261 U.S. 525 (1923), argued 14 Mar. 1923, decided 9 Apr. 1923 by vote of 5 to 3; Sutherland for the Court, Taft and Holmes in dissent, Brandeis not participating. Reflecting widespread popular acceptance of laissez‐faire economics, the Supreme Court in the 1890s fashioned the liberty of contract doctrine, which affirmed the constitutional right of private parties to enter contractual arrangements. This doctrine curtailed the power of government to interfere with contractual freedom through regulatory legislation. The landmark Adkins decision exemplified the Court's commitment to laissez‐faire principles and the liberty of contract.
At issue in Adkins was a 1918 federal law establishing a minimum wage for women in the District of Columbia. The announced purpose of the act was to protect the health and morals of women from detrimental living conditions caused by inadequate wages. Felix Frankfurter, a future Supreme Court justice, appeared as counsel in support of the legislation. He sought to justify the measure as a valid exercise of the police power to ameliorate the handicaps experienced by women in the marketplace. Children's Hospital, on the other hand, contended that the statute was a price‐fixing law that unconstitutionally interfered with the liberty of contract for employment.
Justice George Sutherland, speaking for the majority, invalidated the minimum wage law as a violation of the liberty of contract guaranteed by the Due Process Clause of the Fifth Amendment. Although Sutherland recognized that the terms of contracts could be regulated in certain situations, he stressed that “freedom of contract is … the general rule and restraint the exception” (p. 546). Distinguishing wage laws from measures limiting the hours of labor, he reasoned that the minimum wage law arbitrarily cast on employers a welfare function that belonged to society at large. In view of the Nineteenth Amendment and changes in the legal position of women, Sutherland further maintained that women could not be subjected to greater restrictions on their liberty of contract than men. He argued that the minimum wage law disregarded the “moral requirement implicit in every contract of employment” that the value of labor and wages should be equivalent (p. 558). In short, wages must be ascertained by the operation of the free market. (See Labor.)
In a forceful dissent, Chief Justice William Howard Taft asserted that lawmakers could limit the freedom of contract under the police power to regulate the maximum hours or minimum wages of women. He cautioned that the justices should not strike down regulatory statutes simply because they deem particular economic policies to be unwise. Justice Oliver Wendell Holmes questioned the constitutional basis of the liberty of contract doctrine. Noting that “pretty much all law consists in forbidding men to do some things that they want to do,” Holmes pointed out that the Court had sustained many laws that limited contractual freedom (p. 568). He argued that legislators might reasonably conclude that fixing minimum wages for female employees would improve their health and morals.
The Adkins decision was a striking expression of laissez‐faire constitutionalism. It demonstrated the Court's conviction that wage and price determinations were at the heart of the free‐market economy and must be secured against unwarranted legislative interference. During the 1920s and early 1930s, the Supreme Court frequently cited Adkins for a broad interpretation of the liberty of contract doctrine. In particular, the justices invoked Adkins to overturn several state minimum wage laws.
As a consequence of the Great Depression and the political triumph of the New Deal, the Supreme Court in 1937 abandoned laissez‐faire constitutionalism and permitted both federal and state governments to play a major role in directing economic life. The Court's new outlook was revealed in West Coast Hotel Co. v. Parrish (1937), in which the justices narrowly upheld a Washington minimum wage law for women and minors and overruled Adkins. The decision in West Coast Hotel marked the effective end of the liberty of contract doctrine as a constitutional norm.
See also Contract, Freedom of.
— James W. Ely, Jr.
