ArtI.S8.C3.5.6 Railroad Retirement and Securities Exchange Acts of 1934

Article I, Section 8, Clause 3:

[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .

To assist commerce and labor, Congress passed the Railroad Retirement Act (RRA) in 1934,1 which ordered compulsory retirement for superannuated employees of interstate carriers and provided they receive pensions from a fund comprised of the compulsory contributions from the carriers and the carriers’ present and future employees. In Railroad Retirement Board v. Alton Railroad,2 however, a closely divided Court held the RRA to exceed Congress’s Commerce Clause power and to violate the Due Process Clause of the Fifth Amendment. Writing for the majority, Justice Owen Roberts stated:

We feel bound to hold that a pension plan thus imposed is in no proper sense a regulation of the activity of interstate transportation. It is an attempt for social ends to impose by sheer fiat noncontractual incidents upon the relation of employer and employee, not as a rule or regulation of commerce and transportation between the States, but as a means of assuring a particular class of employees against old age dependency. This is neither a necessary nor an appropriate rule or regulation affecting the due fulfillment of the railroads’ duty to serve the public in interstate transportation.3

In dissent, Chief Justice Charles Hughes contended that “the morale of the employees [had] an important bearing upon the efficiency of the transportation service.” 4 He added:

The fundamental consideration which supports this type of legislation is that industry should take care of its human wastage, whether that is due to accident or age. That view cannot be dismissed as arbitrary or capricious. It is a reasoned conviction based upon abundant experience. The expression of that conviction in law is regulation. When expressed in the government of interstate carriers, with respect to their employees likewise engaged in interstate commerce, it is a regulation of that commerce. As such, so far as the subject matter is concerned, the commerce clause should be held applicable.5

In subsequent legislation, Congress levied an excise on interstate carriers and their employees, while by separate but parallel legislation, it created a fund in the Treasury from which pensions would be paid along the lines of the original plan. The Court did not appear to question the constitutionality of this scheme in Railroad Retirement Board v. Duquesne Warehouse Co.6

New Deal legislation did not necessarily require expansive interpretations of congressional power. The Securities Exchange Act of 19347 created the Securities and Exchange Commission (SEC), authorized the Commission to promulgate regulations to keep dealings in securities honest, and closed the channels of interstate commerce and the mails to dealers refusing to register under the Act.

48 Stat. 1283. back
295 U.S. 330 (1935). back
Id. at 374. back
Id. at 379. back
Id. at 384. back
326 U.S. 446 (1946). Indeed, in a case decided in June 1948, Justice Rutledge, speaking for a majority of the Court, listed the Alton case as one “foredoomed to reversal,” though the formal reversal has never taken place. See Mandeville Island Farms v. Am. Crystal Sugar Co., 334 U.S. 219, 230 (1948). Cf. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 19 (1976). back
48 Stat. 881, 15 U.S.C. §§ 77b et seq. back