Compstitutional Law 101: Part 2: Will Sveen signal a move to judicially dismantle the “grand bargain”?

Watch out for what these three could say in Sveen v. Melin

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

WILG is hosting a summit on the constitutional challenges in workers’ compensation on April 18th, I won’t be able to attend, but this post and my last post are my contribution to this ongoing discussion.

Stating that “a seemingly obscure case could have far-reaching implications” is one of the most overused clichés in legal blogging and journalism.  But a case involving a dispute over the proceeds of a life insurance policy might impact the constitutional basis for workers’ compensation and other state laws protecting employees.

In March, the Supreme Court heard oral argument in Sveen v. Melin (paywall). In Sveen, a former spouse was challenging a Minnesota law automatically removing a spouse as beneficiary of an insurance policy upon divorce. The grounds for the challenge is the so-called contracts clause of the United States Constitution which prohibits states from passing laws that impair the obligation of a contract.

Pro-corporate legal commentators have long lamented the demise of the contracts clause at the expense of laws enacted by states under 10th Amendment police powers. When these pundits and academics write about a “contracts clause revival”, they are really writing about diminishing the rights of states to enact laws under their police powers.

One of the most important set of state laws enacted under police powers are workers’ compensation laws. In New York Central Railroad v. White  state workers’ compensation laws were found to be constitutionally enacted under a state’s 10th Amendment police powers.  State laws regulating workplace safety and the ability to injured employees to seek legal redress were one of the primary drivers for the broad recognition of police powers in the late 19th century. A good discussion of the background behind the expansion of state police powers is found in the 1898 Supreme Court case of Holden v. Hardy.  In short, the Supreme Court found that state workplace safety laws were a response to the new industrial economy of the late 19th century and valid exercises of state police powers.

University of Chicago Law Professor Richard Epstein argued that minimum wage laws violated the contracts clause.  It’s not much of an intellectual stretch to argue that mandatory workers’ compensation laws would violate the contracts clause using Epstein’s interpretation of the contracts clause. A gig economy employer like Uber subjected to a state workers’ compensation law might argue that they should not be subjected to such a law under the contracts clause.

On April 2nd the Supreme Court reversed 70 years of precdent in narrowly construing exceptions to the Fair Labor Standards Act in the Navarro case. Navarro will likely have the effect of pushing plaintiffs to file more wage and hour cases under state laws. A revived contracts clause could cut off or curtail opportunities for justice for victims of wage theft in state court.

A potential contracts clause revival should concern advocates for injured workers for other reasons. In recent years, attorneys for injured workers have had a fair amount of success in overturning anti-worker changes to workers’ compensation laws based on state constitutions. That avenue would likely be blocked with a full-blown contracts clause revival.

In the late 19th and early 20th century, state laws regulating workplace conditions were struck down under 14th Amendment substantive due process. But substantive due process also allows claims for a broad variety of civil rights that are disliked by judicial conservatives, so the substantive due process clause is disfavored by courts.  The contracts clause allows courts to strike down worker-friendly state laws without creating a mechanism for expanding rights for suspect classes of individuals like prisoners or victims of police brutality. In New York Central v. White, the Supreme Court considered and rejected arguments overturning workers’ compensation laws on substantive due process grounds and contracts clause grounds.

Finally, a broad interpretation of the contracts clause would allow the Supreme Court to overturn state workers’ compensation laws while still maintaining the narrowed interpretation of interstate commerce the Roberts court appear to be endorsing in NFIB v. Sebelius. As I wrote in a post last week, a narrow construction of the commerce clause could be a high hurdle in enacting worker-friendly chagnes to workers’ compensation laws on a federal level.

Sveen v. Melin will likely be decided this spring. If the Supreme Court strikes down the Minnesota law based on the contracts clause, I will be interested to read the language of the opinion. I will also be interested in reading any concurring opinions from hard core conservatives like Gorsuch, Thomas and Alito as those opinions could be a clue as to where the court could be going on contracts clause jurisprudence. It is unlikely that Sveen v. Melin will be grounds to invalidate state workers’ compensation laws. Supreme Court decisions are limited to actual cases and controversies that are presentd to them. But Sveen could be another step in undercutting New Deal and Progressive Era refroms.  The Supreme Court has been chipping away at New Deal era laws in cases like Navarro and the Tackett decision in 2015. A bad decision in Sveen might accelerate the rollback of pro-worker laws.