Fry v. United States

421 U.S. 542, 95 S. Ct. 1792, 44 L. Ed. 2d 363, 1975 U.S. LEXIS 67

• Court: Supreme Court of the United States
• Decided: May 27, 1975
• Docket: 73-822
• Status: Published

Opinions

Mr. Justice Marshall

delivered the opinion of the Court.

The Economic Stabilization Act of 1970¹ authorized the President to issue orders and regulations to stabilize wages and salaries at levels not less than those prevailing on May 25, 1970. By Executive Order, the President created the Pay Board to oversee wage and salary controls imposed under the Act’s authorization. Exec. Order No. 11627, 3 CFR 218 (1971 Comp.), note following 12 U. S. C. § 1904 (1970 ed., Supp. I). In implementing the wage stabilization program, the Pay Board issued regulations that limited annual salary increases for covered employees to 5.5% and required prior Board approval for all salary adjustments affecting 5,000 or more employees.² The State of Ohio subsequently enacted legislation providing for a 10.6% wage and salary increase, effective January 1, 1972, for almost 65,000 state employees.³ The State applied to the Pay Board for approval of the increases, and a. public hearing was held. In March 1972, the Board denied the application for an exemption to the extent that it exceeded salary increases of 7% for the 1972 wage year.⁴ Petitioners, two state employees, sought a writ of mandamus in state court to compel Ohio officials to pay the full increases provided in the state pay act. The Ohio Supreme Court granted the writ and ordered the increases to be paid. State ex rel. Fry v. Ferguson, 34 Ohio St. 2d 252, 298 N. E. 2d 129 (1973).

After the State Supreme Court decision, the United States filed this action in the District Court to enjoin Ohio and its officials from paying wage and salary increases in excess of the 7% authorized by the Pay Board. The District Court certified to the Temporary Emergency Court of Appeals the question of the applicability of federal wage and salary controls to state employees. See §211 (c) of the Economic Stabilization Act, note following 12 U. S. C. § 1904 (1970 ed., Supp. I).

The Court of Appeals construed the Act as applying to state employees and as thus construed upheld its constitutionality. United States v. Ohio, 487 F. 2d 936 (1973). Relying on the decisions of this Court in Maryland v. Wirtz, 392 U. S. 183 (1968), and United States v. California, 297 U. S. 175 (1936), the court concluded that the interference with state affairs incident to the uniform implementation of federal economic controls was of no consequence since Congress had a rational basis upon which to conclude that the state activity substantially affected commerce. The Court of Appeals accordingly enjoined the payment of wage and salary increases in excess of the amount authorized by the Pay Board. We affirm.

I

At the outset, it is contended that Congress did not intend to include state employees within the reach of the Economic Stabilization Act and that the Pay Board therefore did not have the authority to regulate the compensation due state employees.⁵ We disagree. The language and legislative history of the Act leave no doubt that Congress intended that it apply to employees throughout the economy, including those employed by state and local governments. The Act contemplated general stabilization of “prices, rents, wages, salaries, dividends, and interest,” § 202, note following 12 U. S. C. § 1904 (1970 ed., Supp. I), and it provided that the controls should “call for generally comparable sacrifices by business and labor as well as other segments of the economy.” § 203 (b)(5). It contained no exceptions for employees of any governmental bodies, even at the federal level.⁶ The failure of the Act to make express reference to the States does not warrant the inference that controls could not be extended to their employees. See Case v. Bowles, 327 U. S. 92, 99 (1946); United States v. California, 297 U. S., at 186. Indeed, in framing the Act, Congress specifically rejected an amendment that would have exempted employees of state and local governments. 117 Cong. Rec. 43673-43677 (1971). And the Senate Committee Report makes it plain that the Committee considered and rejected a proposed exemption for the same group. S. Rep. No. 92-507, p. 4 (1971). It is clear, then, that Congress intended to reach state and local governmental employees. The only remaining question is whether it could do so consistent with the constitutional limitations on its power.

II

Petitioners acknowledge that Congress’ power under-the Commerce Clause is very broad. Even activity that is purely intrastate in character may be regulated by Congress, where the activity, combined with like conduct by others similarly situated, affects commerce among the States or with foreign nations. See Heart of Atlanta Motel, Inc. v. United States, 379 U. S. 241, 255 (1964); Wickard v. Filburn, 317 U. S. 111, 127-128 (1942). There is little difficulty in concluding that such an effect could well result from large wage increases to 65,000 employees in Ohio and similar numbers in other States; e. g., general raises to state employees could inject millions of dollars of purchasing power into the economy and might exert pressure on other segments of the work force to demand comparable increases.

Petitioners do not appear to challenge Congress’ conclusion that unrestrained wage increases, even for employees of wholly intrastate operations, could have a significant effect on commerce. Instead, they contend that applying the Economic Stabilization Act to state employees interferes with sovereign state functions and for that reason the Commerce Clause should not be read to permit regulation of all state and local governmental employees.⁷

On the facts of this case, this argument is foreclosed by our decision in Maryland v. Wirtz, 392 U. S. 183 (1968), where we held that the Fair Labor Standards Act could constitutionally be applied to schools and hospitals run by a State. Wirtz reiterated the principle that States are not immune from all federal regulation under the Commerce Clause merely because of their sovereign status. 392 U. S., at 196-197. We noted, moreover, that the statute at issue in Wirtz was quite limited in application. The federal regulation in this case is even less intrusive. Congress enacted the Economic Stabilization Act as an emergency measure' to counter severe inflation that threatened the national economy. H. R. Rep. No. 91-1330, pp. 9-11 (1970). The method it chose, under the Commerce Clause, was to give the President authority to freeze virtually all wages and prices, including the wages of state and local governmental employees. In 1971, when the freeze was activated, state and local governmental employees composed 14% of the Nation’s work force. Brief for United States 20. It seems inescapable that the effectiveness of federal action would have been drastically impaired if wage increases to this sizeable group of employees were left outside the reach of these emergency federal wage controls.

We conclude that the Economic Stabilization Act was constitutional as applied to state and local governmental employees. Since the Ohio wage legislation conflicted with the Pay Board’s ruling; under the Supremacy Clause the State must yield to the federal mandate. See Public Utilities Comm’n of California v. United States, 355 U. S. 534, 542-545 (1958); Murphy v. O’Brien, 485 F. 2d 671, 675 (Temp. Emerg. Ct. App. 1973).

Affirmed.

Mr. Justice Douglas.

Less than three months after we granted certiorari, Congress allowed the Economic Stabilization Act to expire on April 30, 1974. There is therefore no continuing impediment to the payment of salary increases of the kind at issue in this case. I would therefore dismiss the writ as improvidently granted.

1 Title II of the Act of Aug. 15, 1970, Pub. L. 91-379, 84 Stat. 799, as amended, note following 12 U. S. C. § 1904 (1970 ed., Supp. I). The Act was extended five times before it expired on April 30, 1974.

2 6 CFR §§ 101.21, 201.10 (1971). See also 6 CFR §101.28 (1972).

3 Ohio Rev. Code Ann. § 143.10 (A) (Supp. 1972). The Act provided for salary increases for employees of the state government, state universities, and county welfare departments. Elected state officials were not included.

4 The Pay Board determined that the implementation of the pay increase from March 1972 to November 1972 would reduce the effective rate to 7% for the wage year November 14, 1971, to November 13, 1972. The payments in issue here therefore represent the wages and salaries that were due from January 1, 1972, when the pay increase was to take effect, to March 16, 1972. The total amount involved is $10.5 million.

5 Petitioners did not raise the statutory issue either in their petition for certiorari or in their brief. Rather than decide a constitutional question when there may be doubt whether there is any statutory basis for it, however, we deal first with the statutory question, which is addressed in the briefs of amici curiae seeking reversal.

6 Congress did provide for the exemption of certain categories of employees, such as members of the working poor, those earning substandard wages, and those entitled to wage increases under the Fair Labor Standards Act. §§ 203 (d) and (f), note following 12 U. S. C. § 1904 (1970 ed., Supp. I). See also §§ 203 (c) (l)-(3), (f)(2), (3), and (g). The various stabilization agencies have uniformly interpreted the Act to include the States within its scope, see 36 Fed. Reg. 21790, 25428 (1971); 37 Fed. Reg. 1240, 24961, 24989-24991 (1972). We have long recognized that the interpretation of a statute by an implementing agency is entitled to great weight. Udall v. Tallman, 380 U. S. 1, 16-18 (1965).

7 Petitioners have stated their argument, not in terms of the Commerce power, but in terms of the limitations on that power imposed by the Tenth Amendment. While the Tenth Amendment has been characterized as a “truism,” stating merely that “all is retained which has not been surrendered,” United States v. Darby, 312 U. S. 100, 124 (1941), it is not without significance. The Amendment expressly declares the constitutional policy that Congress may not exercise power in a fashion that impairs the States’ integrity or their ability to function effectively in a federal system. Despite the extravagant claims on this score made by some amici, we are convinced that the wage restriction regulations constituted no such drastic invasion of state sovereignty.