In the case of Wisconsin Department of Industry, Labor and Human Relations et al. v. Gould Inc., 1985, the U.S. Supreme Court ruled that a state cannot bar a company from doing business with it due to previous violations of federal labor laws. The court held that such sanctions were preempted by federal law under the National Labor Relations Act (NLRA). Gould Inc., an electronics manufacturer, had been debarred three times within five years for violating NLRA provisions in its dealings with employees and unions. In response, Wisconsin enacted legislation prohibiting repeat violators from contracting with the state for three years following each violation conviction or adjudication date; this led to Gould's disqualification from bidding on any state contracts during those periods. However, Justice Brennan delivered the opinion of a unanimous court stating that while states may regulate behavior in areas traditionally within their power even if they affect labor relations indirectly, they are not permitted to provide their own regulatory or judicial remedies for NLRA violations as these would interfere with national policy.

In the dissenting opinion for Wisconsin Department of Industry, Labor and Human Relations et al. v. Gould Inc., Justice Rehnquist argued that the majority's decision was inconsistent with previous rulings on federal preemption in labor law cases. He contended that the National Labor Relations Act (NLRA) does not preempt state laws unless they regulate activities protected by Section 7 or prohibited by Section 8 of NLRA, which he believed was not applicable to this case as it involved a state acting as a market participant rather than regulator. Furthermore, he disagreed with the majority's view that Wisconsin’s debarment statute interfered with national labor policy because it did not provide any additional sanctions beyond those already available under federal law but simply expressed its preference for doing business only with companies who comply fully with their obligations under NLRA.