In the 1904 case of Clyatt v. United States, the U.S. Supreme Court ruled that peonage, a type of involuntary servitude where an individual is forced to work off a debt or other obligation, was unconstitutional and violated the Thirteenth Amendment's prohibition against slavery and involuntary servitude. The case involved two men from Georgia who were convicted for forcing African American workers into peonage after they had quit their jobs at a sawmill owned by one of them. The defendants argued that these workers owed them money for advances on their wages and thus could be compelled to work until those debts were paid off. However, Justice Edward D White delivered the unanimous opinion rejecting this argument stating it would make "the prohibition against slavery and involuntary servitude...nugatory". This landmark decision affirmed federal authority in enforcing constitutional rights even when state laws or practices might infringe upon them.

In the dissenting opinion for Clyatt v. United States, Justice Brewer argued that peonage laws were not intended to apply to voluntary contracts between employers and employees. He believed that these laws were designed to prevent involuntary servitude, but should not interfere with free labor agreements where an individual willingly agrees to work off a debt. In this case, two African American men voluntarily agreed to work for Clyatt in exchange for him paying off their fines. They later left his employment without fulfilling their agreement and he had them arrested under Georgia law which allowed such action in cases of breach of contract involving fraud or deceit. The majority ruled this as peonage and thus unconstitutional under the Thirteenth Amendment; however, Justice Brewer disagreed stating it was a valid exercise of state power over contractual relationships.