Secretary of Labor (MSHA) on behalf of Milton Bailey v. Arkansas-Carbona Company and Michael Walker (Commission decision, December 12, 1983)

Plain-English summary

An ALJ found that Arkansas-Carbona Company unlawfully fired mine safety director Milton Bailey after a complaint about a first aid kit. On review, the Commission upheld the judge's decision to separate the Secretary's civil penalty request from the discrimination complaint. It replaced the judge's six percent back pay interest rate with an adjusted prime rate formula and reversed his decision to end back pay when the complaint was filed. The Commission held that back pay should run until Bailey told the Secretary he no longer wanted reinstatement, and remanded to determine that date and recalculate the award. It upheld the denial of Bailey's request for college tuition and related expenses.

Decision snapshot

• Governing provisions: 30 U.S.C. § 815(c); 29 C.F.R. § 2700.42.
• Outcome: Remedy issues partly affirmed and partly reversed; back pay and interest remanded for recalculation.
• Key point: Back pay did not end when the discrimination complaint was filed; it continued until Bailey declined reinstatement.

Full text (FMSHRC public release)

CCASE:
MILTON BAILEY (MSHA) V. ARKANSAS-CARBONA
DDATE:
19831212
TTEXT:

FEDERAL MINE SAFETY AND HEALTH ADMINISTRATION 1730 K STREET, N.W., 6TH FLOOR
WASHINGTON, D.C. 20006
DECEMBER 12, 1983

SECRETARY OF LABOR,
MINE SAFETY AND HEALTH
ADMINISTRATION (MSHA)

On behalf of MILTON BAILEY
Docket No. CENT 81-13-D
v.

ARKANSAS-CARBONA COMPANY
and

MICHAEL WALKER

DECISION

This discrimination case presents four issues whether the Commission's administrative law judge abused his discretion in severing the Secretary of Labor's request for a civil penalty from the complaint of discrimination; whether the judge erred in awarding 6% interest on the back pay award; whether he erred in tolling the back pay award on the date the Secretary filed a complaint on Bailey's behalf; and whether he erred in refusing to award Bailey tuition and certain miscellaneous expenses.

For the reasons that follow, we hold that the judge did not abuse his discretion in this case when he severed the request for a civil penalty from the discrimination complaint but we also announce our intention to amend Commission Procedural Rule 42, 29 C.F.R. 2700.42, to end the need for such severance in future cases. W adopt as the Commission's interest rate formula for back pay awards the interest formula used by the National Labor Relations Board--that is, interest set at the "adjusted prime rate" announced semiannually by the Internal Revenue Service for the underpayment and overpayment of taxes. We hold that the judge erred in assessing 6% interest on the back pay award and remand for recalculation of the award pursuant to the computation rules announced in this decision. We reverse the judge's order tolling back pay on the date of the Secretary's complaint on behalf of Bailey. We continue the award until the date Bailey informed the Secretary he did not wish reinstatement, and additionally remand for determination of the date when that notification occurred. Finally, we affirm the judge's holding that Bailey was not entitled to payment of college tuition and related expenses.
~2043
I. Factual and procedural background

We briefly summarize the facts, which are undisputed as background for our discussion of this case. Arkansas-Carbona Company, a joint venture, operated a small surface anthracite coal mine in Dardanelle, Arkansas at the relevant time. Milton Bailey was employed by Arkansas-Carbona from May 13, 1980, until his discharge on June 27, 1980. Bailey was the company's safety director and he earned $1,000 per month. Michael Walker was the president of one of the firms comprising the Arkansas-Carbona joint venture, and after June 13, 1980, took over control of mine operations at the mine site. On June 27, 1980, Bailey complained to Walker that the mine's first aid kit, which had been moved from the main office to a screened porch, should remain in the office to prevent its exposure to dust. Walker contended the kit was in a dustproof container. An argument ensued which resulted in Bailey's discharge.

On October 20, 1980, the Secretary of Labor filed a discrimination complaint before this independent Commission on behalf of Bailey against Arkansas-Carbona and Michael Walker. 1/ His complaint alleged that Bailey was unlawfully discharged for exercising rights protected by section 105(c)(1) of the Federal Mine Safety and Health Act of 1977, 30 U.S.C. 801 et se. (1976 & Supp. V 1981). The relief sought included back pay with 9% interest, and reinstatement on the same shift with the same or equivalent duties at a rate of pay "presently proper" for the position. The Secretary's complaint also requested "an order assessing a civil penalty of not more than $10,000 against [the operator] for [the] violation of section 105(c) of the Act." 30 U.S.C. 815(c)(Supp. V 1981). On January 22, 1981, the Secretary filed a motion to amend his discrimination complaint. The motion stated in part "Subsequent to his filing of the complaint the Secretary was informed by complainant Bailey that he did not wish to be reinstated by respondents and that in lieu of reinstatement he would accept tuition for one year of college plus an allowance for expenses."

The Commission's administrative law judge first held. that Bailey's complaint concerning the first aid kit on the day of his discharge was protected activity and that Bailey's discharge was motivated in part by that protected activity. Thus, the judge held that a prima facie case of discrimination, that is, adverse action motivated in part by protected activity, was proved. 3 FMSHRC 2313, 2318-19 (October 1981)(ALJ). The judge then examined each non-discriminatory ground the operator resented as the cause of Bailey's termination and concluded, "Neither singularly nor in combination do Respondents' contentions establish that Respondents would have discharged Complainant for the reasons given." 3 FMSHRC at 2319. Therefore, the judge determined that Arkansas-Carbona's discharge of Bailey violated section 105(c)(1) of the Mine Act. 30 U.S.C. 815(c)(1).
The judge awarded Bailey back pay with 6% interest from the date of discharge until October 19, 1980 one day before the Secretary's complaint was filed. 3 FMSHRC at 2323. Because the complaint on behalf of Bailey was amended January 22, 1981, to request one year's college tuition and related expenses in lieu of reinstatement, the judge applied
____
1/ We refer to the respondents collectively as "the operator."
~2044
Rule 15(c), Federal Rules of Civil Procedure, and concluded that the amendment related back to October 20, 1980, the date of the Secretary's complaint. 2/ Therefore, the judge concluded that Bailey did not request reinstatement from that date and that, accordingly, the obligation for back pay ceased on that date. 3 FMSHRC at 2321. The judge also declined to order the payment of one year's college tuition and expenses because Bailey "failed to establish any entitlement to an award of 1 year of college tuition." 3 FMSHRC at 2322. The judge also ordered expunging of all references to "this matter" from Bailey's employment record.

In addition, the judge severed MSHA's proposed assessment of a civil penalty from this proceeding. and he ordered MSHA to proceed under Commission Procedural Rule 25, 29 C.F.R. 2700.25. 3/ At the outset of the administrative hearing, the judge explained the reason for the severance: "I will sever the civil penalty proceeding because there has not been the required administrative processing of the proposal through the notification to the respondents of the amount of the proposed penalty or the opportunity to discuss this matter with the District Manager's office." Tr. 4.

II. Severance of the civil penalty from the proceedings involving the complaint of discrimination

We first consider the question of how civil penalties for violations of section 105(c) should be proposed and assessed in cases where the Secretary files a complaint on behalf of a miner, and then whether the judge erred in severing the penalty proceeding.

Civil penalties are assessed under the Mine Act to induce compliance with the Act and its standards. See, for example, S. Rep. No. 181, 95th Cong., 1st Sess. 40-41 (1977) ("S. Rep."), reprinted in Subcommittee on Labor, Senate Committee on Human Resources, 95th Cong., 2d Sess., Legislative History of the Federal Mine Safety and Health Act of 1977, at 628-29 (1978) ("Legis. Hist."). Penalties are mandatory for violations of
________
2/ Rule 15(c), Fed. R. Civ. P., provides in part: Relation Back of Amendments. Whenever the claim or defense asserted in the amended pleading arose out of The conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading. 3/ Commission Procedural Rule 25 provides: The Secretary, by certified mail, shall notify the operator or any other person against whom a penalty is proposed of: (a) the violation alleged; (b) the amount of the penalty proposed; and (c) that such person shall have 30 days to notify the Secretary that he wishes to contest the proposed penalty. If within 30 days from the receipt of the Secretary's notification or proposed assessment of penalty, the operator or other person fails to notify the Secretary that he intends to contest the proposed penalty, the Secretary's proposed penalty shall be deemed to be a final order of the Commission and shall not be subject to review by the Commission or a court.
~2045
the Act and its standards. The Act separates the procedures for civil penalty assessment between the Secretary and the Commission. The Secretary proposes the penalty he wishes assessed for a violation and the Commission assesses a penalty of an appropriate amount. See Sellersburg Stone Co., 5 FMSHRC 287, 290-92 (March 1983), pet. for review filed, No. 83-1630, 7th Cir., April 8, 1983; Tazco Inc., 3 FMSHRC 1895, 1896-98 (August 1981). 4/

This bifurcation of functions is set forth in sections 105 and 110 of the Act. 30 U.S.C. 815 & 820 (Supp. V 1981). Section 105(a) requires the Secretary to take certain steps to notify an operator of the civil penalty "proposed to be assessed under section 110(a) for the violation cited." 30 U.S.C. 815(a). Section 110(a) provides, in turn, for penalty assessments of not more tan $10,000 per violation. 30 U.S.C. 820(a). Section 110(i) provides, "The Commission shall have authority to assess all civil penalties provided in this Act." 30 U.S.C. 820(i). After listing the six statutory penalty criteria, section 110(i) concludes, "In proposing civil penalties under this Act, the Secretary may rely upon a summary review of the information available to him and shall not be required to make findings of fact concerning the above [six] factors." 5/

Section 105(a) states that the civil penalty proposal procedures set forth for the Secretary therein are only invoked "[i]f, after an inspection or investigation, the Secretary issues a citation or order under section 104 [30 U.S.C. 814]." 30 U.S.C. 815(a). 6_/ The Secretary must notify an operator "within a reasonable time" of The penalty he proposes. If the operator chooses to contest a proposed penalty, the Secretary must "immediately advise" the Commission so that a hearing can be scheduled. 30 U.S.C. 815(d). The statutory procedures for prompt notification
________
4/ When penalties proposed by the Secretary are not contested, however a proposed civil penalty is not actually assessed but is deemed to be a final order of the Commission, as if the Commission had assessed it. 30 U.S.C. 815(a). See also Commission Procedural Rule 25 (n. 3 supra). 5/ The words "shall be assessed a civil penalty by the Secretary" in section 110(a) must be read in pari materia with sections 105(a) and 110(i). Although section 110(a) uses the language "shall be assessed a civil penalty by the Secretary," the express language of sections 105(a) and 110(i) makes clear that this Secretarial function is one of proposal not disposition. The legislative history bears out this reading of section 110(a). Conf. Rep. No. 461, 95th Cong., 1st Sess. 58 (1977) reprinted in Legis. Hist 1336; S. Rep. 43, 45-46, reprinted in Legis. Hist 631, 633-34. Thus, the reference to "shall be assessed" in section 110(a) means "shall be subject to a proposed assessment of a civil penalty by the Secretary." See Sellersburg Stone Co., supra. 6/ Section 104, 30 U.S.C. 814 (Supp. V 1981), contains the procedures trough which an operator's violations of the Act or its standards are enforced. Section 104(a) makes clear that citations shall be issued for violations of "this Act, or any mandatory health or safety standard, rule, order, or regulation promulgated pursuant to this Act." 30 U.S.C. 814(a).
~2046
and contest of a proposed civil penalty assessment reflect Congress' belief that penalty assessment had lagged under the 1969 Coal Act, 30 U.S.C. 801 et seq. (1976)(amended 1977), and its consequent desire to speed the process. Thus, the thrust of the penalty procedures under the Mine Act is to reach a final order of the Commission assessing a civil penalty for violations without delay.

Cases involving violations of the discrimination provisions, however are not initiated with the issuance of a citation or order under section 104 but, rather, with filing of special complaints before the Commission under sections 105(c)(2) or 105(c)(3). 30 U.S.C. 815(c)(2) & (3). These two statutory subsections provide for complaint by the Secretary if he believes discrimination has occurred, or complaint by the miner if the Secretary declines to prosecute.

It is clear that a penalty is to be assessed for discrimination in violation of section 105(c)(1). The last sentence of section 105(c)(3) states, "Violations by any person of paragraph (1) shall be subject to the provisions of sections 108 [30 U.S.C. 818] and section 110(a)." 30 U.S.C. 815(c)(3). 7/ Section 110(a) requires the Secretary o propose penalties to be assessed for violations of the Act. Neither section 105(c) nor section 110(a), however, states how and when the Secretary is to propose a penalty for a violation of section 105(c)(1).

The Secretary's regulations in 30 C.F.R. Part 100 set forth "criteria and procedures for the proposed assessment of civil penalties under section 105 and 110 of the Mine Act]." 30 C.F.R. 100.1. 8/ Section 100.5 lists a number of "categories [o violations which] will individually reviewed to determine whether a special assessment is appropriate" including "discrimination violations under section 105(c) of the Act." 9/

In spite of this reference to discrimination cases, none of the Part 100 regulations specifies how the Secretary shall propose a civil penalty when he files the complaint of discrimination, and it does not appear that the Secretary contemplated that his administrative review procedures for proposed penalties should apply to a determination that an operator had violated
_______
7/ Section 108 permits injunctive relief and is not relevant to the issues presented in this case. 8/ In this analysis, for convenience, we will refer to the current Part 100 regulations, which became effective May 21, 1982. They are substantially similar to those in effect when the judge's decision issued. The changes made do not affect our analysis, and we would reach the same conclusions under either version. 9/ A review of the discrimination cases adjudicated by this Commission indicates that the Secretary has used the section 100.5 special assessment procedure in discrimination cases only when the miner has proceeded on his own behalf pursuant to section 105(c)(3) of the Act and prevailed, or when, as here, the judge has severed the penalty proceedings from the discrimination case. In other discrimination cases, the Secretary has requested a penalty in his complaint of discrimination.
~2047
section 105(c)(1). Similarly, the Commission's procedural rules do not specifically address penalty procedures for alleged violations of section 105(c)(1). Our rules more generally require the Secretary to notify the operator of "the violation alleged" and the penalty proposed and to afford the operator 30 days in which to notify the Secretary if it wishes to contest the proposal. Commission Procedural Rule 25 (n. 3 supra). See also Commission Procedural Rules 26 through 28, 29 C.F.R. 2700.26 through 28. 10/

The Secretary argues that the penalty proposal procedures in section 105(a) of the Mine Act and Commission Procedural Rule 25 apply only to citations and orders issued under section 104. Violations of the discrimination section, the Secretary urges, are subject only to the provisions expressly mentioned in section 105(c) itself. The Secretary relies on the last sentence in section 105(c)(3), which states that violations of section 105(c)(1) "shall be subject to the provisions of sections 108 [injunctions] and 110(a)." 30 U.S.C. 815(c)(3). He argues that because section 110(a) contains no reference to section 104 or to section 105(a), the assessment proposal procedures required therein need not be applied in penalty proposals under section 105(c)(3).

Thus, from the language of sections 105(c)(3) and 110(a), the Secretary argues that it is not necessary to have separate penalty proceedings in discrimination cases. Rather, he contends that penalties should be assessed by Commission judges when liability is determined--that is, when an operator is found in a discrimination proceeding to have violated section 105. The Secretary asserts he is "always" prepared to provide the information on the penalty criteria in section 110(i), and that an administrative law judge will never be more competent to decide the penalty question than at the close of a discrimination case in which the judge has determined the existence of a violation.
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10/ Commission Procedural Rules 40 through 44 (29 C.F.R. 2700.40 through 44) deal with discrimination complaints, but do not resolve the issue of how a penalty is to be proposed. Rule 42 requires that a discrimination complaint include, among other things, va statement of the relief requested." The rule tracks section 105(c)(2) of the Act, which requires the Secretary in his complaint to "propose an order granting appropriate relief." 30 U.S.C. 815(c)(2). The Secretary contends that a civil penalty is part of the "relief" he may request in the complaint, and that inclusion of such a request in a complaint conforms to Rule 42 and section 105(c)(2). We conclude however, that "relief" as used in section 105(c) and Rule 42 indicates only those remedies available to make the discriminatee whole. Section 105(c)(3) states in part, "The Commission shall ... issue an order ... granting ... relief ... including ... rehiring or reinstatement ... with backpay and interest or such remedy as may be appropriate." 30 U.S.C. 815(c)(3). The legislative history also supports this reading of "relief." See Secretary on behalf of Dunmire and Estle v. Northern Coal Company. 4 FMSHRC 126, 142 (February 1982), citing to S. Rep. 37. reprinted in Legis Hist 625. A civil penalty, on the other hand. is not intended to compensate the victim but rather to deter the operator's future violations.
~2048
We agree with the Secretary that it is desirable to adjudicate in one proceeding both the merits of the discrimination claim and the civil penalty. The Mine Act emphasizes, "Proceedings under [section 105(c)] shall be expedited by the Secretary and by the Commission." 30 U.S.C. 815(c)(3). Because the last sentence of section 105(c)(3) references penalty proposals under section 110(a), we conclude that penalty proposals for section 105(c) violations are to be expedited as well. The express statutory intent to expedite these proceedings is furthered by having the Secretary avoid dual proceedings and incorporate his penalty proposal in his discrimination complaint.

We also conclude. however, that it is incumbent upon the Secretary in a combined proceeding to set forth in the discrimination complaint the precise amount of the proposed penalty with appropriate allegations concerning the statutory criteria supporting the proposed amount. Experience makes us somewhat skeptical about the Secretary's assertion that he has "always" been prepared to present evidence on penalty criteria. Formal penalty allegations in the complaint better afford operators adequate notice of penalty issues in discrimination cases. Because the Secretary may "rely on a summary review of the information available to him" in proposing penalties (30 U.S.C. 820(i)), the penalty allegations in the discrimination complaint ma be stated in summary fashion.

In this case, the Secretary's naked request in his complaint for a penalty of "up to $10,000" is scarcely a penalty proposal at all. Henceforth, we shall require in these cases that the Secretary propose in his complaint a penalty in a specific dollar amount supported by information on the section 110(i) criteria for assessing a penalty. This new rule shall apply to cases pending with our judges as of the date of this decision or filed with the Commission as of, or after, the date of this decision. Leave to amend complaints to add the penalty allegations shall be freely granted. Thus, the operator will be informed not only of the dollar amount proposed, but also the basis therefor. The parties will then be better prepared to litigate at the hearing any disputes concerning the penalty sought.

Because the Secretary did not provide in his complaint sufficient notice to the operator of the amount of the penalty sought and the basis therefor, we cannot say that the judge erred in severing the penalty proposal in order to provide such notice to the operator. Nor do we see the utility of a remand to allow the Secretary to amend his complaint. The judge's approach to the Secretary's inadequate proposal is consistent with the Act's notice requirements and with the position we now enunciate. Accordingly, we affirm the judge's severance of the penalty proposal from the underlying discrimination complaint. 11/
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11/ We are presently in the process of adopting an interim amended Rule 42, which will reflect our resolution of the penalty issue. We also note that this case does not raise, and we do not reach, the question of how penalties should be proposed when the Secretary.v does not file a discrimination complaint on the miner's behalf and the miner files his own complaint under section 105(c)(3).
~2049
III. The rate and computation of interest on back pay awards

The next question in this case is whether the judge erred in assessing '6%, restor interest on the back pay award. The remedial goal of section 105(c) is to e the [victim of illegal discrimination] to the situation he would have occupied but for the discrimination." Secretary on behalf of Dunmire and Estle v. Northern Coal Co., 4 FMSHRC at 142. As we have previously observed, 'Unless compelling reasons point to the contrary, the full measure of relief should be granted to [an improperly] discharged employee.' Secretary on behalf of Gooslin v. Kentucky Carbon Corp., 4 FMSHRC 1, 2 (January 1982), quoting Goldberg v. Bama Mfg. Corp., 302 F.2d 152, 156 (5th Cir. 1962).

Included in that "full measure of relief" is interest on an award of back pay. Section 105(c)(3) of the Mine Act expressly includes interest in the relief that can be awarded to discriminates, while leaving it up to the discretion of the Commission to determine the exact contours of such an award. 12/ The Senate Committee that drafted the section which became section 105(c) stated in its report:

It is the Committee's intention that the Secretary propose, and the Commission require, all relief that is necessary to make the complaining party. whole and to remove the deleterious effects of the discriminatory conduct including, but not limited to reinstatement with full seniority rights, backpay with interest, and recompense for any special damages sustained as a result of the discrimination.

S. Rep. 37, reprinted in Legis. Hist 625 (emphasis added).

Our judges have awarded interest at rates varying from 6% per annum to 12.5% per annum and have used a variety of methods to compute interest awards. At least two of our judges have adopted the NLRB's rate of interest on back pay awards. See e.g., Bradley v. Belva Coal Co., 3 FMSHRC 921, 925 (April 1981)(AJ) ad in part, remanded in part on other grounds, 4 FMSHRC 982 (June 1982); Secretary.v on behalf of Smith et al. v. Stafford Construction Co., 3 FMSHRC 2177, 2199 (September 1981)(ALJ) aff'd in part, rev'd in part on other grounds, 5 FMSHRC 618 (April 1983), pet. for review filed, No. 83-1566, D.C. Cir., May 27, 1983. The experience of our
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12/ Section 105(c)(3) provides in part:
 The Commission ... shall issue an order, ... if the charges [of discrimination] are sustained granting such relief as it deems appropriate, including but not limited to, an order requiring the rehiring or reinstatement of the miner to his former position with back pay and interest or such remedy as may be appropriate.

30 U.S.C. 815(c)(3).
~2050
judges in this area has greatly aided our evaluation of different methods of assessing interest. It has also led us to the conclusion that it is time to adopt a uniform method of computing interest so that all discriminates will be treated uniformly when they are awarded back pay under the Mine Act.

The miner has not only lost money when he or she has not been paid in violation of section 105(c), but has also lost the use of the money. As the NLRB has stated with regard to interest on back pay awards under the National Labor Relations Act, "The purpose of interest is to compensate the discriminatee for the loss of the use of his or her money." Florida Steel Corp., 231 NLRB 651, 651 (1977). Thus, in selecting an interest rate, we have considered the potential cost to the miner both as a "creditor" of the operator, and as a potential borrower from a lending institution under real economic conditions. We have therefore sought a rate of interest that compensates the discriminatee fully for the loss of the use of money. In addition, we have attempted to select a rate of interest flexible enough to reflect economic and market realities, but not so complex in application as to place an undue burden on the parties and our judges when attempting to implement it.

For all of these reasons we adopt the interest rate formula used by the NLRB interest set at the "adjusted prime rate" announced semi-annually by the Internal Revenue Service under 26 U.S.C.A. 6621 (West Supp. 1983) as the interest it applies on underpayments or overpayments of tax. The "adjusted prime rate" of the IRS is the average predominant prime rate quoted by commercial banks to larger businesses as determined by the Federal Reserve Board and rounded to the nearest full percent. 26 U.S.C.A. 6621 (West Supp. 1983). Under the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248, 345, 96 Stat. 636 (to be codified at 26 U.S.C. 6621), the adjusted prime rate must be established semi-annually by October 15 based on the prime rates from April 1 to September 30 and by April 15 based on the prime rates from October 1 to March 31. The rate announced in October becomes effective the following January 1, and the rate announced in April becomes effective the following July 1.

We agree with the NLRB that the IRS adjusted prime rate comes closest to compensating the miner fully for loss of the use of money. On the one hand, if the miner had the money, he or she could invest it or save it and probably earn less than the prime rate. On the other hand, if the miner has to borrow money because he or she is deprived of a paycheck, the rate of interest most likely would be higher than the prime rate. In these circumstances, we concur with the NLRB that the IRS formula "achieves a rough balance between that aspect of remedial interest which attempts to compensate the discriminatee or charging party as a creditor and that which attempts to compensate for his loss as a borrower." Olympic Medical Corp., 250 NLRB 146, 147 (1980). This "rough balance" in our view achieves the goal of making the miner whole for the loss of the use of money.

The IRS adjusted prime rate is also attractive for pragmatic reasons. It is a per annum rate adjusted semi-annually, based on the prime rates for the six months preceding its calculation. In this way, the rate reflects economic conditions with reasonable accuracy. Its announcement well in advance of the effective date offers notice to all parties and our judges. Cf. Olympic Medical Corp., supra.
~2051
The relevant adjusted prime rates. which we adopt as the Commission's remedial interest rates, are: January 1, 1978 to December 31, 1979...6% per year (.0001666% per day) January 1, 1980 to December 31, 1981...12% per year (.0003333% per day) January 1, 1982 to December 31, 1982...20% per year (.0005555% per day) January 1, 1983 to June 30, 1983.......16% per year (.0004444% per day) July 1, 1983 to December 31, 1983......11% per year (.0003055% per day) January 1, 1984 to June 30. 1984.......11% per year (.0003055% per day) Because the IRS rates of interest are announced as annual rates, it is necessary, as explained below, to convert them to daily rates to calculate interest on periods of less than one year. 13/

There must also be a uniform method of computing the interest on back pay awards under the line Act. We have considered a number of possible computational approaches. We are mindful of the NLRB's extensive administrative and legal experience in this area. The NLRB's general back pay methodology is sound and has met with judicial approval. The labor bar is familiar with this system. We conclude that rather than expending administrative resources in attempting to devise a new system, we will best, and most efficiently, effectuate the remedial goals of section 105(c) of the inc Act by adopting the major features of the NLRB computational system. We are satisfied that this system will do justice to the miner, avoid unnecessary penalization of the operator, and not prove unduly burdensome for our judges and bar to apply.

We therefore announce the following general rules for the computation of interest on back pay.

Back pay and interest shall be computed by the "quarterly" method. See Florida Steel Corp., 231 NLRB at 652; F.W. Woolworth Co., 90 NLRB 289 (1950), approved NLRB v. Seven-Up Bottling Co., 344 U.S. 344 (1953). 14/
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13/ Prior to the passage of the Tax Equity and Fiscal Responsibility Act of 1982, the IRS announced the adjusted prime rate in the October of the appropriate year to take effect the following February. For ease of administration under the Mine Act, however, we have bounded certain interest periods at December 31 and January 1 rather than at January 31 and February 1. (The NLRB's general Counsel has followed the same simplifying approach. NLRB Memorandum GC 83-17. August 8, 1983.) 14/ Back pay is the amount equal to the gross pay the miner would have earned from the operator ut for the discrimination, less his actual interim earnings. Bradley v. Belva Coal Co., 4 FMSHRC 982, 994-95 (June 1982). The first figure, the gross pay the miner would have earned, is termed "gross back pay." The third figure the difference resulting from subtraction of actual interim earning from gross back pay, is "net back pay"--the amount actually owing the discriminatee. Interest is awarded on net back pay only.
In a discrimination case where, as here, there has been an illegal discharge, the back nay. period normally extends from the date of the discrimination to the date a bona fide offer of reinstatement is made. (As we conclude below, the period may also be tolled when the discriminatee waives the right to reinstatement.) ~2152
Under this method (referred to as the "Woolworth formula," after the NLRB's decision in the case of the same name, supra), computations are made on a quarterly basis corresponding to the four quarters of the calendar year. Separate computations of back pay are made for each of the calendar quarters involved in the back pay period. Thus, in each quarter, the gross back pay, the actual interim earnings, if any, and the net back pay are determined. See n. 14.

Interest on the net back pay of each quarter is assessed at the adjusted prime interest rate or rates in effect, as explained below. Like the NLRB, we will assess only simple interest in order to avoid the additional complexity of compounding interest. Interest on the amount of net back pay due and owing for each quarter involved in the back pay period accrues beginning with the last day of that quarter and continuing until the date of payment. See Florida Steel Corp., 231 NLRB at 652. In calculating the amount of interest on any given quarter's net back pay, the adjusted prime interest rates may vary between the last day of the quarter and the date of payment. If so, the respective rates in effect for any quarter or combination of quarters must be applied for the period in which they were operative. The interest amounts thus accrued for each quarter's net back pay are then summed to yield the total interest award.

For administrative convenience, we will compute interest on the basis of a 360-day year, 90-day quarter, and 30-day month. Using these simplified values, the amount of interest to be assessed on each quarter's net back pay is calculated according to the following formula:

Amount of interest = The quarter's net back pay x number of accrued days of interest (from the last day of that quarter to the date of payment) x daily adjusted prime rate interest factor.

The "daily adjusted prime rate interest factor" is derived by dividing the annual adjusted prime rate in effect by 360 days. For example, the daily interest factor for the present adjusted prime rate of 11% is
~2053
.0003055 (.11/360). The daily interest factors are shown in the list of adjusted prime rates above. A computational example is provided in the accompanying note. 15/
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15/ The mechanics of the quarterly computation system may be illustrated by the following hypothetical example, in which a miner is discriminatorily discharged on January 1, 1983 and offered reinstatement on September 30, 1983. Payment of back pay and interest is tendered on October 15 1983. After subtraction of the relevant interim earnings, the net back pay of each quarter involved in the back pay period is as follows:

First quarter (beginning January 1, 1983) $1,000 Second quarter (beginning April 1, 1983) $1,000 Third quarter (beginning July 1, 1983) $1,000 Total net back pay $3,000
The adjusted prime interest rates in effect in 1983 are:
16% per year (.0004444% er day) from January 1, 1983, to June 30, 1983;
11% per year (.0003055% per day) from July l, 1983, to December 31, 1983.
The interest award on the net back pay of each of these quarters is as follows: (1) First Quarter:
(a) At 16% interest until end of second quarter of 1983:
$1,000 net back pay x 91 accrued days of interest (last day of first quarter plus the entire second quarter) x .0004444 = $40.44
Plus,
(b) At 11% interest for entire third quarter through the date of payment:
$1,000 net back pay x 105 accrued days of interest (the third quarter plus 15 days) x .0003055 = $32.07 (c) Total interest award on first quarter:
$40.44 + $32.07 = $72.51
(2) Second Quarter
(a) At 16% interest for the last day of the second quarter $1,000 x 1 accrued day of interest x .0004444 = $.44 Plus,
(b) At 11% interest for the entire third quarter through date of payment:
$1,000 x 105 accrued days of interest x .0003055 = $32.07
(c) Total = $.44 + $32.07 = $32.51
(3) Third Quarter:
At 11% interest for the last day of the third quarter through date of payment:
$1,000 x 16 accrued days of interest x .0003055 = $4.88
total
(4) Total Interest Award:
$72.51 + 32.51 + 4.88 = $109.90
This amount is added to the total amount of back pay ($3,000), for a total back pay award of $3,109.90.
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The major alternative computational approach would involve awarding interest on the total lump sum of net back pay from the date of discrimination to the time of payment. We recognize that this method would involve less complex calculations. We reject the lump sum method however, because it would penalize the operator by assuming that the entire amount of the back pay debt was due and owing on the first day of the back pay period. We will carefully monitor the experience of our judges and parties in applying the computational system announced in this decision. We will modify the system if that experience over time demonstrates the desirability of adjustment.

In discrimination cases, our judges should advise the parties of the methodology for calculating back pay and interest. The parties shall submit to the judge the requisite back pay figures and calculations, and are urged to make as much use of stipulation as possible. The burden of computation of interest on back pay awards should be placed primarily on the parties to the case, not the judge, in order to comport with the adversarial system.

We apply the foregoing principles in this proceeding because the issue of the appropriate rate of interest in discrimination cases arising under the Mine Act was squarely raised on review. As a matter of discretionary policy in judicial administration, we will otherwise apply these principles only prospectively to discrimination cases pending before our judges as of the date of this decision or filed with the Commission as of, or after, the date of this decision. We do not mean to intimate that any previous awards of interest by our judges in other cases, based on different computational methods, are infirm.

Applying our formula to the present case, we conclude that reversal is necessary. The judge's award of 6% interest is so disparate from the adjusted prime rates in effect from the date of Bailey's discharge on June 27, 1980, as to raise questions concerning whether the complainant would truly be made "whole" if the judge's award stands. Accordingly, we hold that the judge erred in awarding 6% interest, and will remand for recalculation of interest pursuant to the interest formula and computational methods announced in this case.

IV. Tolling of the back pay award

The judge concluded that Bailey was not entitled to back pay after October 20, 1980, the date on which Bailey's complaint was filed. That complaint requested reinstatement, but it was amended January 22, 1981. The amended complaint sought back pay and requested the Commission to "order respondents to pay Mr. Bailey $900.00 for one year college tuition plus $400.00 book and maintenance expense allowance in lieu of reinstatement at respondents' mine." The accompanying motion to amend stated:

Subsequent to his filing of the complaint the Secretary was informed by complainant Bailey that he did not wish to be reinstated by respondents and that in lieu of reinstatement he would accept tuition for one year of college plus an allowance for expenses.
~2055
The judge granted the motion to amend and, when determining the back pay award, applied Rule 15(c), Fed. R. Civ.P., and tolled the award on October 20, 1980. Rule 15(c) provides that where a claim or defense in an amended pleading arises out of the same circumstances set forth in the original pleading, the amendment relates back to the date of the original pleading. Relation back has been generally permitted where the movant seeks to enlarge the basis or extent of a demand for relief. See, for example, Goodman v. Poland 395 F. Supp. 660, 682-86 (D. Md. 1975)(change of theory of recovery from equity to law permitted); Wisbey v. Amer. Community Stores Corp., 288 F. Supp. 728, 730-32 (D. Neb. 1968)(amendment seeking additional damages in FLSA action permitted). We do not believe that the restrictive application of relation back by the judge was appropriate in this case.

Rather, in determining when back pay should terminate we look to the date when Bailey informed the Secretary he no longer sought reinstatement at Arkansas-Carbona. We agree with the judge's related conclusion: "It would be unfair and improper to require a mine operator to pay a former employee back pay for a period of time when the employee has unequivocally stated that he does not want to return to his former employment." 3 FMSHRC at 2321. In a case involving similar issues, this judge compared a miner's lack of desire to be reinstated to a rejection of an offer of reinstatement under the National Labor Relations Act. Secretary on behalf of Ball v. B&B Mining, 3 FMSHRC 2371, 2378 (October 1981)(ALJ). We concur with the NLRB rule that an employer is released from his back pay obligations when the employee rejects an appropriate offer of reinstatement, and consider the analogy to the facts of this case appropriate. See, for example, NLRB v. Huntington Hospital, 550 F.2d 921, 924 (4th Cir. 1977); NLRB v. Winchester Electronics, Inc., 295 F.2d 288, 292 (2d Cir. 1961); Lyman Steel Co., 246 NLRB 712 (1979).

Tolling the back pay award on the date Bailey informed the Secretary that he no longer desired reinstatement effectuates the preceding principles, while the judge's relation back to the original complaint needlessly and unfairly penalizes Bailey. Therefore, we reverse the judge's relation back to the date of the original pleading. The present record does not reveal the date Bailey informed the Secretary of his waiver of reinstatement. Accordingly, we additionally remand for determination f that date in order that the back pay period may be established and the necessary computations properly made.

V. College tuition and related expenses. Bailey's remaining contention concerning the award is that the judge erred in not granting him tuition and miscellaneous college expenses. The judge held, "Complainant failed to establish any entitlement to an award of 1 year of college tuition plus $400 book and miscellaneous expense allowance." 3 FMSHRC at 2322. We affirm the judge on this point.

The Secretary argued in his brief before the judge that Bailey would not have paid tuition and expenses, but for his accepting the position at Arkansas-Carbona. 16/ The judge found that, prior to his employment with
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16/ The Secretary did not raise this issue on review and, although Bailey briefly raised it in his petition for review, he did not file a brief before us.
~2056
Arkansas-Carbona, Bailey worked as a campus security guard at Arkansas Tech, and as a fringe benefit of that campus job did not pay tuition. 3 FMSHRC at 2315. (The judge made no finding on whether Bailey's campus job also entitled him to college expenses.) After Bailey accepted a position at Arkansas-Carbona, and resigned from his campus job, he paid his own tuition.

The remedial goal of section 105(c) of the Act is to return the miner to the status quo before the illegal discrimination. Secretary on behalf of Dunmire and Estle v. Northern Coal, 4 SHRC at 142. Had Bailey not been discharged illegally, he would have been working at Arkansas-Carbona and would have had to pay tuition for his classes. We do not see how Arkansas-Carbona can be held responsible for a fringe benefit Bailey did not receive from that company. Although at times we may need to seek alternative remedies to make a miner whole for illegal discrimination (for example where reinstatement is impossible or impractical), such considerations are not present in this case.

Accordingly, we affirm the judge's refusal to award tuition and college expenses.

VI. Conclusion

For the foregoing reasons, we affirm the judge's severing of the request for a civil penalty from the merits of the discrimination case, and hold that in future cases the Secretary must propose in his discrimination complaints a specific penalty supported by allegations relevant to the statutory penalty criteria. As we have stated above, we are accordingly in the process of amending our Procedural Rule 42 to provide for unified proceedings in the future.

We reverse the judge's assessment of 6% interest on back pay and remand to the Chief Administrative Law Judge for assignment to a judge for calculation of back pay and interest according to the principles.and methodology announced in this decision. 17/ We reverse the judge's tolling of the back
_______
17/ The judge who decided this case has left the Commission.
~2057
pay award on the date the complaint was filed, and additionally remand for determination of the date Bailey informed the Secretary he no longer wished reinstatement. Finally, we affirm the judge's denial of Bailey's request for college tuition and related expenses. Distribution

James R. Pate, Esq.
Sanford, Pate & Marschewski
P.0. Box 1004
Russellville, Arkansas 72801

R. David Lewis, Esq.
1109 Kavanaugh
Little Rock, Arkansas 72200

Michael McCord, Esq.
Office of the Solicitor
U.S. Department of Labor
4015 Wilson Blvd.
Arlington. Virginia 22203