In the case of Adkins v. Children’s Hospital (261 U.S. 525 (1923)), a Federal law establishing a minimum wage in Washington DC was found to be unconstitutional because it interfered with the freedom of contract included within the Due Process Clause of the 5th Amendment.

  • The US Supreme Court found that the law artificially restricted an employer’s ability to negotiate employment contracts. They found that the law “takes account of the necessities of only one part to the contract. It ignores the necessities of the employer by compelling him to pay not less than a certain sum, not only whether the employee is capable of earning it, but irrespective of the ability of his business to sustain the burden.”
  • This case invalidated a Federal law, on the basis of the 5th Amendment. A few years later, the Court overturned a State minimum wage Statute in Morehead v. New York ex re. Tipaldo (298 U.S. 587 (1936)), but the grounds for that decision was not the 5th Amendment (which only applied to the Federal government), but on the idea that setting a minimum wage fell outside of a State’s police powers because it did not serve a valid State purpose.
    • The Court argued that if the State wanted to raise the standard of living for poor people, the way to do it would be for the State to pay welfare and make it up in a tax that affected everyone equally. It isn’t fair to ask a class of people (employers) to take on the entire burden themselves.
  • The decision in this case was later overturned in West Coast Hotel Co. v. Parrish (300 U.S. 379 (1937)).
    • Parrish used the alternate logic that said that it shouldn’t be the State’s burden to subsidize dishonest employers who are making extra profits by exploiting their poor, hungry workers.
      • There was a big change in how the country viewed employment law between Adkins (1923) and Parrish (1937) because of the Great Depression.