The President's Mediation Commission represented a partial federal response to two vital aspects of wartime labor policy: 1) the spreading wave of strikes which interfered with the production of goods deemed vital to the war effort, and 2) the growth of labor radicalism associated with the Industrial Workers of the World (IWW), which precipitated widespread state and local repression of labor's rights and murderous vigilantism. Samuel Gompers, the president of the AFL, feared both the growth of the IWW and the ensuing vigilantism, which threatened AFL unions. Gompers desired a federal policy that would simultaneously curb the IWW and protect "legitimate" trade unions. As vigilantism against labor spread throughout the American West in July-August 1917, Gompers used his influence in Washington to urge the appointment of a special presidential commission to investigate labor-capital relations. In August, William B. Wilson, the secretary of labor, began to urge the same policy on President Wilson. The secretary desired a commission that would effectively mediate the substantive issues causing labor discontent and would also eliminate the IWW. To cloak his proposed commission's true purposes, which included the destruction of the IWW, W.B. Wilson suggestd that it investigate labor disputes unrelated to IWW strikes. On August 31, he recommended to the president a five-person commission to consist of the following members: J.L. Spangler, a Pennsylvania Dutch coal mine operator with a reputation for dealing fairly with the United Mine Workers (UMW); Verner Z. Reed, a Colorado enrepreneur and liberal Roman Catholic; John H. Wlaker, a former UMW official and then president of the Illinois State Federation of Labor; E.P. Marsh, a conservative AFL unionist and president of the Washington State Federation of Labor; and William B. Wilson as the chair. More important than any of the five suggested commission members was the person Wilson selected as his secretary, Felix Frankfurter.

Officially appointed by President Wilson on September 19, 1917, the President's Mediation Commission operated on the basis of guidelines set by Frankfurter. Those guidelines recommended the promotion of AFL-style trade unionism, the elimination of subversvie IWW locals, and the encouragement of industrial democracy. The Commission began its formal investigations and hearings in the Arizona copper mining districts on October 6, 1917. Its members later traveled to the Butte, Montana, copper district; the forest district of the Pacific Northwest; San Francisco, where they investigated a dispute affecting telephone operators; and Chicago, where they studied labor discontentment in the packinghouses. In January, 1918, the Commission presented its findings and recommendations to the president, which largely followed the original Frankfurter guidelines and which were subsequently published as a special bulletin by the Department of Labor.