Olsen v. Nebraska Ex Rel. Western Reference & Bond Assn., Inc.
61 S. Ct. 862, 313 U.S. 236, 1941 U.S. LEXIS 1202 (1941)
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Rule of Law:
A state law fixing the maximum fees that a private employment agency may charge for its services does not violate the Due Process Clause of the Fourteenth Amendment. States have broad authority under their police powers to regulate economic activity, and the wisdom or necessity of such legislation is a matter for the legislature, not the courts.
Facts:
- The state of Nebraska enacted a statute capping the fees private employment agencies could charge clients for securing employment.
- The maximum fee was set at ten percent of the first month's salary for the job obtained.
- Western Reference & Bond Assn., Inc. and other private employment agencies operated a business in Nebraska securing positions primarily for clerical, executive, technical, and professional workers.
- These employment agencies refused to agree to limit their fees to the ten percent maximum as required by the statute.
- As a result of the agencies' refusal to comply with the fee cap, Olsen, the Nebraska Secretary of Labor, withheld their license to operate for the year commencing May 1, 1940.
Procedural Posture:
- Western Reference & Bond Assn., Inc. (the relator) filed an action in a Nebraska state trial court for a peremptory writ of mandamus to compel Olsen, the Secretary of Labor, to issue it a business license.
- The relator's motion for judgment on the pleadings was sustained by the trial court, which ordered the writ of mandamus to be issued.
- Olsen appealed the trial court's decision to the Supreme Court of Nebraska.
- The Supreme Court of Nebraska affirmed the lower court's judgment, holding the state statute unconstitutional based on the precedent set in Ribnik v. McBride.
- The U.S. Supreme Court granted Olsen's petition for a writ of certiorari to review the decision of the Supreme Court of Nebraska.
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Issue:
Does a Nebraska statute that fixes the maximum compensation a private employment agency may collect from an applicant violate the Due Process Clause of the Fourteenth Amendment?
Opinions:
Majority - Mr. Justice Douglas
No. The Nebraska statute fixing maximum compensation for private employment agencies does not violate the Due Process Clause of the Fourteenth Amendment. The Court explicitly overrules its prior decision in Ribnik v. McBride, which had struck down a similar law. The Court discards the "affected with a public interest" test used in Ribnik, noting it was an unsatisfactory and fictional standard that was effectively abandoned in Nebbia v. New York. The Court affirms that states possess broad police power to regulate economic affairs for the public good. The wisdom, need, or appropriateness of such legislation are policy questions for the legislature, not constitutional questions for the judiciary, and the Court will not invalidate economic regulations based on its own public policy preferences.
Analysis:
This decision marks a definitive end to the Lochner-era's use of substantive due process to strike down economic regulations. By explicitly overruling Ribnik v. McBride, the Court solidified the principle established in cases like West Coast Hotel v. Parrish and Nebbia v. New York, which grants legislatures wide deference in enacting economic controls. The Court's refusal to second-guess the "wisdom, need, or appropriateness" of the law cements a rational basis standard of review for such legislation, significantly expanding state police power and limiting judicial intervention in economic policy.
