Delivering for Best-in-Class Wholesaler-Distributors
March 28, 2018

NAW Amicus Briefs Urge U. S. Supreme Court to Revisit Rules for State Sales Taxation of Interstate Sales

NAW has urged the U. S. Supreme Court to re-examine and overturn a 1992 ruling that blocks states from collecting sales and use taxes from remote sellers who do not have a physical presence in the state (South Dakota v. Wayfair, Inc., et al., Docket No. 17-494).

In its “friend-of-the court” brief, NAW supports the petition by South Dakota to have the Court overturn its decision in Quill Corp. v. North Dakota, that unfairly imposes state sales tax collection obligations on sellers with an in-state presence, while exempting sales made by internet and other out-of-state sellers from taxation.

South Dakota’s law requires absentee businesses to collect sales tax when they sell at least $100,000 in merchandise, or engage in 200 sales, to retail customers in the state per year.

The state sales tax issue affects wholesaler-distributors – not just retailers. In fact, any business that makes a sale at retail under the various state tax laws has a vital stake in the outcome of this case.  The brief cites substantial economic consequences for the community-based brick-and-mortar wholesaler-distributor:

NAW member companies who have a distribution center, a sales office, a branch office, make deliveries in a state, or have some other form of physical presence in a state are forced to operate at a clear and substantial economic disadvantage vis-à-vis remote internet sellers competing in the same markets.  This disadvantage results in lost sales revenue and hampers the ability of locally present wholesaler-distributors to grow their businesses, invest in the community, and produce in-state employment opportunities.

The NAW brief agrees with Justice Kennedy who declared in a 2015 case that the Quill decision was “questionable even when decided,” and that the Court should find an appropriate case to reexamine it.  The brief stresses that the South Dakota law focuses on the absentee business’s sales activity in the state, rather than its physical presence, in a manner permitted by the Constitution’s Commerce Clause.

The time has come, and this is the appropriate case. NAW concludes by urging the Court to grant South Dakota’s petition for review (four Justices must vote to approve the petition).

On January 12, 2018, the Court did approve the petition and the Court will hear the appeal.

Once again, on March 5, 2018, NAW joined numerous other business groups and wholesaler-distributor associations and filed a subsequent amicus brief, urging the Court to overturn its prior cases and rule in favor of the South Dakota tax statute and abandon the physical presence requirement.

Oral arguments in the case are scheduled for April 17, 2018, and the Court’s decision could come as early as June 2018.

Click here to view the latest NAW brief.



The Rules Have Improved for NLRB Scrutiny of Employee Handbook Restrictions

Section 7 of the National Labor Relations Act (NLRA) grants employees the right to discuss or criticize management, their wages, hours and other working conditions.  An employer’s interference with these so-called section 7 rights can result in an unfair labor practice charge for adjudication by the National Labor Relations Board (NLRB). The Act applies to employers, whether or not your employees are represented by a labor union.

A favorite target for employee or union complaints has been the employee handbook and company policies applicable to employee conduct – such as social media, use of email, workplace recordings, confidentiality and conflicts of interest.

The assault on employee handbooks and company policies is likely to ease – as a result of The Boeing Company case.  In a 3-2 decision under the new Republican majority (the first in 9 years), the NLRB articulated a new standard for the evaluation of company policies or rules that are facially-neutral (i.e., rules that don’t expressly interfere with NLRA rights).

In the Boeing case the NLRB overruled its 2004 decision in Lutheran Heritage Village-Livonia, which held if a workplace rule could be “reasonably construed” by employees as interfering with the exercise of protected rights it violated the NLRA.  Under this vague standard, practically any rule was subject to challenge.  (Example: “Be respectful of others and the Company” was found illegal by the Board because an employee might possibly refrain from criticizing a supervisor, co-worker of the employer.)

New Boeing Test

The “reasonably construed” standard has been scrapped in favor of a new test.  “When evaluating a facially-neutral workplace policy, rule, or handbook provision, that when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.”  According to the Board, this new test strikes “the proper balance between employees’ rights and business justifications.”

The Board goes on to delineate three categories of employment policies, rules, and handbook provisions.  These categories represent a classification of results from that new test:

  • Category 1: “Will include rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.” The NLRB declared that rules requiring that employees foster “harmonious interactions and relationships” or abide by basic standards of civility are lawful, as are rules like Boeing’s which prohibited the use of cameras in the workplace without a valid business need and permit. All prior cases to the contrary were overruled.
  • Category 2: “Will include rules that warrant individualized scrutiny in each case as to whether the rule, when reasonably interpreted, would prohibit or interfere with the exercise of NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.”
  • Category 3: “Will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.” For example, a rule prohibiting employees from discussing wages or benefits with one another would be unlawful.



More Good News from the NLRB

Also in 3-2 votes, the Board:

Overruled a 2015 decision that greatly relaxed the test when two separate companies were deemed joint employers under the NLRA.  No longer will a joint employer relationship be found where there is only “indirect control” or a reserved right to control employment terms.(Browning-Ferris reversed in Hy-Brand Industrial Contractors).

Overruled a 2011 decision that allowed union attempts to represent “micro-units” of employees rather than the general workforce at a location (e.g., Board approved representation of Macy’s fragrance department workers, as opposed to all store workers). Unionization votes are easier to win when the petitioned unit is small (Specialty Healthcare reversed in PCC Structurals Inc.).

On December 16, 2017 the term of Chairman Philip Miscimarra ended, returning the Board once again to a split 2-2 between Democrat and Republican appointees.  When the seat is filled by the President, experts expect further reversals of prior Board rulings that abandoned precedents and favored unionization.