Unique Electric

Plain-English summary

Unique Electric was a sole proprietorship operated by Kim Warnock, and the case returned to the judge after the Commission vacated an earlier $400 penalty assessment and required a new review of the penalty criteria. Judge Richard W. Manning considered the household's income, assets, liabilities, and ability to meet financial obligations. He vacated the unwarrantable-failure allegation, modified the matter to a section 104(a) citation, and found that the violation remained serious and significant and substantial. The judge assessed a $400 penalty, payable by Warnock, and dismissed the case upon payment.

Decision snapshot

• Governing provisions: 30 C.F.R. § 57.12025; 30 U.S.C. §§ 802(d) and 820(i)
• Outcome: The unwarrantable-failure allegation was vacated, the citation was modified to section 104(a), and a $400 penalty was assessed.
• Key point: Penalty size for a self-employed mine operator must account for personal income, net worth, household obligations, and ability to pay.

Full text (FMSHRC public release)

FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION
1244 SPEER BOULEVARD #280
DENVER, CO 80204-3582
303-844-3577/FAX 303-844-5268

                                      January 25, 1999

SECRETARY OF LABOR, : CIVIL PENALTY PROCEEDING
MINE SAFETY AND HEALTH :
ADMINISTRATION (MSHA), : Docket No. WEST 95-333-M
Petitioner : A.C. No. 04-03425-05503 TIR
:
v. : Washington Mine
:
UNIQUE ELECTRIC, :
Respondent :

                                DECISION ON REMAND

BEFORE: Judge Manning

    In my original decision in this civil penalty proceeding, I held that Unique Electric violated

30 C.F.R. ' 57.12025 and I assessed a civil penalty of $400 for the violation, Unique Electric, 19
FMSHRC 783 (April 1997). In the decision, I found that Unique Electric was a sole
proprietorship, without employees or assets, operated by Mr. Kim Warnock and that it was no
longer performing work at any mine. The Secretary of Labor appealed my decision to the
Commission on the basis that I improperly reduced the $8,500 civil penalty proposed by the
Secretary based on my analysis of the Aability to continue in business@ criterion in section 110(i) of
the Federal Mine Safety and Health Act of 1997, (AMine Act@) (30 U.S.C. ' 820(i)). The
Commission granted the Secretary=s petition for review. The single citation in this case was
issued following a fatal accident, as described in my original decision.

                        I. DECISION OF THE COMMISSION

    In its decision, the Commission vacated my $400 penalty assessment in this case and

remanded the case to me for further proceedings consistent with its decision. Unique Electric,
20 FMSHRC 1119 (October 1998). The Commission vacated the penalty I assessed based on
concepts developed in its decisions in Sunny Ridge Mining Co., 19 FMSHRC 254, 271-72
(February 1997) and Ambrosia Coal & Construction Co., 19 FMSHRC 819, 823-24 (May 1997).
These decisions discuss how penalties should be assessed against agents of corporate mine
operators under section 110(c) of the Federal Mine Safety and Health Act of 1997, 30 U.S.C.
' 820(c). The $8,500 penalty in this case was proposed by the Secretary under section 110(a) of
the Mine Act. The Commission held that the present case is Aakin to one brought against an
individual under section 110(c) of the Mine Act@ because Mr. Warnock, the owner of Unique
Electric, was self-employed at the time the citation was issued. 20 FMSHRC at 1122.

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     In its decision, the Commission directed that I reconsider the penalty taking into

consideration the six criteria set forth in section 110(i) of the Mine Act.1 With respect to the
ability to continue in business criterion, the Commission directed that I consider Awhether the
proposed penalty would affect Warnock=s ability to meet his financial obligations.@ Id. With
respect to the size of the business criterion, the relevant inquiry is whether the penalty is
appropriate Ain light of the individual=s income and net worth.@ Ambrosia, 19 FMSHRC at 824.
In Sunny Ridge, the Commission set forth its analysis with respect to penalties brought against
individuals as follows:

            The criteria regarding the effect and appropriateness of a penalty
            can be applied to individuals by analogy, and we find that such an
            approach is in keeping with the deterrent purposes of penalties
            assessed under the Mine Act. In making such findings, judges
            should thus consider such facts as an individual=s income and family
            support obligations, the appropriateness of a penalty in light of the
            individual=s job responsibilities, and an individual=s ability to pay.
            Similarly, judges should make findings on an individual=s history of
            violations and negligence, based on evidence in the record on these
            criteria. Findings on the gravity of a violation and whether it was
            abated in good faith can be made on the same record evidence....@

19 FMSHRC at 272.

   The Commission further analyzed how penalties should be assessed against individuals in

Wayne Steen, employed by Ambrosia Coal & Construction Co., 20 FMSHRC 381, 385-86 (April
1998). The Commission stated that Aour judges must engage in a two-step analysis...@ as follows:

            First, they must determine [an individual=s] household financial
            condition. Then they must make findings on the ... Asize@ and
            Aability to continue in business@ criteria on the basis of the
            [individual=s] share of his or her household=s net worth, income, and
            expenses.

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       The criteria are Athe [mine] operator=s history of previous violations, the appropriateness

of such penalty to the size of the business of the operator charged, whether the operator was
negligent, the effect on the operator=s ability to continue in business, the gravity of the violation, and
the demonstrated good faith of the person charged in attempting to achieve rapid compliance after
notification of a violation.@ 30 U.S.C. ' 820(i).

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Id.

                           II. PROCEEDINGS ON REMAND

     On October 26, 1998, I ordered Mr. Warnock to provide me with information concerning

his income, financial obligations, and net worth. 20 FMSHRC 1241 (October 1998). I asked for
a listing of his major assets and liabilities, indicating which assets were held jointly with his wife
and which liabilities were joint obligations. I also asked him to describe his Afamily support
obligations.@ Finally, I asked for a copy of his Federal tax return so that I could verify the
information submitted. This information was submitted to me. I sealed the tax returns submitted
by Mr. Warnock.

   1.      Information Supplied by Mr. Warnock

 The information submitted shows that all assets and

liabilities of Mr. Warnock are shared jointly with his wife, as
follows:

   1.      Major Assets

      a. Home - The Warnocks own a home that is valued at

about $83,000. The present mortgage is about $69,900 and the
monthly payment is $735. Thus, their equity in the home is about
$13,100.

      b. Automobile - The Warnocks own a car that is valued

at about $8,500. The outstanding loan on the car is about $8,000
and the monthly payment is $250. Thus, their equity in the car
is about $500.

      c. Trailer Recreational Vehicle (5th Wheel) - The

Warnocks own an R.V. that is valued at about $7,000. The
outstanding loan on the R.V. is about $6,000 and the monthly
payment is $120. Thus, their equity is about $1,000.

      d. Truck - The Warnocks own a truck that is valued at

about $5,700. The loan has been paid. Thus, their equity is
about $5,700.

   2.      Major Liabilities

      a. Loans - In addition to the home mortgage and loans

listed above, the Warnocks owe about $6,000 on a Visa charge
card. They make a monthly payment of about $300.

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      b. Monthly payments - The Warnocks= monthly payments

for the assets listed above including the Visa bill is about
$1,400. In addition, they estimate that their monthly payments
for other basic goods and services to be about $1,100. These
payments include the cost of utilities, phone service, life and
health insurance, auto insurance, food, and gasoline. The total
monthly payments are about $2,500.

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 3.   Income

 The citation in this case was issued in September 1994. In

that year, the Warnocks= household adjusted gross income was
about $32,000. Of this amount, about $20,000 was from earnings
by Mr. Warnock from Unique Electric.

 In 1997, the most recent year for which tax returns are

available, the household adjusted gross income was about $70,000.
In September 1997, Mr. Warnock took a new job and his monthly
gross income was about $2,880. This new position is closer to
home but it pays significantly less than the job he held before
September 1997. As of the end of 1997,
Mr. Warnock=s gross annual income was about $34,500. At the end
of 1997, Mrs. Warnock=s gross monthly income was about $1,360, or
about $16,300 annually. Thus, as of December 1997, the Warnocks=
gross annual income from employment was about $50,800. As of
December 1998, Mr. Warnock=s gross monthly wage is $2,400, about
$400 lower than in 1997.

 4.   Financial Condition

 The household net worth of the major assets shown above is

about $20,300. The household monthly payment for loans,
insurance, utilities, telephone, food, and gasoline is about
$2,500 per month or about $30,000 per year. The household gross
income is less than $50,800.

 The information supplied by the Warnocks indicates that all

assets and liabilities are joint. There is no indication whether
the Warnocks are supporting any children, so I assume that there
is no such support obligation. In his submission, Mr. Warnock
states that after paying taxes and monthly bills, the household
had about $700 of discretionary income per month to cover other
essentials such as non-reimbursed medical expenses, as well as
nonessential items and services.

 2.   Response of the Secretary of Labor

 In her response to Mr. Warnock=s submission, the Secretary

contends that the information supplied is Amaterially incomplete@
with regard to Mr. Warnock=s net worth. Specifically, she states
that Mr. Warnock=s submission does not indicate whether he owns
Aany additional assets, including any investments such as
additional real estate, IRA=s, 401(k)=s, [or] vested pension
assets....@ Counsel states that without such information, the
Secretary cannot make any Ameaningful submission regarding the
appropriate amount of penalty....@ The Secretary provided an

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affidavit that the Department of Labor uses to determine whether
a civil penalty should be reduced due to financial hardship and
suggests that Mr. Warnock should be required to fill it out or to
provide a sworn statement that he has no interest in any
additional assets.

          III.   ANALYSIS AND PENALTY ASSESSMENT

 I find that Mr. Warnock provided sufficient information on

which I can assess a civil penalty under the Commission=s remand
order. In its decision, the Commission stated that, when I
evaluate the ability to continue in business criterion, I should
consider whether the proposed penalty would affect Mr. Warnock=s
ability to meet his financial obligations, and that when I
evaluate the size criterion, I should consider Mr. Warnock=s
income and net worth. I have reviewed the Warnocks= tax returns
and I am satisfied that the information submitted is accurate and
provides a good outline of his financial condition. The 1997 tax
return shows that the Warnocks= earned minimal interest, and no
dividends or capital gains. My examination of the tax return
also shows that they do not own any real estate other than their
home. When assessing a penalty, I will assume that the Warnocks
have a checking account and some tax sheltered savings for
retirement in the form of an IRA, 401(k), or a vested retirement
plan that is commensurate with their economic profile.

 In assessing a civil penalty, I must consider all six

penalty criteria. I review each of them below. For the criteria
that are not at issue on remand, I incorporate my findings from
my original decision.

 1.   The Operator=s History of Previous Violations

 Neither Unique Electric nor Mr. Warnock has any history of

previous violations of the Mine Act or the Secretary=s safety and
health standards.

 2.   The Appropriateness of the Penalty to the Size of the
      Business of the Operator

 There is no dispute that Unique Electric was a small

electrical contractor operated by
Mr. Warnock. Unique Electric was a sole proprietorship without
any employees or assets. Unique Electric was simply the name
that Mr. Warnock used when he provided services to his customers;
it was not a separate legal entity. Mr. Warnock was a mine
Aoperator@ under section 3(d) of the Mine Act because he was an
Aindependent contractor performing ... services at [a] mine.@ 30

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U.S.C. ' 802(d). I have considered Mr. Warnock=s share of the
household income and net worth when analyzing this criterion.

 3.   Whether the Operator was Negligent

 The citation in this case was issued under section 104(d)(1)

of the Mine Act and charged that the violation was caused by the
unwarrantable failure of Unique Electric to comply with section
57.18025. At the hearing, the Secretary did not present any
evidence with respect to the unwarrantable failure allegation in
the citation. Accordingly, I vacated the unwarrantable failure
allegation and modified the citation to a section 104(a)
citation. I found that Mr. Warnock was negligent in failing to
ground the pump circuit in accordance with his normal practice.

 4.   The Effect on the Operator=s Ability to Continue in
      Business

 The Commission held that I should consider Awhether the

proposed penalty would affect Warnock=s ability to meet his
financial obligations@ when analyzing this criterion. 20 FMSHRC
at 1122 (emphasis added). Given the financial profile provided
by Mr. Warnock, which I believe to be reasonably accurate, I find
that a $8,500 penalty would affect his ability to meet his
financial obligations. If I determined that such a penalty was
appropriate after considering all six of the penalty criteria, I
would allow Mr. Warnock to pay the penalty in installments over a
period of time. As discussed below, however, I find that such a
penalty is not appropriate.

 5.   The Gravity of the Violation

 I found that the violation was serious and was of a
 significant and substantial nature.

 6.   Demonstrated Good Faith of the Person Charged in
      Attempting to Achieve Rapid Compliance after
      Notification of the Violation

 I found that the violation was abated in good faith. The

violation was abated by replacing the electric pump with a
compressed air pump. Because it is not clear to what extent
Warnock was involved in the abatement, this criterion is not a
major factor in my penalty assessment.
Mr. Warnock testified that he recommended that an air pump be
used instead of an electric pump when he was originally asked to
install the pump. (Tr. 75, 372-73).

 7.   Determination of an Appropriate Civil Penalty

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 In determining an appropriate penalty, I take into

consideration my findings with respect to all six of the
criteria. As directed by the Commission, I have not assumed that
because Kim Warnock no longer provides services to the mining
industry, no deterrent purpose would be served by the penalty
proposed by the Secretary or any other penalty. 20 FMSHRC at
1123.

 I find that the Secretary=s proposed penalty is not

appropriate for a number of reasons. First, Unique Electric was
an extremely small business, as described above and in my
original decision. The proposed penalty was not appropriate
given Mr. Warnock=s income and net worth. Second, Unique
Electric had no history of previous violations. Third, the
Secretary did not establish that the violation was a result of
Unique Electric=s unwarrantable failure. This fact directly
relates to the negligence criterion and it was a major factor in
my assessment of a penalty in my original decision and in this
decision. Fourth, the proposed penalty would affect
Mr. Warnock=s ability to meet his financial obligations.

 As stated above, the Agood faith@ criterion was not a major

factor in my penalty assessment. Finally, I considered the
gravity criterion. This criterion is extremely important because
it takes into consideration the hazards created by the violation.
I reemphasize my finding that the violation was serious and was
of a significant and substantial nature.

 The penalty proposed by the Secretary was Aspecially

assessed@ under 30 C.F.R. ' 100.5. The Secretary usually
proposes civil penalties for S&S violations using the formula set
forth in section 100.3. Section 100.5 gives the Secretary wide
discretion to Aspecially assess@ penalties. Penalties proposed
under section 100.5 are generally higher than penalties proposed
under section 100.3. Among the factors that the Secretary
considers when deciding whether to specially assess a penalty are
whether the violation involves a fatality or serious injury and
whether the citation alleges an unwarrantable failure. (30
C.F.R. ' 100.5(a) & (b)). As stated above, I vacated the
Secretary=s unwarrantable failure determination. At the hearing,
the Secretary maintained that Mr. Warnock was Anot being charged
with responsibility for@ the fatality. (Tr. 414, 28).

 If the Secretary had proposed the penalty in 1995 under the

Aregular assessment@ formula in section 100.3, the proposed
penalty would have been $292 (41 points) using Inspector
Pederson=s high gravity and high negligence determinations,

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without a 30% reduction for good faith abatement. I am not bound
by the Secretary=s penalty regulations. I present this
information solely to show that establishing an appropriate civil
penalty using the criteria is not an exact science and that
different techniques yield different penalties.

 I find that a penalty of $400 is appropriate for the

citation in this case; Citation No. 3910427 issued September 9,
1994. I reach this conclusion taking into consideration all six
penalty criteria. The criteria that resulted a lower assessment
than that proposed by the Secretary are: (1) history of previous
violations; (2) appropriateness of the penalty to the size of the
business (income and net worth); (3) the negligence of the
operator; and (4) the effect of the penalty on the ability to
stay in business (ability to meet financial obligations).

                                     IV.    ORDER

 Mr. Kim Warnock, acting on behalf of Unique Electric, is

ORDERED TO PAY the Secretary of Labor the sum of $400.00 within
60 days of the date of this order, if he has not already done so.
Upon payment of this penalty, this case is DISMISSED.

                                         Richard W. Manning
                                         Administrative Law Judge

Distribution:

Jan M. Coplick, Esq., Office of the Solicitor, U.S. Department of Labor, 71 Stevenson St., Suite
1110, San Francisco, CA 94105-2999 (Certified Mail)

Mr. Kim Warnock, 1136 Cedar Street, Shasta Lake City, CA 96019 (Certified Mail)

RWM

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