The act of the Legislature of Arkansas of March 25, 1889,
entitled an act to provide for the protection of servants and
employs of railroads, is not in conflict with the provisions of the
Constitution of the United States.
This action was commenced in a justice's court in Saline
Township, Saline County, Arkansas, by Charles Paul against the St.
Louis, Iron Mountain and Southern Railway Company, a corporation
organized under the laws of the State of Arkansas and owning and
operating a railroad within that state, to recover $21.80 due him
as a laborer and a penalty of $1.25 per day for failure to pay him
what was due him when he was discharged. The case was carried by
appeal to the Circuit Court of Saline County, and there tried
de novo. Defendant demurred to so much of the complaint as
sought to recover the penalty on the ground that the act of the
General Assembly of Arkansas entitled "An act to provide for the
protection of servants and employees of railroads," approved March
25, 1889, Acts Ark. 1889, 76, which provided therefor, was in
violation of Articles V and XIV of the amendments to the
Constitution of the United States, and also in violation of the
Constitution of the State of Arkansas. The demurrer was overruled,
and defendant answered, setting up certain matters not material
here and reiterating in its third paragraph the
Page 173 U. S. 405
objection that the act was unconstitutional and void. To this
paragraph plaintiff demurred, and the demurrer was sustained. The
case was then heard by the court, the parties having waived a trial
by jury, and the court found that the plaintiff was entitled to
recover the sum claimed and the penalty at the rate of daily wages
from the date of the discharge until the date of the commencement
of the suit, and entered judgment accordingly. Defendant appealed
to the Supreme Court of the State of Arkansas, which affirmed the
judgment, 64 Ark. 83, and this writ of error was then brought.
The act in question is as follows:
"Section 1. Whenever any railroad company or any company,
corporation, or person engaged in the business of operating or
constructing any railroad or railroad bridge, or any contractor or
subcontractor engaged in the construction of any such road or
bridge shall discharge, with or without cause, or refuse to further
employ any servant or employee thereof, the unpaid wages of any
such servant or employee, then earned at the contract rate, without
abatement or deduction, shall be and become due and payable on the
day of such discharge or refusal to longer employ, and if the same
be not paid on such day, then, as a penalty for such nonpayment,
the wages of such servant or employee shall continue at the same
rate until paid,
provided such wages shall not continue
more than sixty days unless an action therefor shall be commenced
within that time."
"SEC. 2. That no such servant or employee who secretes or
absents himself to avoid payment to him or refuses to receive the
same when fully tendered shall be entitled to any benefit under
this act for such time as he so avoids payment."
"SEC. 3. That any such servant or employee whose employment is
for a definite period of time and who is discharged without cause
before the expiration of such time may, in addition to the
penalties prescribed by this act, have an action against any such
employer for any damages he may have sustained by reason of such
wrongful discharge, and such action may be joined with an action
for unpaid wages and penalty. "
Page 173 U. S. 406
"SEC. 4. That this act shall take effect and be in force from
and after its passage."
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
Plaintiff in error was a corporation duly organized under the
laws of Arkansas and engaged in operating a railroad in that
state.
The state constitution provided:
"Corporations may be formed under general laws, which laws may
from time to time be altered or repealed. The General Assembly
shall have the power to alter, revoke, or annul any charter of
incorporation now existing and revocable at the adoption of this
constitution, or any that may hereafter the created, whenever in
their opinion, it may be injurious to the citizens of this state,
in such manner, however, that no injustice shall be done to the
corporators."
Art. XII, § 6. This constitution was adopted in 1874, but prior
to that, the Constitution of 1868 had declared:
"The General Assembly shall pass no special act conferring
corporate powers. Corporations may be formed under general laws,
and all such laws may from time to time be altered or
repealed."
Article V, § 48.
In
Leep v. Railway Co., 58 Ark. 407, section one of the
Act of March 25, 1889, was considered by the Supreme Court of
Arkansas and was held unconstitutional so far as affecting natural
persons, but sustained in respect of corporations, as a valid
exercise of the right reserved by the constitution "to alter,
revoke, or annul any charter of incorporation."
The court conceded that the legislature could not, under the
power to amend, take from corporations the right to contract,
Page 173 U. S. 407
but adjudged that it could regulate that right by amendment when
demanded by the public interest, though not to such an extent as to
render it ineffectual or substantially impair the object of
incorporation.
As the constitution expressly provided that the power to amend
might be exercised whenever, in the opinion of the legislature, the
charter might "be injurious to the citizens," and as railroad
corporations were organized for a public purpose, their roads were
public highways, and they were common carriers, it was held that,
whenever their charters became obstacles to such legislative
regulations as would make their roads subserve the public interest
to the fullest extent practicable, they would be in that respect
injurious, and might be amended, and, as it was the duty of the
companies to serve the public as common carriers in the most
efficient manner practicable, the legislature might so change their
charters as to secure that result. And the court said:
"If the legislature, in its wisdom, seeing that their employees
are and will be persons dependent on their labor for a livelihood,
and unable to work on a credit, should find that better servants
and service could be secured by the prompt payment of their wages
on the termination of their employment, and that the purpose of
their creation would thereby be more nearly accomplished, it might
require them to pay for the labor of their employees when the same
is fully performed at the end of their employment. If it be true
that in doing so it would interfere with contracts which are purely
and exclusively private, and thereby limit their right to contract
with individuals, it would nevertheless, under such circumstances,
have the right to do so under the reserved power to amend."
But the court added that it did not follow that the legislature
could, by amendment, fix or limit the compensation of employees,
and particularly not as the right to amend was to be exercised so
"that no injustice shall be done to the corporators;" that,
however, this act was not obnoxious to that objection, as it left
"to the corporations the right of making contracts with their
employees on advantageous terms."
In respect of the provision that the unpaid wages then
Page 173 U. S. 408
earned at the contract rate were to become due and payable on
the cessation of the employment "without abatement or deduction,"
the court held that that did not
"require the corporation to pay the employee all the wages to
which he would have been entitled had he fully performed his
contract up to the time of his discharge, notwithstanding he had
failed to do so and had damaged the corporation thereby,"
but that it meant
"that the unpaid wages earned at the contract rate at the time
of the discharge shall be paid without discount on account of the
payment thereof before the time they were payable according to the
terms of the contract of employment."
Construing the statute thus, and, by elimination, confining it
to the corporations described, its validity was sustained as within
the reserved power of amendment, and the case was approved and
followed in that before us.
The scope of the power to amend and the general subject of the
lawfulness of limitations on the right to contract were considered
at length, with full citation of authority, in both these
decisions.
The contention is that, as to railroad corporations organized
prior to its passage, the act was void because in violation of the
Fourteenth Amendment. Corporations are the creations of the state,
endowed with such faculties as the state bestows and subject to
such conditions as the state imposes, and if the power to modify
their charters is reserved, that reservation is a part of the
contract, and no change within the legitimate exercise of the power
can be said to impair its obligation, and as this amendment rested
on reasons deduced from the peculiar character of the business of
the corporations affected and the public nature of their functions,
and applied to all alike, the equal protection of the law was not
denied.
Missouri Pacific Railway v. Mackey, 127 U.
S. 205.
The question, then, is whether the amendment should have been
held unauthorized because amounting to a deprivation of property
forbidden by the federal Constitution.
The power to amend
"cannot be used to take away property already acquired under the
operation of the charter, or to deprive the corporation of the
fruits, actually reduced to
Page 173 U. S. 409
possession, of contracts lawfully made,"
Waite, C.J.,
Sinking Fund Cases, 99 U. S.
700; but any alteration or amendment may be made
"that will not defeat or substantially impair the object of the
grant, or any rights which have vested under it, and that the
legislature may deem necessary to secure either that object or
other public or private rights,"
Gray, J.,
Commissioners v. Holyoke Water Power Company,
104 Mass. 446, 451;
Greenwood v. Freight Co., 105 U. S.
13;
Spring Valley Water Works v. Schottler,
110 U. S. 347.
This act was purely prospective in its operation. It did not
interfere with vested rights or existing contracts, or destroy, or
sensibly encroach upon, the right to contract, although it did
impose a duty in reference to the payment of wages actually earned,
which restricted future contracts in the particular named.
In view of the fact that these corporations were clothed with a
public trust and discharged duties of public consequence affecting
the community at large, the supreme court held the regulation, as
promoting the public interest in the protection of employees to the
limited extent stated, to be properly within the power to amend
reserved under the state constitution.
Inasmuch as the right to contract is not absolute, but may be
subjected to the restraints demanded by the safety and welfare of
the state, we do not think that conclusion, in its application to
the power to amend, can be disputed on the ground of infraction of
the Fourteenth Amendment.
Insurance Co. v. Daggs,
172 U. S. 557;
Holden v. Hardy, 169 U. S. 366;
St. Louis & San Francisco Railway v. Mathews,
165 U. S. 1.
Gulf, Colorado & Santa Fe Railway v. Ellis,
165 U. S. 150, is
not to the contrary, and was properly distinguished from this case
by the Supreme Court of Arkansas. There, a state statute provided
for the assessment of an attorney's fee of not exceeding ten
dollars against railroad companies for failure to pay certain
debts, and the exaction was held to be a penalty, although no
specific duty was imposed for the nonperformance of which it was
inflicted. This Court said:
"The
Page 173 U. S. 410
statute arbitrarily singles out one class of debtors and
punishes it for a failure to perform certain duties -- duties which
are equally obligatory upon all debtors; a punishment not visited
by reason of the failure to comply with any proper police
regulations, or for the protection of the laboring classes, or to
prevent litigation about trifling matters, or in consequence of any
special corporate privileges bestowed by the state."
The conclusion was that the subjection of railroad companies
only to the penalty was purely arbitrary, not justifiable on any
reasonable theory of classification, and that the statute denied
the equal protection of the law demanded by the Fourteenth
Amendment. In this case, the act was passed "for the protection of
servants and employees of railroads," and was upheld as an
amendment of railroad charters, such exercise of the power reserved
being justified on public considerations, and a duty was specially
imposed, for the failure to discharge which the penalty was
inflicted. The penalty was sustained because the requirement was
valid.
Judgment affirmed.
