State Bar of Wisconsin

The Rise of Labor & Wisconsin's "Little New Deal"

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Biography: Joseph Padway
Wisconsin's Influence on the Social Security Act

by Joseph A. Ranney

Writing in the mid-1930s after his retirement from the Wisconsin Supreme Court, Justice Burr Jones concluded that the years following the end of World War I "could not be called an epochal period" in Wisconsin's legal history. Jones felt that "the foundation [of modern Wisconsin law] had been laid" by the Progressives and that little had been added to the law since that time.¹

Jones' opinion probably reflected the conventional wisdom of his time. But in hindsight it is clear that important changes took place in the law during the 1920s and 1930s. The Legislature and the supreme court created much of Wisconsin's modern labor law, culminating in the adoption of a comprehensive labor code and the nation's first unemployment compensation law in 1931. The struggle over what rights unions should have was renewed in the late 1930s. During the 1930s the Legislature also enacted a series of laws that collectively constituted a "little New Deal," generating as much legal controversy at the state level as the federal New Deal did nationally.

The evolution of Wisconsin labor law

Wisconsin's labor movement began before statehood. Membership in unions grew dramatically after the Civil War, and unions were an established part of Wisconsin's social scene by the 1870s. However, Wisconsin's legal system did not take any serious notice of the labor movement until the late 1880s.²

Early labor laws. In May 1886 thousands of Milwaukee workers demonstrated in support of a national movement for an eight-hour day. The demonstration turned into a contentious strike that reached a climax when National Guard troops fired on strikers at a plant in Bay View, killing five of them. The "Bay View riots" triggered a wave of legal reaction: several strike leaders were prosecuted for conspiracy to boycott and inciting to riot, and in 1887 the Legislature reacted to the riots by passing Wisconsin's first labor laws.³

The most controversial 1887 law prohibited all combinations "for the purpose of wilfully or maliciously injuring another in his ... business."⁴ Prior to the 1880s, injunctions had rarely been sought or granted in any legal context; but during the decade after 1886 employers, prosecuting attorneys and conservative judges throughout the United States made extensive use of labor injunctions and criminal prosecutions to check union activism. Wisconsin's anticombination law was a product of this movement. Wisconsin judges and juries, however, proved more reluctant to use the law against organized labor than did their colleagues in other states.⁵ In Aikens v. Wisconsin (1902) the Wisconsin Supreme Court made clear that the 1887 law could be used only to restrain conduct that was violent or directly interfered with business operations.⁶ Wisconsin judges routinely permitted peaceful labor picketing.

Wisconsin's early labor laws were not all antiunion. Another law passed in 1887 prohibited employers from coercing or blacklisting employees because of union membership. In 1893 the Legislature explicitly recognized the legitimacy of unions by exempting them from the state's antitrust laws; it also prohibited employers from hiring private strikebreakers. In 1895 and again in 1899 it outlawed "yellow dog" contracts, that is, employment contracts that required workers to promise not to join a union.⁷

The supreme court was by no means a force of reaction against organized labor, but it was more conservative than the Legislature in the labor law field. In State ex rel. Zillmer v. Kreutzberg (1902), the court unanimously struck down the 1899 yellow dog contract law on the substantive due process ground that it interfered with employers' and employees' freedom of contract. The court noted that similar statutes had been struck down in many other states; in fact, if the court had upheld the yellow dog contract law, it would have been the first court to do so. Nonetheless, the Zillmer case was a striking exception to the court's general policy of rejecting the substantive due process doctrine during and after the Progressive era.⁸

The second wave of labor legislation, 1919-1931. No major labor legislation was enacted during the Progressive era.⁹ The Progressives drew their support from middle-class reformers and rural areas more than from industrial workers. On those occasions when Progressives turned their energies to the workplace, they concentrated on improving workplace conditions more than on empowering workers. During World War I the membership and influence of Wisconsin unions increased dramatically due to labor shortages. That in turn triggered a new wave of labor reform.

The new wave of reform began in 1919. That year, the Legislature enacted a series of laws which were in effect a bill of rights for organized labor. The 1919 laws reaffirmed that unions were lawful organizations and were exempt from state antitrust laws, and they weakened the 1887 anticombination law by prohibiting labor injunctions unless "necessary to prevent irreparable injury." In 1923 the Legislature further weakened the 1887 law by establishing the right to a jury trial in all actions brought under the law and by requiring that 48 hours elapse before any injunction issued under the law could go into effect.¹⁰

The supreme court continued to chart a more conservative course than the Legislature in the field of labor relations. It did not strike down any of the 1919 labor laws, but it construed them narrowly and it consistently refused to protect strikes for closed shops. In A.J. Monday Co. v. Automobile Workers Local No. 25 (1920), the court was asked to decide whether the 1919 anti-injunction law, which applied to disputes concerning "terms and conditions of employment," extended to an injunction limiting the activities of a union that was striking for a closed shop. The court's decision was a mixed result for employers and unions. The court held that the closed shop issue did not constitute a condition of employment. It also questioned whether the Legislature had the power to limit the circumstances under which Wisconsin courts could issue injunctions, although it did not decide this issue. On the other hand, the court declined to declare the law unconstitutional, and it refused to limit participation in strike activities to employees of the plant being struck.¹¹

In Trade Press Publishing Co. v. Milwaukee Typographical Union No. 23 (1923), the court ruled that the 1887 anticombination law did not apply to agreements between employers not to make closed-shop agreements with unions.¹² In West Allis Foundry Co. v. State (1925), the court held that if a strike reached the point where it no longer "materially affected" the employer, it ceased to exist and the law's protections ended. Justice Charles Crownhart dissented and criticized the majority for "ignoring the facts of industrial life." The Legislature agreed with Crownhart and broadened the statute's definition of strikes.¹³

Advance and retreat, 1931-1940. The 1930s marked a revolution in labor law at the national level. The Norris-LaGuardia Act (1932) and the Wagner Act (1935) dramatically increased the rights and powers of organized labor throughout the United States.¹⁴ The evolution of Wisconsin labor law mirrored national developments, and in some cases anticipated them. In 1929 the Legislature passed a new law outlawing yellow dog contracts, and for reasons that are not clear the new law was never challenged in court. In the same year the supreme court held in David Adler & Sons Co. v. Maglio that under the equitable doctrine of "unclean hands," employers who breach collective bargaining agreements are not entitled to seek injunctive relief against striking workers. The Adler decision marked the first judicial advancement of worker's rights in Wisconsin, and it also signaled that the court was moving away from its earlier conservatism in the labor law area.¹⁵

In 1931 the Legislature enacted Wisconsin's first comprehensive labor code, which was patterned after the Norris-LaGuardia Act. The 1931 code was enacted in part as a reaction to a prolonged, violent strike at the Allen-A Hosiery Company in Kenosha in 1928. The code also reflected increasing national acceptance of unions as an established part of American society. The code explicitly declared that all workers had a right to organize, sanctioned a wide range of union activities, and expanded the right to a jury trial in cases involving labor disputes.¹⁶

Throughout the 1930s the supreme court was divided over the question of how broadly to interpret the union rights granted by the laws of the 1920s and 1930s, but it almost always came down in favor of labor's position. The two leading cases of the period were American Furniture Co. v. Teamsters Local 200 and Senn v. Tile Layers Protective Union, both decided in 1936. In American Furniture the court held by a 4-3 vote that the 1931 code protected picketing even in situations where the targeted employer's workers opposed the union. The majority concluded that unlike the Norris-LaGuardia Act, the Wisconsin code was not limited to disputes between employers and employees, but allowed all workers in a given craft to picket a plant employing workers in that craft. Justice Edward Fairchild argued in dissent that allowing the picketing at issue would compel employers to perform unlawful acts, namely force employees into unions not of their own choosing.¹⁷

In Senn the court held that unions could strike for a closed shop even in a situation where the employer worked alongside his employees but was ineligible to join the union. Two dissenting justices protested that because the picketing at issue would force the employer to stop working at his own trade it was "un-American, oppressive and intolerable." In effect, American Furniture and Senn told employers and unions that picketing was lawful in Wisconsin for almost any purpose provided that it was peaceful.¹⁸

In 1935 Congress passed the Wagner Act, which was the first labor law aimed directly at employer rather than union behavior. The Wagner Act required employers to recognize and bargain with unions that represented their employees. During the late 1930s, a prolonged debate took place over whether Wisconsin should enact a "Little Wagner Act." Gov. Philip LaFollette strongly favored such a law, and he made it a central part of his legislative program after 1934. The Progressives did not have enough strength in the Legislature to enact the law in the 1935 session; but they gained enough members in the 1937 session to pass the Wisconsin Labor Relations Act (WLRA) on a close vote. The WLRA prohibited employers from discriminating against workers based on union membership and outlawed company unions and other tactics used to combat organized labor. The law also established a state labor relations board, which had the power to supervise union elections and rule on complaints of unfair labor practices.¹⁹ The WLRA went a step beyond the Wagner Act by allowing employers to agree to closed shops even where there was no direct evidence that the affected workers favored it. In passing this provision, the Legislature signaled its approval of the American Furniture decision.

The WLRA marked a high point for the labor movement in Wisconsin; however, it was short-lived. LaFollette lost the governorship to a conservative Republican in 1938 and Progressive strength in the Legislature declined sharply. In 1939 the Legislature repealed the WLRA and replaced it with the Wisconsin Employment Peace Act, which in many ways foreshadowed the federal Taft-Hartley Act of 1947. The Employment Peace Act prohibited mass picketing and secondary boycotts; it bowed to farmers by requiring unions to give 10 days notice before striking any agricultural plant; and it disallowed closed-shop agreements unless 75 percent of the affected employees voted for a closed shop.²⁰

Wisconsin unions challenged the Employment Peace Act's restrictions on mass picketing and closed shops on the grounds that they unconstitutionally interfered with freedom of speech and expression, but the supreme court rejected the challenge and upheld the Act in Wisconsin Employment Relations Board v. Milk & Ice Cream Drivers Union (1941).²¹ In another case decided the same year, however, the court emphasized that picketing was a form of speech and that the law would be interpreted to allow peaceful picketing that did not disrupt an employer's business, in accordance with earlier court decisions.²²

The unions next challenged the Act on the ground that it was preempted by the Wagner Act and did not apply in disputes involving employers in interstate commerce, but the court also rejected this challenge in Allen-Bradley Local No. 1111 v. Wisconsin Employment Relations Board (1942), and its decision was upheld by the U.S. Supreme Court.²³

Wisconsin's New Deal legislation

The New Deal era was dominated by federal rather than state economic reform legislation. But unlike many states, Wisconsin was not content to let the federal government solve all of the problems created by the Depression. During the 1930s it enacted several measures, some of which were unique and some of which copied federal reforms, which together can fairly be called a "little New Deal."

The unemployment compensation law. In 1931 Wisconsin became the first state in the nation to create an unemployment compensation system. The Wisconsin labor movement set the campaign for the system in motion and was always the prime force behind the campaign. But the system applied to all workers, not just union members, and the Legislature did not view it as a concession to organized labor. Wisconsin's unemployment compensation system is more appropriately viewed as an offshoot of the great Progressive reforms between 1901 and 1911. It is probably the greatest achievement of Gov. Philip LaFollette and the other second-generation Progressives in Wisconsin.

The Wisconsin State Federation of Labor (WSFL) first publicly advocated an unemployment compensation system in 1910. The idea that government should provide for workers apart from the general relief system gained ground slowly. About 1920 John Commons, one of the authors of the Wisconsin worker's compensation law, became interested in unemployment compensation. Commons prepared a draft unemployment compensation plan, modeled on the British system. He and the WSFL promoted the plan vigorously. Versions of the plan were introduced in every session of the Legislature during the 1920s.²⁴

The plan did not pass for various reasons. The 19th century belief that unemployment was a matter of individual bad luck or bad character was deeply ingrained in Wisconsin and American culture, and the realization that in fact it was an unavoidable feature of the modern industrial economy came only slowly. The public was wary of creating yet another new administrative agency. Employers disliked Commons' proposal that they finance the system by making contributions to a common fund for all workers: they viewed that arrangement as a tax that would unduly penalize responsible employers with low employee turnover. Wisconsin farmers were strongly opposed to any system that would apply to them. However, Commons' plan gained increasing support as the public became familiar with its features and as Wisconsinites became comfortable with the Industrial Commission and the other agencies created during the Progressive era.

One of the new assemblymen elected in the Progressive sweep of the 1930 elections was Harold Groves, a U.W. economics professor who had studied under Commons. Groves defused much employer opposition to unemployment compensation by proposing that individual reserves be created for each employer. Groves' bill put a cap on each employer's reserve. This ensured that employers with good employment records would not have to help pay claims against employers with bad records. Groves and LaFollette further defused opposition by agreeing that if Wisconsin employers set up private funds that covered at least 175,000 workers by June 1933, the new law would not go into effect. Groves' bill also exempted farmers from its requirements. As a result of these factors and the rapidly increasing unemployment that the Depression was bringing to Wisconsin, Groves' bill passed in early 1932. The Wisconsin unemployment compensation system was widely praised as a model for other states and was soon copied by many of them.²⁵

The Wisconsin Recovery Act. It was an article of faith among economic reformers that the rapidly falling prices and rising unemployment of the early 1930s were largely due to predatory competition, and that this evil could be checked by enacting fair practices codes for each industry. The National Industrial Recovery Act of 1933 (NIRA), one of the earliest pieces of New Deal legislation, implemented this idea at the federal level. In 1933 the Wisconsin Legislature passed a similar law, known as the Wisconsin Recovery Act (WRA). The WRA authorized the governor to establish codes of fair competition for Wisconsin industries after consulting with each industry. The law gave the governor broad power to fill in the details of the codes, including regulation of working conditions, minimum pay levels and collective bargaining rights. The Legislature also passed several companion laws providing for wage, price and other controls in the dairy industry.²⁶

Both the NIRA and the WRA were ripe for constitutional challenge. The state challenge came first. In Gibson Auto Co. v. Finnegan (1935) the Wisconsin Supreme Court struck down the WRA, tartly commenting that "it is difficult to conceive of a more complete abdication of legislative power than is involved in this act." The court noted that unlike the NIRA, the WRA created criminal penalties for industry code violations: thus, the governor's power to create codes under the WRA was a power to create criminal laws. The court went out of its way to note that the economic goals of the law were good ones, but it emphasized that fact was not enough to save the law.²⁷ A few months later, in Schechter Poultry Corp. v. United States, the U.S. Supreme Court struck down the NIRA on similar grounds.²⁸

Joseph A. Ranney, Yale 1978, is a trial lawyer with DeWitt Ross & Stevens S.C., Madison. He is the author of several articles on legal and historical topics.

The 1935 Legislature promptly responded to Gibson Auto by amending the WRA to meet the court's criticisms. The 1935 version of the WRA carefully followed the standards created by the supreme court during the Progressive era for permissible delegation of administrative powers. It eliminated the governor's power to establish wage and price controls. Instead, it broadly prohibited unfair competition and trade practices and appointed the governor as an agency to enforce those prohibitions. The governor was authorized to make findings of fact as to whether prohibited practices existed in particular industries, and to promulgate regulations against such practices where they were found to exist. In the Tavern Code Authority Case (1936), the supreme court upheld the revised WRA.²⁹

The battle over rural electrification. Another cherished goal of New Dealers in Washington and Wisconsin was the establishment of electric power systems in rural areas. Starting in 1935, Philip LaFollette made that goal one of his top priorities. He was opposed by many businessmen and legislators who felt that the development of power systems should be left to the private sector. Private power advocates succeeded in blocking a state program in 1935, but the 1937 Legislature passed LaFollette's program on a close vote after a long and bitter debate.

The new law made an appropriation to the Wisconsin Development Authority (WDA), a private corporation that previously had been created in anticipation of the bill's passage. The WDA was required to use the appropriation to promote municipal utilities and electric cooperatives, and the law contained a general proviso that the WDA was not to use the money for "unconstitutional activities."³⁰

The law was promptly challenged, and the next year a deeply divided supreme court reluctantly upheld it in State ex rel. Wisconsin Development Authority v. Dammann (1938).³¹ The Dammann case was the court's last major decision concerning Wisconsin's "little New Deal" legislation, and it provided a showcase for the competing legal philosophies of economic legislation which clashed in Wisconsin and throughout the United States during the 1930s.

The court initially struck down the appropriation to the WDA because the Legislature did not specify in adequate detail how the money was to be used and did not provide for supervision of the WDA's activities. The court concluded that much like the 1933 WRA law, the WDA law was an unconstitutional delegation of legislative power.³² The state then asked the court to reconsider its decision. It argued that Wisconsin had a long history of appropriating state funds for private corporations charged with public purposes, and that the extent and limits of the WDA's powers were adequately set forth in its articles of incorporation. Five justices accepted the state's argument and proceeded to uphold most portions of the law.

The majority rejected the arguments of the law's opponents that promotion of public power was not a public purpose and that it violated a constitutional prohibition on the use of state money to foster internal improvements.³³ It held that given conditions in the late 1930s, promotion of public power systems was a legitimate public purpose even though many Wisconsin citizens favored private development of power.³⁴ However, the majority ruled that the WDA could not use state money to help a particular group or municipality build or buy a particular plant because that would be purely a "private, local and proprietary matter with which the state has no concern."

Justices Edward Fairchild and Chester Fowler vigorously attacked the WDA law in separate dissents. The dissents in many ways epitomized the concerns that legal conservatives had about New Deal reform legislation in general. Fairchild argued that the majority was eroding the limits on delegation of power set by the court over the past 25 years. Fowler argued that the law violated the "inalienable and inherent right" of individuals to develop businesses, including utilities, without competition from government. Fairchild agreed, and emphasized that any state promotional program would inevitably impede private power development:

"A brief review of the act will convince anyone that the purpose of the Legislature was to place in the field a militant agency, aggressively devoted to the building up of organizations to compete with privately owned utilities ... How is it possible to encourage the formation of power districts in general without throwing the weight of the taxpayers' money into the scales upon an election to determine a purely local and proprietary question?"³⁵

Although the dissenters did not prevail, their concerns continued to be felt after the Dammann decision was handed down. The 1939 Legislature, which was considerably more conservative than the 1937 Legislature, did not renew public funding for WDA. The agency limped along on private funding for some years and was finally dissolved in 1954. Many municipal utilities and rural electric cooperatives were formed under the WDA's aegis, but today most Wisconsinites are served by, and appear content with, utilities that are private but closely regulated by the state.

Endnotes

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¹ Jones, Reminiscences of Nine Decades, 21 Wis. Mag. Hist. 39, 55 (Sept. 1937).

² R. Ozanne, The Labor Movement in Wisconsin: A History (Madison, 1984)(hereinafter "Ozanne, Labor Movement in Wisconsin"), 3-6.

³ Id. at 3-13.

⁴ L. 1887, c. 287.

⁵ The first major effort by employers to make use of the law came when Oshkosh workers struck local lumber plants in 1898. Circuit Judge George W. Burnell refused to issue an injunction, and when local union leaders were tried for violating the 1887 law, they hired Clarence Darrow who secured their acquittal on all counts. Ozanne, Labor Movement in Wisconsin, 19-24.

⁶ Aikens v. Wisconsin, 113 Wis. 419, 89 N.W. 1135 (1902), aff'd 195 U.S. 194 (1904). Aikens did not involve a labor injunction, but it was recognized universally that the holding in Aikens would apply to labor injunctions as well as other applications of the anticombination law.

⁷ L. 1887, c. 349; L. 1893, c. 163, 219; L. 1895, c. 240; L. 1899, c. 332. The 1887 Legislature, however, also passed a law prohibiting the use of threats or force to prevent others from working, which acted as an additional check on unions. L. 1887, c. 427.

⁸ Zillmer v. Kreutzberg, 114 Wis. 530, 90 N.W. 1098 (1902). Five years later, the U.S. Supreme Court also held that yellow dog contract laws were an unconstitutional interference with freedom of contract. Adair v. United States, 208 U.S. 161 (1907); see also Coppage v. Kansas, 236 U.S. 1 (1914).

⁹ See Ranney, Law and the Progressive Era, Part 3: Reforming the Workplace, 1867-1925, 67 Wis. Law. 16 (Oct. 1994).

¹⁰ L. 1919, cc. 211, 399; L. 1923, cc. 37, 208.

¹¹ A.J. Monday v. Auto. Workers Local No. 25, 171 Wis. 532, 177 N.W. 867.

¹² Trade Press Publishing v. Milwaukee Typographical Union, 180 Wis. 449, 193 N.W. 507 (1923). See also Biersach & Niedermeyer Co. v. State, 177 Wis. 388, 188 N.W. 650 (1922); Walter W. Oeflein Inc. v. State, 177 Wis. 394, 188 N.W. 633 (1922).

¹³ West Allis Foundry v. State, 186 Wis. 24, 202 N.W. 302 (1925); L. 1925, c. 332.

¹⁴ 47 Stat. 70 (1932), 29 U.S.C. §§ 101-115; 49 Stat. 449 (1935), 20 U.S.C. §§ 151-166.

¹⁵ David Adler & Sons v. Maglio, 200 Wis. 153, 228 N.W. 123 (1929).

¹⁶ L. 1931, c. 376.

¹⁷ American Furniture v. Teamsters Local 200, 222 Wis. 338, 268 N.W. 250 (1936). The division of the court in close cases involving challenges to aggressive picketing was continuous and consistent throughout the 1930s. Of the justices who served throughout the 1930s, Chief Justice Marvin Rosenberry and Justices Oscar Fritz and John Wickhem generally took a liberal attitude toward picketing. Justices Edward Fairchild, Chester Fowler and George Nelson took a more restrictive attitude, although Fairchild occasionally joined the liberals.

¹⁸ Senn v. Tile Layers Protective Union, 222 Wis. 383, 268 N.W.2d 270 (1936), aff'd 301 U.S. 468 (1937). The Wisconsin court recognized that unions had to be aggressive in order to be effective, and it drew the line only at violence and the forcible restraint of business operations and persons crossing picket lines. See Senn, 222 Wis. at 390; Carpenter Baking Co. v. Bakery Sales Drivers Local No. 344, 238 Wis. 367, 299 N.W.2d 30 (1941).

¹⁹ L. 1937, c. 51; P.W. Glad, The History of Wisconsin, Vol. V: War, A New Era, and Depression, 1914-1940 (Madison, 1990) (hereinafter History of Wisconsin, Vol. V), 510-12.

²⁰ L. 1939, c. 57.

²¹ Wis. Employment Relations Bd. v. Milk & Ice Cream Drivers Union, 238 Wis. 379, 299 N.W.2d 31 (1941), cert. denied 316 U.S. 668 (1942).

²² Hotel & Restaurant Employees Int'l Alliance v. Wis. Employment Relations Bd. (1941), 236 Wis. 329, 294 N.W. 632 (1941), aff'd 315 U.S. 437 (1942).

²³ Allen-Bradley Local No. 1111 v. Wis. Employment Relations Bd., 237 Wis. 164, 295 N.W.2d 791 (1941), aff'd 315 U.S. 740 (1942).

²⁴ Glad, History of Wisconsin, Vol. V, 390-92; J. Commons ed., History of Labour in the United States (New York, 1932) (hereinafter History of Labour), 3:616-19.

²⁵ L. 1931, c. 20; Commons, History of Labour 3:611-23. Wisconsin employers were never able to establish private unemployment compensation plans covering a significant number of workers, and opposition to a state unemployment compensation system faded quickly after 1932.

²⁶ L. 1933, cc. 64, 391, 476.

²⁷ Gibson Auto v, Finnegan, 217 Wis. 401, 412-13, 259 N.W. 420 (1935).

²⁸ Schechter Poultry v. United States, 295 U.S. 495 (1935).

²⁹ Petition of State ex rel. Attorney General, 220 Wis. 25, 264 N.W. 633 (1936).

³⁰ L. 1937, c. 334.

³¹ Wis. Dev. Auth. v. Dammann, 228 Wis. 147, 277 N.W. 278 (1938).

³² Id. at 159-64.

³³ Const. (1848) Art. VIII, § 10.

³⁴ The majority noted that earlier cases had upheld state programs to promote agricultural cooperatives, and it reasoned that public utilities are analogous to cooperatives. It also reasoned that the WDA's efforts to encourage the formation of power districts might promote economies of production and lower prices. 228 Wis. at 187-89.

³⁵ 228 Wis. at 217, 219.

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