06/ 03/ 2008
Arbitration and tax rulings disappoint small business community
This spring, the U.S. Supreme Court issued two decisions that may have a negative impact on small business owners.
In Hall St. Associates v. Mattel, the court ruled that private parties do not have the right to agree in advance of a dispute to have a court review an arbitration decision. The court said these types of agreements violate the Federal Arbitration Act. If parties chose to use arbitration as a method to resolve legal disputes, they are bound to follow the Federal Arbitration Act and cannot independently contract to customize the arbitration process.
The NFIB Small Business Legal Center argued before the Supreme Court that arbitration would become a less attractive option for small businesses if they were not allowed to contract for judicial review of arbitration awards. In its decision, the Supreme Court acknowledged NFIB's argument and said it may be a valid concern. However, in the end, the court said the Federal Arbitration Act allows for such contracting in very limited situations.
The second case was U.S. v. Clintwood Elkhorn Mining Co. This was a tax case concerning how long a private party has to recover an unconstitutional tax paid to the IRS. The Legal Center argued that taxpayers should have six years—the same amount of time the IRS has to bring claims against taxpayers. But the court ruled that even in cases where the IRS collected an unconstitutional tax, private parties must follow IRS procedures, which allow only three years of recovery.
"The outcomes in these cases are a blow to small business and demonstrate why small business needs an advocate fighting for them in the nation's courts," says Karen Harned, executive director of the NFIB Small Business Legal Center. "Despite these setbacks, we are committed to making sure that courts understand how their decisions affect small business."
Employers' rights during unionization drive to be decided
In Chamber of Commerce v. Brown, the Supreme Court is
reviewing the constitutionality of a California law that essentially prohibits businesses that receive state funds from communicating with their employees during a labor union organizing drive. As a result of this law, employers cannot exercise their rights under the National Labor Relations Act and communicate with their employees about the potential disadvantages of unionization.
NFIB and small business owners are outraged by this unfair law. The Small Business Legal Center strongly urged the Supreme Court to strike down this state law as unconstitutional. The outcome of this case will be critical in guiding other states as to whether these types of state laws are constitutional. Oral arguments in the California case were heard by the court in March, and a decision is expected to be announced by the end of June.
For the latest on this and other cases the NFIB Small Business Legal Center is involved in, visit www.NFIB.com/legal.
