Terence Powderly worked with Cardinal James Gibbons (above), Archbishop of Baltimore and supporter of the work of the Knights of Labor, to prevent the Catholic Church from banning its faithful from membership in the Order.

In 1884, a Canadian Archbishop’s condemnation of the Knights of Labor was echoed by several American bishops. The Church's ban on secret societies, a restriction that dated back to the 1734 condemnation of the anti-Catholic Freemasons, was invoked to condemn the Knights in Canada. This was no small matter. A large number of the Knights of Labor in both Canada and the United states were Catholic, reflecting the working-class nature of the Church in the nineteenth century. Condemnation of the Knights would mean that Catholic workers who joined the Order would lose their good standing in the Church—baptism of their children, eligibility to receive communion, marriage within the Church, and other sacraments would all be jeopardized by membership in the Knights.

Ecclesiastical opposition to the Knights infuriated Powderly. However, Cardinal James Gibbons, the influential Archbishop of Baltimore, Maryland, sympathized with the Knights' plight. Powderly notes in his autobiography that many influential priests of the church subjected the Order to “scathing criticism and condemnation. This continued until His Eminence Cardinal Gibbons espoused the cause of the Knights of Labor in the latter part of 1886.” (The Path I Trod, 316)

Gibbons and other Church leaders worked with Powderly, who was himself Catholic, to change aspects of the Knights that did not sit well with the Church on the one hand, while making the case for the Knights to Church authorities in Rome on the other. In the end, Gibbons' argument that the Knights had a right to exist, and that the Church would lose a considerable portion of its flock in condemning the order was accepted and the Knights were not condemned by Rome.

When the Church's decision was made in 1888, however, the Knights were already in decline. A second strike, the Great Southwest railroad strike of 1886, was unsuccessful, causing a decline in membership. The Knights suffered another blow that same year when they were associated with the tragic Haymarket Affair, a bombing in Chicago that took place during a workers rally in the city's Haymarket Square. Finally, the founding of the American Federation of Labor by Samuel Gompers in 1886, drew skilled workers into its ranks, and away from the Knights. By 1889 Knights of Labor membership had fallen to 120,000. Powderly resigned as Master in 1893.