The National Recovery Administration was unconstitutional because the law that created it, the National Industrial Recovery Act of 1933, violated the Constitution in two independent ways: Congress handed the President sweeping power to write binding industrial codes without setting any meaningful standards to guide him, and the codes reached local business activity that fell outside Congress’s power to regulate interstate commerce. A unanimous Supreme Court said so in A.L.A. Schechter Poultry Corp. v. United States in 1935, and the ruling wiped out the entire code system that had governed more than 500 American industries.1Justia. A. L. A. Schechter Poultry Corp. v. United States2National Archives. National Industrial Recovery Act
What the NRA Was and What Its Codes Did
Congress passed the National Industrial Recovery Act in June 1933 as one of the first major New Deal statutes. The law created the National Recovery Administration and authorized the President to approve “codes of fair competition” submitted by trade or industrial associations. If no group submitted a code for a given industry, the President could write and impose one himself.3Constitution Annotated. National Industrial Recovery and Agricultural Adjustment Acts of 1933
These codes carried the force of federal law. They set minimum wages, maximum hours, prices, production quotas, and detailed operating rules for the businesses in each industry. More than 500 codes were adopted.2National Archives. National Industrial Recovery Act Compliant businesses displayed a Blue Eagle emblem. Violators faced fines of up to $500, imprisonment of up to six months, or both.4GovInfo. National Industrial Recovery Act – Section 10a It was, in effect, an attempt to run large parts of the American economy through industry-written rules with presidential approval and criminal penalties behind them.
The Case That Struck It Down
The constitutional challenge came from an unlikely source: a Brooklyn poultry wholesaler. The Schechter brothers ran a slaughterhouse that bought live chickens shipped in from other states, processed them, and sold them to local butchers and retailers in New York City. Federal prosecutors charged them with violating the Live Poultry Code on several counts, including paying workers below the code minimum, exceeding hour limits, selling uninspected and unfit chickens, filing false sales reports, and breaking the code’s “straight killing” rule.1Justia. A. L. A. Schechter Poultry Corp. v. United States
The straight-killing charge became the case’s signature detail and gave it the nickname “the Sick Chicken Case.” The rule forced retail buyers to accept an entire coop or half-coop of birds as a lot, with no picking through and choosing individual chickens. The Schechters had been letting customers select particular birds, and the code treated that as an unfair trade practice.1Justia. A. L. A. Schechter Poultry Corp. v. United States
Every justice voted against the government, including the liberals who generally backed New Deal legislation. Chief Justice Charles Evans Hughes wrote the opinion, and he found the NIRA unconstitutional on two separate grounds. Either would have been enough on its own.1Justia. A. L. A. Schechter Poultry Corp. v. United States
Problem One: Congress Gave Away Its Lawmaking Power
Article I, Section 1 of the Constitution vests all federal legislative power in Congress.5Congress.gov. U.S. Constitution – Article I Congress can hand some authority to the executive branch, but only if it supplies what courts call an “intelligible principle” to guide how that authority is used. That standard came from J.W. Hampton Jr. & Co. v. United States in 1928, which required Congress to lay down guidelines that the delegated authority is directed to follow.6Justia. J. W. Hampton, Jr. and Co. v. United States
The NIRA did not come close. Section 3 let the President approve any industry-submitted code, or impose one himself, with almost no criteria for what those codes had to contain. The Court found that Section 3 “supplies no standards for any trade, industry or activity” and “does not undertake to prescribe rules of conduct to be applied to particular states of fact determined by appropriate administrative procedure.”1Justia. A. L. A. Schechter Poultry Corp. v. United States The only guidance was a vague statement about economic recovery and fair competition in Section 1. The President could add conditions, remove provisions, or modify codes based on his own view of what would “effectuate the policy” of the Act.
There was a second layer to the problem. The people actually drafting the codes were private trade associations representing the industries being regulated. Congress, in the Court’s view, could not hand its lawmaking authority to trade groups and let them write binding federal rules for their own industries, with presidential approval as the only backstop. The Court called this arrangement “unknown to our law.”1Justia. A. L. A. Schechter Poultry Corp. v. United States
The Court also noted that the NRA lacked the procedural safeguards other regulatory schemes used to constrain executive discretion.7Library of Congress. Schechter Corp. v. United States, 295 U.S. 495 No required fact-finding, no meaningful judicial review of codes before they took effect, and no formal way for affected businesses to challenge a code’s provisions. The whole system ran on presidential discretion backed by industry insiders, and it produced federal criminal law.
Problem Two: The Codes Reached Beyond Interstate Commerce
Even a perfectly drafted code would have run into the second constitutional wall. Article I, Section 8, Clause 3 gives Congress power to regulate commerce “among the several states.” In 1935, the Court read that phrase narrowly. Federal power reached goods actually moving between states. It did not reach every local business activity connected to the national economy.
The government argued that the Depression justified broader federal control because disturbances in local markets rippled across state lines. The Court rejected that outright: “Extraordinary conditions do not create or enlarge constitutional power.”1Justia. A. L. A. Schechter Poultry Corp. v. United States The Tenth Amendment reserved to the states any powers not delegated to the federal government, and an economic emergency did not erase that line.
The Schechters illustrated the point. Their chickens had traveled from out of state, but once the birds reached the Brooklyn slaughterhouse, the interstate journey ended. The Schechters processed the poultry and sold it to local retailers. None of their chickens left New York. Once goods came to rest inside a state, the Court held, the handling and sale that followed were local activities outside federal reach.1Justia. A. L. A. Schechter Poultry Corp. v. United States
Direct Versus Indirect Effects
The Court reinforced this boundary by distinguishing direct from indirect effects on interstate commerce. Activities with a direct effect could be federally regulated. Activities with only an indirect effect, however substantial in practical terms, stayed under state control. The wages the Schechters paid and the hours their workers put in eventually touched interstate markets through costs and competition, but the connection was indirect, and that placed it beyond federal authority.1Justia. A. L. A. Schechter Poultry Corp. v. United States
The Court saw where the government’s theory led. If Congress could regulate local wages because low wages affected competitive conditions that eventually affected interstate prices, then Congress could regulate almost anything. Enough links in a chain of indirect effects could connect any local activity to interstate commerce. The Court refused to follow that chain.
What Replaced the NRA
The ruling ended the code system but not the policy goals behind it. Congress rebuilt with narrower, more carefully drafted statutes.
Section 7(a) of the NIRA had guaranteed workers the right to organize and bargain collectively, and those protections disappeared with the rest of the Act. The National Labor Relations Act, also called the Wagner Act, restored them within weeks. The law guaranteed employees the right to form unions, bargain collectively, and engage in other concerted activity for mutual aid or protection, and it created the National Labor Relations Board as an independent agency with formal enforcement procedures.8National Labor Relations Board. Interfering with Employee Rights That structure addressed the procedural vacuum the Court had criticized in the NRA.
The NRA codes had also set minimum wages and maximum hours industry by industry, with the details largely written by private trade groups. The Fair Labor Standards Act of 1938 replaced that patchwork with a single federal minimum wage of 25 cents per hour and a maximum workweek of 44 hours, enacted by Congress itself instead of delegated out.9U.S. Department of Labor. Fair Labor Standards Act of 1938 – Maximum Struggle for a Minimum Wage The statute was written to apply only to workers in industries engaged in interstate commerce or producing goods for interstate commerce, avoiding the Commerce Clause problem that had sunk the NIRA.
Where the Ruling Stands Today
The Commerce Clause half of Schechter did not last. In 1937, the Court upheld the National Labor Relations Act in NLRB v. Jones & Laughlin Steel Corp. and adopted a much broader reading of the clause, letting Congress regulate activities that had a significant effect on interstate commerce even when that effect was indirect. The rigid direct-versus-indirect test that doomed the NRA became a historical artifact.
The nondelegation half followed a different path. Schechter remains good precedent and is still cited, but the Supreme Court has not used the nondelegation doctrine to strike down a federal statute in the ninety years since. Courts have upheld delegations guided by phrases as vague as “public interest” or “just and reasonable rates.” The doctrine that killed the NRA is alive in theory and largely dormant in practice, which is why Schechter still stands as the high-water mark for constitutional limits on how much lawmaking authority Congress can hand away.