Since the New Deal in the 1930s, Congress has created a great many federal programs that have expanded the number of government-provided services. Aid to education, highway construction, public welfare, and public works were all added to the national budget by acts of Congress. As the flow of federal money increased, federal regulations increased as well. Acting in the public interest, and taking its mandate from the Commerce Clause (Article I, Section VIII), Congress established various standards to protect the health, safety, and welfare of the nation. However, States resisted the intrusions of the National Government into areas of government and regulation traditionally left to the States. Challenges to this expansion of federal power reached the Court in increasing numbers, as States petitioned to stop the erosion of the "reserved powers" of the 10th Amendment.
After 30 or more years of steady accumulation of power by the Federal Government, the tide slowly began to turn. In 1976, in a case entitled National League of Cities v. Usery, a 5–4 Court ruled that "traditional functions" of States were not subject to federal regulation under the Commerce Clause, and that States could not be forced to comply with the provisions of the Fair Labor Standards Act of 1974. Provisions of the act were intended to make State and local governments, as employers, comply with federal minimum-wage and maximum-hour regulations.
Until the National League of Cities v. Usery decision, the San Antonio Metropolitan Transportation Authority (SAMTA) had paid wages to its employees as required by the Fair Labor Standards Act of 1974. After the decision, SAMTA decided to vary its wage guidelines from federal law. SAMTA managers believed that SAMTA was no longer subject to Fair Labor Standards Act (FLSA) guidelines because of the Usery decision.
In 1979, however, the U.S. Department of Labor informed SAMTA that the Labor Department did not recognize SAMTA as a government entity performing a traditional function of local government. Therefore, the Usery decision did not pertain. David Garcia and other SAMTA employees then sued the transit authority to receive overtime pay due them under FLSA guidelines.
The U.S. District Court that first heard the case disagreed with both the Labor Department and Garcia, stating that transit systems were traditional functions of State and local government and were not subject to federal rules. The case was then appealed to the Supreme Court by Garcia.
The case involved the 10th Amendment, which addresses the powers "reserved to the States." The case also asked whether, as a public utility, SAMTA qualified as a government entity and was thus exempt from FLSA guidelines regarding federal minimum-wage and maximum-hour regulations. Were there indeed limits to growing federal powers to regulate the States, and did they extend to SAMTA? Could State agencies operate without federal guidelines? Would federalism be irreparably harmed if Garcia and his colleagues were paid according to the Fair Labor Standards Act of 1974? Should National League of Cities v. Usery be overruled as unworkable?
For Garcia (the transit workers): The Usery rule is unworkable. It is not possible to distinguish clearly between "traditional" and "nontraditional" government functions. Usery represents a misinterpretation of the Constitution by the Court and should be overturned. The States need not fear excessive intervention by the National Government. The 10th Amendment was not intended to allow States to operate in such a way as to violate federal standards. Federal standards, enacted in accordance with delegated and implied powers, override State laws and State authority.
For the San Antonio Metropolitan Transit Authority: The Usery rule is not only workable, it is essential to the operation of a federal system. A series of case-by-case decisions of the Court may be necessary to decide which State government functions are traditional and which are not, but that is preferable to subjecting State government to almost absolute federal authority. State immunity from federal laws affecting traditional government functions is essential to the very nature of federalism. Providing public transportation is a traditional government function and is protected from federal regulation by Usery. The Court should be cautious about the prospect of overturning so recent a precedent as Usery.
Justice Harry Blackmun, the swing vote in this case as he had been on the National League of Cities v. Usery decision, wrote the majority opinion for the 5–4 decision of the court.
The Court narrowly agreed to overturn National League of Cities v. Usery. The majority felt that the provisions of the Fair Labor Standards Act of 1974 should apply to San Antonio Metropolitan Transit Authority. The Court felt that Congress had not exceeded its powers under the Commerce Clause, and that the application of the law to a government entity was not unconstitutional.
The Court said that the law "did not regulate States as states"—that is, did not regulate any one of the 50 States in a way that violated their sovereignty. "[W]e perceive nothing in the overtime and minimum-wage requirements of the FLSA, as applied to SAMTA, that is destructive of State sovereignty or violative of any constitutional provision. SAMTA faces nothing more than the same minimum wage and overtime obligations that hundreds of thousands of other employers, public as well as private, have to meet."
Blackmun argued that if citizens of the States have a problem with the Fair Labor Standards Act, they will elect members to Congress who will repeal the act or they will pressure their current congressional representatives to do so. Generally, the Court felt that the question of State authority was more a question of political action than a judiciary matter for the Court to decide.
There was strong dissent. Justice Powell, joined by Chief Justice Burger, Justice Rehnquist, and Justice O'Connor, observed: "The stability of judicial decision , and with it respect of the authority of this Court, are not served by the precipitous overruling of multiple precedents that we witness in this case… The Court today propounds a view of federalism that pays only lip service to the role of the State…. Indeed the Court barely acknowledges that the Tenth Amendment exists…."