring into the courts, but I believe did not
do so. "An Englishman's house is his castle"; an English woman's house
is her castle. Atkinson proposed that a woman of full age, living in
her own house, should connect her loom or spindles by electric wire to
the nearest mill or factory, and then proceed to weave or spin _more_
than the legal limit of nine hours per day. Would the state, under the
broadest principles of English constitutional liberty, have the right
to come in and tell her not to do so; particularly when the man in the
next house remained free? Up to this time there is no doubt that a
factory, a large congregation of labor, under peculiar conditions,
presents a different question and a different constitutional aspect
from that of the individual. This, indeed, is the principle which must
justify the constitutional regulation of sweat-shops, as to which we
will speak next.
The sweat-shop is the modern phrase for a house, frequently a
dwelling, tenement, or home, not a factory, and not under the
ownership or control of the person giving out the employment.
Now a factory may obviously be regulated under ordinary police
principles; but when the first great case came up as to regulating
labor in a man's own home, even though it was but one floor of a
tenement, it was decided by the highest court of New York to be
unconstitutional. The case was one concerning the manufacture of
cigars, which by the statute was prohibited in tenement houses on any
floor partly occupied for residence purposes.[1] Nevertheless it may
be questioned whether, with the advancing social feeling in such
matters, legislation would not be now sustained when clearly aimed at
sanitary purposes, even though it interfered with trades conducted in
a man's dwelling house. I hold that it is quite as possible for the
arm of the state to interfere to prevent the baking of bread in
bedrooms, for instance, as it is to seize upon clothing which has been
exposed to scarlet fever. A man's home, under modern theories, is
no more sacred against this police power than is his body against
vaccination; and the last has been decided by the Supreme Court of the
United States.[2]
[Footnote 1: In re Jacobs, 98 N.Y. 98. See the author's "Handbook to
the Labor Law of the U.S.," p. 151.]
[Footnote 2: Massachusetts _v._ Jacobson, 197 U.S. 11.]
At all events, legislation may be aimed against sweat-shops which in
any sense resemble factories--that is, where numbers of persons not
the family of the occupier are engaged in industrial labor; so
in Pennsylvania it has been extended to jurisdiction over shops
maintained in the back yards of tenements; while in most States the
statute applies to any dwelling where any person not a member of
the family is employed, and general legislation against sweat-shops
already exists in the twelve north-eastern industrial States from
Massachusetts to Missouri and Wisconsin, leaving out only Rhode
Island.
The Massachusetts law as at present forbids work upon clothing
except by members of the family in any tenement without license, and
thereupon subjects the premises to the inspection of the police, and
registers of all help must be kept. Whoever offers for sale clothing
made in a tenement not licensed must affix a tag or label two inches
long bearing the words "Tenement Made," with the name of the State and
city or town in which the garment was made. Moreover, any inspector
may report to the State board of health that ready-made clothing
manufactured under unhealthy conditions is being shipped into the
State, which "shall thereupon make such orders as the public safety
may require."[1] In New York the law applies to the manufacture
of many articles besides clothing, such as artificial flowers,
cigarettes, cigars, rubber, paper, confectionery, preserves, etc. A
license may be denied to any tenement house if the records show that
it is liable to any infectious or communicable disease or other
unsanitary conditions. Articles not manufactured in tenements so
licensed may not be sold or exposed for sale, and there is the same
law as in Massachusetts as to goods coming in from outside the State,
and there is the same exemption of apartments occupied by members of
the family, and even then it appears that they are subject to the
visitation of the board of health and must have a permit. The
Pennsylvania law is similar to the New York law, and in addition, all
persons are forbidden to bargain for sweat-shop labor, that is, labor
in any kitchen, living-room, or bedroom in any tenement house except
by the family actually resident therein, who must have a certificate
from the board of health. The Wisconsin law apparently applies to
persons doing the work in their own homes, who must have a license
like anybody else, and the owner of the building is liable for its
unlawful use. The Illinois and Maryland laws are similar to the New
York law, while the Michigan statute resembles that of Wisconsin,
apparently applying to members of the family as well. The Missouri law
forbids the manufacture of clothing, etc., in tenements by more than
three persons not immediate members of the family, while the New
Jersey and Connecticut statutes content themselves with making
such manufacture by persons not members of the family subject to
inspection.
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