Allied Structural Steel Co. v. Spannaus
438 U.S. 234 (1978)
Spannaus worked for Allied and
was covered under their pension plan.
The plan required workers to
be employed for 15 years before they could collect anything upon
Minnesota enacted the Private
Pensions Benefits Protection Act,
which said in part that if a company terminated an employee who'd worked
for at least 10 years, they were responsible for paying the worker's
pension benefits, regardless of what the employment contract said.
Allied closed their office and
fired Spannaus. Spannaus asked for his pension, but Allied refused
because he'd been there less than 15 years. Spannaus sued.
Allied argued that the
Minnnesota law was a violation of their freedom of contract, and therefore a violation of the Contracts
Clause of the Constitution.
Article I §10 says, "No State shall pass any law
impairing the obligation of contracts."
The US Supreme Court found for
Allied and overturned the Minnesota law.
The Court used the same
three part test they later annunciated in Energy Reserves Group Inc.
v. Kansas Power and Light Co. (459
U.S. 400 (1983)), for determining if a law could survive under the Contracts
Is there a substantial
impairment of a contractual relationship?
If so, does it serve a
significant and legitimate public purpose?
If so, does is reasonably
related to achieving the goal?
In this case, the Court
found that the law caused a "substantial and severe" impact.
However, the Court found
that the law failed the second part of the test because it was not
enacted "to deal with a broad, generalized economic, or social
The law regulated an area
that had never been regulated before by the State, was not temporary,
and was not narrowly tailored.
So far, this has been the only
time the US Supreme Court has invalidated a State Statute on Contracts
Clause grounds since 1934.