The Depression Years

The Presidency of Franklin D. Roosevelt began on March 4, 1933. In his first 100 days in office FDR signed a series of bills to stimulate a desperate economy and to put America on a positive growth track. Among these Bills was to strengthen the banking system including the Glass-Steagall Act which created the Federal Deposit Insurance Corporation (FDIC) and established regulations on stock and commodity trading. Glass-Steagall separated consumer, commercial and investment banking. It prohibited commercial banks from selling stocks and securities to ensure they would not again recklessly speculate with the depositor’s money. Nor could the bank pay interest at market rates. Investment banks could underwrite and sell securities, but they could not accept bank deposits or make loans.

He also signed into law the National Industrial Recovery Act, which established among other things, carried over many of the protections from the Norris-LaGuardia act such as Section 7(a) providing for many of the rights for Labor which still stand, such as: The right for unions to organize, bargain collectively, to engage in concerted activity without the coercion of the employer and the right not to join a company union, and, it outlawed “yellow dog contracts”, which was an employer’s agreement which forbid employees from joining a union, to name a few. It gave exclusive authority to the President to establish a code of ethics upon industry to prevent monopolistic action by the corporations and shift business away from those not compliant.

The Public Works Authority was designed to stimulate the economy by building infrastructures like the Triborough Bridge, Grand Coulee Dam, Boulder Dam and the bridge to Key West.

The President was given the authority to regulate oil pipelines and the price of transportation of all petroleum products in it. If a company did not comply with the law, the President had the right to take it over. With such far-reaching powers of the President, it is not surprising the Supreme Court declared pieces of it unconstitutional. However, many of the features of the Act did enough in the short term to stimulate the economy. Other features of the Act like the portions regarding labor turned up again in the Wagner Act.

In 1935 Congress passed the Wagner Act also known as the National Labor Relations Act. It established the National Labor Relations Board for adjudicating disputes and implementing new law, which was one reason cited by the Supreme Court in striking down the NIRA for not having a process.

The Act was biased in favor of the Unions much the same way the NIRA was. It was seen that even though Unions were militant, compared to industry, unions were weak. Thus, the reason that the Section 7 rights guaranteeing labor rights was included in the Act. More importantly, there was no Section 8(b). There was a Section 8(a) outlining the ways employers could not violate labor’s rights. However, there was no such language regarding labor. We could not commit an Unfair Labor Act under the law because there was no such provision to prosecute us under. Congress and the President knew, where the development of labor and capital bargaining law was so new, it could never even attempt to include all the problems that were sure to come. Thus, Congress put together a very loose law. A basic skeletal structure. The rule of the law would be created by the case law verdicts that would come as the law was used and establish precedence, for the future cases that followed.

Finally, workers had some protection under the law. The question is whether or not the Federal Court would dismember it like it did the Clayton Act of 1914. The Clayton Act was designed by Henry De Lamar Clayton to clarify and supplement the Sherman Act and most importantly separate Labor from the Anti-Trust portion of the Act. It was enacted on October 15, 1914.

It was hoped that the threat of injunction against strikers would cease, and the transition of labor struggles would be moved away from the Federal Court.

The Act in Section 6 exempted labor organization from the Sherman Act, saying that human labor is not an article of commerce nor is it a commodity. Then in Section 20 it protected boycotts, strikes and picketing as long as they are peaceful, remain exempt. Under this law, injunctions could not be used to settle labor disputes. Instead, the Court ruled in Duplex Printing v. Deering, that the Clayton Act did not exempt unions from the Sherman Act.

In this case the union called a secondary boycott against the nonunion Duplex. Which meant literally stopping supplies to the company, blocking them from trade shows and stopping the shipping of their product; stopped repairs of their equipment and protested the buying of their goods. Basically, shutting them down and trying to force them to unionize. The court held that Congress exempted only those activities that were permitted at the time the Clayton Act was passed and not before. If that is true, then why even bother going through this exercise in futility? Therefore, those activities that were illegal before Clayton were still illegal, making the Clayton Act subservient to Sherman. Well, this new law finally separated labor from the Sherman Anti-Trust Act.

However, that did not exempt Labor’s disputes away from the Federal Courts, which meant its meaning was up to determination by the Federal Court once again. For example: McKay Radio & Telegraph was in the business of transmitting and telegraphing messages to and from centers in the U.S. and internationally. In October of 1935, 60 of its workers in San Francisco went out on strike for a collective bargaining agreement which began to formulate nationally. In anticipation of a national strike the employer transferred workers from other areas. Sensing job loss from a possible national strike, some of the workers in San Francisco arranged a settlement to the strike. However, five of those strikers were not reinstated after the strike. As the case moved forward it was brought out that a strike was considered protected as concerted activity under the Act.

It was brought out that the term employee included “any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute”. To which the Board and the Court agreed with. If the Court had stopped there, it would have been a clear win. Unfortunately, the Court went beyond the scope of the question showing that the actions against the employees came after the strike. There was evidence that the rejected workers union activity made them undesirable. The Court affirmed the right to strike but with it came a risk of being replaced. The employer had the right to protect and run the business and was not obligated to hold a spot for striking workers nor was he obligated to discharge the replacements. Although the rejected striker remains an employee, he has a preferential claim to the prior job, if and when, it becomes vacant and only if the former striker has been unable to find comparable work. So, just when we thought we were safe, the Congress and the President once again did their job. However, it was once again the Supreme Court that would continue wordsmithing the intent of the law in favor of big business. Though many Supreme Court cases upheld the NLRA, this one filed just after its passage in 1935 and decided in 1938 and was pretty much tucked under the rug until 1981. Interestingly, it was not really reported on until 1941 and was not discussed in literature until 1960. Used by President Reagan in 1981 against the air traffic controllers and then again in Jay, Maine, against striking paper mill workers at International Paper in 1993 where strikers were permanently replaced.

So, what are the lessons of history we need to pay attention to: First, we had a Labor friendly President. Second, Congress passed pro-union legislation. Third, Federal courts continued to hinder our progress in favor of Capital.

It matters and we need to pay attention to it. Job one for any business is to achieve a profit. Job two for any business is to maximize that profit. As long as profit maximization is the long-term goal; is how long our struggle for equity will exist.

This has been the battle since the 1500’s because Capital is incapable of regulating itself which is why governments keep bailing them out. Like I keep saying. There is nothing wrong with Capitalism that a strong dose of regulation can’t cure