Will Parrish Perish?
By David Weil
In 1937, hotel maid Elsie Parrish sued her employer for failing to pay her a minimum wage of $14.50 per week as required by Washington state law. Her case made it all the way to the Supreme Court, and her win there set legal precedent for a new generation of workplace and labor laws.
As another Labor Day has come and gone, her case bears notice because the premise of worker protection laws passed after the Parrish decision faces attack along multiple fronts: from business models that undercut employment responsibility to recent state and federal legislative initiatives that could erode the protections of existing workplace laws. And the past term of the Supreme Court has proved that the very legal principle underpinning those protections may not be considered sacrosanct in the future.
Rather than paying Parrish what she was owed, the West Coast Hotel Company challenged the law itself. The company had good reason to follow this strategy. For three preceding decades, the Supreme Court looked askance at states’ attempts to enact protective work legislation, citing the 14th Amendment concept of “liberty of contract.” Under this doctrine, individuals have the right to contract freely in a market economy, including the right to purchase and sell labor. In case after case, the Supreme Court applied the doctrine ruthlessly, eviscerating workplace protections except in the narrowest cases.
Parrish v. West Coast Hotel landed on the Supreme Court docket in 1937. But unlike past decisions, the 5-4 majority acknowledged something fundamentally different about the labor market: Liberty of contract assumes that both parties strike employment deals on equal footing. Not so, noted Chief Justice Charles Evans Hughes in his majority decision: “[T]he proprietors of these establishments and their operatives do not stand upon an equality…In other words, the proprietors lay down the rules and the laborers are practically constrained to obey them. In such cases, self-interest is often an unsafe guide, and the legislature may properly interpose its authority.”
The Court acknowledged what millions of working people knew (and know) from daily experience about unequal bargaining power, setting legal precedent for a new generation of federal workplace and labor laws. In subsequent decisions, it drew on Parrish to uphold laws regulating wages and hours, the ability to organize unions, and later outlawing employment and pay discrimination and assuring access to healthy and safe work conditions.
We now take it for granted that the government enacts laws to protect workers. We should not.
Today, this idea is under direct attack in the form of business models that treat workers as “independent contractors” rather than employees. Using the argument that workers gain increased flexibility in work arrangements by being designated independent contractors, companies shed responsibility for paying minimum wage and overtime, unemployment and workers compensation coverage and liability for sexual harassment. This argument echoes the pre-Parrish concept of liberty of contract: workers should have the “freedom” to accept work unfettered by government protections.
Workers involved in the current wave of union organizing face similar arguments. Corporate leaders of some of the largest companies in the country argue that unions stand unhelpfully between their employees and management and thwart productive and mutually beneficial agreements. In other words, unions undermine the ability of individuals to strike their own deals directly with employers.
And we see this argument playing out in states where platform companies have attempted to carve their workforce out of coverage from workplace protections and rights by declaring them to be independent contractors. For example, after California passed a sweeping law providing clear criteria for defining employment, Uber, Lyft and other platform companies spent more than $200 million to push through a referendum to escape those protections. Those businesses pressed related legislation in numerous states and similar legislation has been recently introduced in Congress, grandiosely titled “The Worker Flexibility and Choice Act.” Central to the argument of these initiatives is that flexibility requires an individual right to contract work unfettered by the collective protection of government policy.
Given the Supreme Court’s demonstrated willingness to overturn long-established precedent, one can imagine a legal return to a pre-Parrish understanding of the right to contract.
People legitimately desire and need greater flexibility in their work arrangements. The pandemic gave fortunate workers a taste of enhanced work / life balance. And even before Covid, working households struggled to balance the time demands posed by declining real earnings against those of caring for children and aging parents.
Yet unequal bargaining power remains an intrinsic part of the labor market. As states and the federal government contemplate legislative responses to old and new business models and courts consider challenges to fundamental worker protections, the Parrish decision’s reminder that workers “do not stand upon an equality” in the labor market must continue to guide us.
David Weil is Professor of Social Policy at the Heller School for Social Policy and Management, Brandeis University and the former Administrator of the US Department of Labor’s Wage and Hour Division in the Obama administration.