On this day in 1937, the Supreme Court handed down NLRB v. Jones & Laughlin Steel, a cornerstone of what became known as the “Constitutional Revolution of 1937.”

In National Labor Relations Board v. Jones & Laughlin Steel Corporation, ten former workers of Jones & Laughlin Steel brought a suit against the company, asserting that they were illegally fired after they attempted to unionize and join the Steel Workers Organizing Committee. The recently created National Labor Relations Board ordered Jones & Laughlin Steel to rehire the employees and compensate them for any back pay owed them.

The law that created the NLRB, the National Labor Relations Act of 1935, also known as the Wagner Act, was a critical component of President Franklin D. Roosevelt’s New Deal program of legislative reforms. An unprecedented attempt to address the unequal bargaining power dynamic between employers and employees, the Wagner Act prohibited employers from punishing employees for organizing or joining a union and required them to engage in collective bargaining with unionized workers.

Congress claimed authority to pass the Wagner Act under its power to regulate interstate commerce, enumerated in Article I of the Constitution. In challenging the law, Jones & Laughlin argued that its provisions regulating the bargaining relationship between employees and employers went beyond Congress’s commerce power.

After a string of controversial decisions striking down New Deal legislation, the Supreme Court changed course. In a 5-4 decision, the Supreme Court upheld the bargaining provisions of the Wagner Act. Chief Justice Charles Evans Hughes delivered the opinion of the Court, arguing that the commerce power extended to regulations designed to prevent a potential strike at Jones & Laughlin, since a work stoppage would have an “immediate, direct, and paralyzing effect upon interstate commerce.” “Collective bargaining is often an essential condition of industrial peace,” Hughes asserted, and a “refusal to confer and negotiate has been one of the most prolific causes of strife.”

The decision was a landmark ruling on the meaning of the Commerce Clause. Its reasoning granted far more authority to Congress to regulate economic relations than the Court had previously allowed. It was also a major victory for industrial and factory workers across the country. The Wagner Act helped usher in a new era of labor relations, one in which union power, backed by the authority of the federal government, entered into negotiations with industry on far more equal footing than before.