Hope rebounds for reform in '99
Product liability, inside sales reform head Congress' to-do list for the New Year
By Ken Brack -- Industrial Distribution, 1/1/1999
Newton, Mass.--For many distributors, 1998 was the year of broken promises to rewrite product liability laws and other measures important to industry. Some believe the prospects for action will improve in 1999, an off-election year.Industry trade groups will again press for product liability relief, changing inside sales compensation and in a new effort, for repeal or replacement of the Fastener Quality Act. Owners of family-owned firms should also watch for a renewed attempt to cut estate taxes, which supporters say would increase the incentive to keep businesses in the family.
After Republicans lost several House seats in November and failed to increase their edge over Democrats in the Senate, a few industry officials feared legislation on a handful of key issues would again meet defeat. Others believe the climate for action on several industry concerns brightened considerably after the election and with the public calling on Congress to return to the nation's business.
Becky Relic, senior director of government relations for the National Assn. of Wholesaler-Distributors, says the prospects for inside sales reform appear to be good, for example, particularly if supporters reintroduce it early in the new session.
A proposal to exempt distributors from having to pay inside salespeople overtime passed in the House last summer. It was never taken up in the Senate, however, because of rules which would have allowed members to try and tack on a minimum wage increase. Supporters instead chose to skip that politically charged debate just before the election, says Relic. But this year, that sword no longer hangs over senators' heads. "Our supporters in the Senate really want to get something done, and there was a handful of Democrats who appeared to be really interested in the issue and understand it," she says.
The proposal would allow distributors to pay more people on commission systems and give them equal footing with large retailers like Home Depot, which are exempt from overtime provisions. New technologies have also transformed the roles of many outside salespeople, who today conduct more business on site.
Cliff Cheatwood, CEO of Arkansas Mill Supply Co. in Pine Bluff, Ark., says changing inside sales compensation is imperative.
"The rules have changed, and just like we've got to change our company policies and direction, the government has got to get off their butts and realize that they have to make changes more in place with market conditions," says Cheatwood. While inside salespeople have become more valuable with the rise of integrated supply and systems contracts, firms struggle over how to pay them, he says.
William Derville, president of General Tool & Supply Co. in Portland, Oreg., says that for now, many companies have a disincentive to train inside staffers after hours, which stunts employee development.
"Subsequently, we can't give them a lot of extra education, not as much as we'd like to, because they have to be paid OT when not on the phone" after hours, says Derville. "There's a lot of companies that forgo the opportunity and that expense."
On another front, the climate for repealing the FQA has improved, says Dave Merrifield, executive vice president of the National Fastener Distributors Assn.
During the summer, President Clinton signed a law to exempt certain aerospace fasteners that are already regulated by the Federal Aviation Administration. The law also delays implementation of FQA until June of 1999, and provides an opportunity to review its effectiveness. During the past few months, industry officials were expected to provide comments to the Secretary of Commerce before the secretary's scheduled report to Congress on Feb. 1. Meanwhile, some industry groups are pushing for a fraud law instead to penalize firms that make false claims.
"The issue isn't really quality as much as it is fraud," says Merrifield. "Those who are bringing in or producing sub-quality fasteners know they are, and a quality law won't change that. A fraud law will.
"I think if in fact some other congressional detractors can be [moved] out of the way, then I think they will be pretty receptive to this," he says. "And being a Republican Congress they're always trying to reduce government controls and reduce what is spent on this" by companies.
Late in the fall, NFDA and other groups talked with representatives from the automotive and heavy equipment industries to begin coordinating their efforts for this year. NFDA members recently raised more than $100,000 to hire a lobbyist on their behalf.
Although an attempt to change product liability laws failed in 1998, officials pledge to lobby hard again this year. Clinton refused to sign a bill that had moved ahead last summer, citing last-minute language added by the Republican Senate leader.
A compromise backed by the NAW would establish a uniform standard of liability for wholesaler-distributors and other non-manufacturing product sellers, which would reduce the filing of product liability lawsuits against distributors. The measure would also help renters because it states that parties who rent or lease products will not be held liable for the negligence of others beyond their control. Meanwhile, liability insurance premiums continue to soar for many distributors, Derville says.
Chuck Stockinger, executive director of the American Supply and Machinery Manufacturers Assn., and others blasted Clinton for reversing a pledge to sign the legislation.
"We'll probably have to go through the whole thing all over again. But as long as [Clinton is] president, I firmly believe it's a waste of time because he's in the pocket of the trial lawyers," Stockinger said in an interview with ID first published in November. Derville believes the election results will make action even more difficult to obtain.
James Anderson Jr., vice president of government relations for NAW, says product liability will continue to be a priority issue. A clear majority of lawmakers appear to favor reform, but because of the election results, they do not have the numbers to stop opponents who could mount a filibuster or sustain a presidential veto, Anderson says. Adding to that is Vice President Al Gore's opposition to recent product liability proposals. "So what the attitude of the White House would be is obviously absolutely critical" to success, Anderson says.
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