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Why "Precedent" Is a Bad Measure of a Law's Worth

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Whenever the Supreme Court’s end-of-the-term “announcement season” comes around, I am reminded of the importance of handling precedent correctly under a Constitution that is supposed to remain “the supreme law of the land.” Such a result requires that courts actively maintain constitutional rights against government overreaching, meaning that divergent precedents must not be allowed to preempt the Constitution. It also requires that precedents consistent with the Constitution are not overturned without good cause, which is why stare decisis (“to stand by things decided”) is important. The Supreme Court has said such deference to precedent “promotes the evenhanded, predictable, and consistent development of legal principles,” which expands voluntary social cooperation.

That two-part standard for precedents, however, has been violated by a two-step “living Constitution” approach, which has undermined Americans’ Constitutional protections. Divergent precedents have been substituted for the Constitution by artful judicial reinterpretation (far easier than passing a Constitutional Amendment, which is typically unachievable), such as with the sprawling expansion of the meaning of the Commerce Clause, now jokingly called the "everything clause" in law school), effectively creating a “new and improved” supreme law of the land. Once that has happened, defenders then insist that stare decisis be honored, and the new interpretation be upheld against subsequent alterations. If their insistence is accepted, it allows mistaken precedents to persist and further precedents to build on them, expanding deviations from the Constitution.

Of course, there is an internal contradiction in that two-step approach. If stare decisis means the Supreme Court must defer to earlier Constitutional precedents, there is no respectable defense for those reinterpretations “living Constitution” advocates are now so adamant in defending, because they deviated from still-earlier Constitutional precedents.

The Supreme Court term now approaching its close has illustrated both types of threats to our Constitutional republic. In Janus v. AFSCME (pending), we saw arguments to uphold a precedent that should not have been accepted, despite inconsistency with Constitutional precedents. In Epic Systems v. Lewis (just decided), we saw attempts to overturn a well-established Constitutional interpretation by retroactively “discovering” a conflict created 77 years ago.

In Janus v. AFSCME, the key issue was the Abood precedent, giving government employee unions authority to charge workers for the costs of negotiating on their behalf, but not for unwanted union political spending, which would violate their First Amendment rights. Mark Janus argued that all union expenditures are inherently political (e.g., if government union members get higher wages or better benefits, taxpayer costs will rise), which would result in banning all coerced non-member fees by government employee unions.

Unions and left-leaning groups ignored the Constitution and went all in defending Abood as a controlling precedent, requiring continuation under stare decisis. Unfortunately, Abood does not stand up as a Constitutional precedent.

The reason is the Supreme Court’s application of three-tiers of scrutiny for Constitutional rights. For some rights, notably economic rights, as in Commerce Clause cases, it applies a “rational basis” or minimal scrutiny test, requiring only that some legitimate government interest is involved, and the law has some rational relationship to that interest, which in practice is almost a rubber stamp. For First Amendment and other rights they deem more important, “strict scrutiny” is applied, requiring a compelling government interest and a law narrowly tailored to that interest, using the least restrictive means, which is a standard far more difficult to meet.

The central precedents that Abood relied on were Commerce Clause cases, addressing government’s right to regulate labor disputes, subject to minimal scrutiny. They did not address whether mandating union agency fees violated First Amendment rights, which the Supreme Court has increasingly held, that are to be subjected to strict scrutiny. Therefore, they provide no controlling precedent for Janus. The minimal scrutiny justification of advancing “labor peace” in Abood cannot meet the strict scrutiny standard for compelled speech in Janus, and does not justify stare decisis deference.

In Epic Systems v. Lewis, just decided 5-4, left-leaning groups’ arguments tried to get around stare decisis principles. They argued that the 1925 Federal Arbitration Act (FAA) explicitly calls for government enforcement of individual arbitration agreements for worker disputes with employers should be over-ridden by the 1935 National Labor Relations Act (NLRA), because one of its clauses granted employees “the right…to engage in other concerted activities for…mutual aid or protection.”

Under stare decisis, why would part of a 1925 law be overturned by a 1935 law? If a 1935 law was written while the decade-earlier law was in force, the intent to overturn parts of the earlier law would have been made clear by Congress and would have been revealed by the ensuing application of the laws. But neither condition was met.

Mandatory individual arbitration is a now-familiar business practice. Even the National Labor Relations Board (NLRB) did not assert any such conflict between the NLRA and the FAA for decades. Then, in 2012, the Obama NLRB decided that, despite no explicit statement of such an intent, the vague clause in Section 7 in the NLRA should be read as creating a worker right to use group legal action actions for worker-employer disputes, which should invalidate the FAA’s enforcement of individual mandatory arbitration agreements (a position even the current Department of Justice filed against).

In fact, as Walter Olson noted, seven major Court rulings in the last 35 years have confirmed that the FAA policy of enforcing arbitration agreements is not in conflict with other federal laws. And in Gilmer v. Interstate/Johnson Lane Corp. (1991), the Court held that even the federal statute directly governing wage and hour suits--the Fair Labor Standards Act (FLSA)--does not ban this kind of arbitration agreement. And as Justice Gorsuch wrote, “Our rules aiming for harmony over conflict in statutory interpretation grow from an appreciation that it’s the job of Congress by legislation, not this Court by supposition, both to write the laws and to repeal them.”

There were other issues of interpretation, as well. The FAA explicitly endorses enforcing individual arbitration agreements, while one must work hard to twist the vague Section 7 phrase of the NLRA to interpret it as creating a contradictory right that remained undiscovered for over three-quarters of a century. Further, the Section 7 clause of the NLRA deals with the power to unionize, while the FAA deals with the very different issue of workplace grievances in non-union environments. Also, the principle of ejusdem generis (“of the same kind”) would require that the “other concerted activities” referred to in the NLRA should be understood in terms of the specific enumerated joint activities — all related to collective bargaining--preceding it. Consequently, the NLRA clause should not trump the long-held FAA support for individual arbitration in an entirely different context.

To many, getting into details of judicial interpretation is an exercise in making their eyes glaze over. As someone not trained as a lawyer, I understand that. But it is important to know that our liberty is often dependent on just such issues, making them something that we cannot effectively defend our liberties without. And that is especially true, given the two-step way our liberties have been eroded.


Gary Galles

Gary M. Galles is a Professor of Economics at Pepperdine University and an adjunct scholar at the Ludwig von Mises Institute. His research focuses on public finance, public choice, economic education, organization of firms, antitrust, urban economics, liberty, and the problems that undermine effective public policy. In addition to his most recent book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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