Fry v. United States

1975-05-27

Headline: Federal wage-control law upheld, allowing the Government to block Ohio from paying state employees raises above federally authorized limits during the emergency stabilization program, affecting tens of thousands of public workers.

Holding: The Court held that Congress validly included state and local government employees under the Economic Stabilization Act, so Ohio may not pay raises above the Pay Board’s federally authorized limit.

Real World Impact:

Prevents Ohio from paying raises beyond federal Pay Board limits.
Applies federal wage caps to state and local employees during emergencies.
Gives federal authorities power to limit state payroll increases in inflation controls.

Topics: wage controls, state worker pay, federal power over states, emergency economic rules

Summary

Background

Two state employees sued after Ohio passed a law giving about 65,000 state and local workers a 10.6% pay increase effective January 1, 1972. The federal Pay Board, created under the Economic Stabilization Act, limited annual raises and denied Ohio an exemption beyond 7% for the 1972 wage year. The Ohio Supreme Court ordered the raises, and the United States then sued to stop payments that exceeded the Pay Board’s limit.

Reasoning

The Court addressed whether Congress meant to cover state and local government employees and whether that rule was constitutional. It found the Act and its legislative history showed Congress intended to include public employees and that excluding them would weaken emergency inflation controls. Relying on earlier decisions about the national commerce power, the Court held Congress could regulate wages that, when aggregated, affect interstate commerce, and therefore the federal limits applied to state employees. Because Ohio’s law conflicted with the Pay Board’s ruling, the federal limit prevailed under the Supremacy Clause.

Real world impact

The decision enforces federal wage caps over conflicting state pay laws during the stabilization program, directly limiting how much state and local governments could increase payrolls in an emergency. The opinion notes agencies uniformly treated the Act as including the States. Separately, one Justice observed that Congress later allowed the Act to expire on April 30, 1974, so the specific federal freeze no longer continued.

Dissents or concurrances

One Justice would have dismissed the case because the statute had expired; another dissented, warning the ruling unduly intrudes on state sovereignty under the Tenth Amendment.