Erie Railroad v. Williams

Background

A railroad company challenged a New York Labor Law that requires employers to pay workers in cash twice each month. The company argued the law took away its property and contract freedom and denied equal protection under the Fourteenth Amendment. The New York courts interpreted the law to bar contracts changing the required pay schedule, and the dispute reached this Court.

Reasoning

The Court considered whether the State could require semi-monthly cash payments and prevent contracts that set a different schedule. It said the law could be supported as an exercise of the State’s reserved power over corporate charters and, alternatively, as a valid exercise of the police power in the public interest. The Court found the burden on the company—extra cost and inconvenience of two payments instead of one—was not confiscatory, that Congress had not regulated the subject, and that any effect on interstate commerce was indirect. The company’s Fourteenth Amendment and equal-protection claims were rejected, and the judgment upholding the law was affirmed.

Real world impact

The decision means New York may require covered railroad employers to pay workers in cash twice a month and may restrict contracts that try to change that rule. The ruling leaves regulation of such pay schedules to state law unless Congress acts. Employees themselves were not allowed to press the company’s constitutional claim in this case.