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 James C. Carter tells us[1] that all these laws are contrary to modern principles and were repealed a century ago.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.