National Labor Relations Board v. Jones & Laughlin Steel Corp.

Majority reasoning

The Court, through Chief Justice Hughes, reasoned that the Act should be read, where possible, to operate within constitutional limits rather than struck down wholesale, since it only reaches practices that actually "affect commerce." The majority held that manufacturing itself is not interstate commerce, but that Congress may still regulate activities with a close and substantial relationship to interstate commerce, including labor practices that could cause strikes disrupting the flow of goods across state lines. Because Jones & Laughlin was a vast, vertically integrated enterprise drawing raw materials from multiple states and shipping most of its product across state lines, a strike there would have an immediate and possibly catastrophic effect on interstate commerce, not a remote or indirect one. The Court concluded that recognizing employees' right to organize and bargain collectively serves industrial peace and is not an arbitrary restraint on the employer, since the Act does not compel any actual agreement, only negotiation. The majority also rejected due process and Seventh Amendment challenges, finding the Board's procedures adequate and the back-pay remedy a statutory sanction rather than a common-law damages claim requiring a jury.

Dissent reasoning

Justice McReynolds, joined by Justices Van Devanter, Sutherland, and Butler, argued that the Act as applied went beyond Congress's commerce power because manufacturing and the employment relations within it are purely local activities that only indirectly affect interstate commerce. The dissent contended that under Schechter and Carter Coal, the distinction between direct and indirect effects on commerce must be maintained, and that any effect here—discharge leading to discontent, possibly a strike, possibly reduced production, possibly less interstate shipment—was too remote and speculative to justify federal regulation. The dissent warned that accepting the majority's reasoning would let Congress regulate nearly all local employment relationships, since almost any manufacturer ships some goods across state lines, effectively erasing the constitutional line between state and federal authority. It also argued that the right to contract, including the right to select and discharge employees freely, is a fundamental liberty that the Act unduly restricts, citing Adair v. United States and Coppage v. Kansas.