October 1, 2012
When a mine operator does not get the relief sought during negotiations with attorneys representing the Mine Safety and Health Administration (MSHA) who are employed by a separate agency within the Department of Labor, the “Office of the Solicitor,” or with a “CLR” (Conference & Litigation Representative, a non-attorney employed directly by MSHA who handles less complex or high-dollar matters), litigation may be the only resort. However, this does not come without risk. Not only can an Administrative Law Judge (ALJ) affirm the citations or orders, but the judge also has what is known as de novo penalty authority: that means that the ALJ can ignore MSHA’s proposed civil penalty assessment and is not bound by the civil penalty point assessment formula contained in 30 CFR Part 100.
Therefore, an ALJ can either raise or lower the penalties if a violation is sustained. Although many times certain judges are known to significantly raise penalties — ALJ Miller often doubles, triples, or quadruples penalties, for example, and recently ALJ McCarthy doubled a $20,000 penalty in a discrimination case to $40,000 — they are also empowered to reduce the proposed penalty where they see fit. This often happens against small operators, especially where the ALJ agrees that MSHA’s proposed fines could impact an operator’s ability to remain in business.
Section 110(i) of the Mine Act grants the Commission the authority to assess all civil penalties provided under the Act, and directs the Commission, in determining penalty amounts, to consider: “the 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.”
Most of the time, when an ALJ exercises discretion to lower penalties, that is the end of the story unless MSHA appeals on other grounds. However, in the Commission’s August 2012 decision in Secretary of Labor v. Mize Granite Quarries Inc., Robert W. Mize III, and Clayborn Lewis (both employed by Mize Granite), MSHA appealed ALJ Rae’s significant reduction in penalties against both the company and its agents (issued under Section 110(c) of the Mine Act). In this case, the operator represented himself against the agency. Mize’s fight is not over because some issues were remanded to the judge for further consideration.
While there is no presumption of validity given to the Secretary’s proposed assessments, the Commission has held that substantial deviations from the Secretary’s proposed assessments must be adequately explained using the Section 110(i) criteria. The question on review was whether the judge failed to adequately explain the basis for substantially reducing the penalties against Mize Granite and for either substantially reducing or dismissing the penalties against Mr. Mize and Mr. Lewis in their personal capacities.
Mize is a small granite operator in Elberton, GA, with seven miners and one foreman, Mr. Lewis. Robert Mize is the owner and operator of the quarry. MSHA could pursue personal penalties against the two men because the small mine is incorporated; had it been a sole proprietorship or a partnership, no penalties under Section 110(c) would be permitted under the Mine Act.
There were 11 citations against the company at issue (including Section 104(d) unwarrantable failure allegations) and four personal actions against Mr. Mize and Mr. Lewis. In making the changes to MSHA’s proposed enforcement action, ALJ Rae observed that “[t]he penalty assessment for a particular violation is within the sound discretion of the administrative law judge so long as the six statutory criteria and the deterrent purpose of the Act are given due consideration.” Of the 11 proposed penalties against Mize Granite, the judge vacated two citations, affirmed four citations with the proposed penalties imposed in full, and reduced the amounts of five penalties. With regard to the four penalties proposed against Mr. Mize and Mr. Lewis, the judge dismissed the penalties for arising from one of the Section 104(d) orders, and reduced the amounts of the remaining three penalties.
On appeal, MSHA claimed that the judge did not adequately explain her rationale for the penalty reductions. She also argued that the judge did not resolve the conflicting claims concerning the effect of the proposed penalties on Mize Granite’s ability to remain in business, and that the judge did not discuss the submitted corporate tax returns. In response to the Secretary’s post-hearing brief, Mize Granite did submit three years of corporate tax returns, showing that it was currently losing money and had experienced a net loss for the previous three years.
In recent years, to consider a penalty reduction based on economic necessity, MSHA’s attorneys and CLRs often ask for up to five years of tax returns and current asset/liability ledgers, and some judges are also seeking this detailed information. Reportedly, MSHA has even retained a forensic economist to review the tax returns to determine if the penalties truly impair the ability to continue in business or otherwise warrant offering a payment plan to operators. Not too long ago, I even had an MSHA representative complain that a single page (out of many) was missing from an older tax return, and he refused to discuss settlement until the complete return was produced!
In assessing penalties against Mize Granite, the judge stated on the record: “I have considered the criteria in 110(i) in view of the evidence of record in making my findings herein. The following penalties w[i]ll not affect the operator’s ability to continue in business and are appropriate under the Act.” MSHA claimed, on appeal, that this conclusory statement failed to identify the basis for the judge’s penalty reductions, since it was unclear whether they were based on claims of financial hardship, the judge’s disagreement with the Secretary’s proposed penalty amounts, or some combination of both. Moreover, the Secretary asserted that since Mr. Lewis did not submit any financial information, and the judge did not address Mr. Mize’s net worth, the judge failed to resolve the conflicting claims concerning the individual financial abilities of the two men to pay the proposed Section 110(c) penalties. Finally, the Secretary alleged that there was no discernible method used by the judge in arriving at the penalty reductions.
In a 4-1 decision, the Commission majority did not disturb the ALJ’s action dismissing some of the Section 110(c) actions, because this was based on her determination that no “unwarrantable failure” occurred, which is a predicate finding for a personal penalty action. ALJ Rae wrote that the “danger posed by this condition [in contrast with the unwarrantable failure violation in the other two Section 104(d) actions]…was not of such grave concern that a failure to address it constituted aggravated conduct.” She also noted the fact that MSHA did not cite this same condition in the previous inspection two months earlier, finding this “does militate against a finding that [Mize Granite] was on notice that greater efforts were necessary to comply with the standard.”
But in reducing the penalties against the two agents of management, the judge commented on the fact that Mize Granite had been assessed rather significant 110(i) penalties for the violations (which she affirmed), and these would also be paid by Mr. Mize. She took this overlapping effect of the penalties into account in the assessment of the personal penalties, and held that the penalties proposed by the Secretary were disproportionate to the size of the mine vis a vis the income of the agents, and their lack of personal histories for previous violations.
The Commission disagreed, stressing that prior decisions make clear that the proper inquiries for the determination of individual penalties ought not include the size of the mine nor the penalties levied against the corporation, and discredited the judge’s assumption that Mr. Mize would effectively be paying both the corporate and his own personal penalties. The Commission also rejected the reduction of Mr. Lewis’ penalties, noting that he did not provide financial information and, therefore, the ALJ did not have an adequate basis for lowering the fines. Moreover, there was nothing in the record which indicated that Lewis understood that the amount of his penalty would be affected by consideration of his income and net worth, and his ability to meet his financial obligations.
The personal penalties that had been lowered, in the Section 110(c) actions that were not dismissed, have now been remanded back to ALJ Rae for reconsideration of the individual penalties assessed against Lewis (a total of $17,600), so he can be given another opportunity to provide documentary evidence and an affidavit or declaration regarding his personal income and financial responsibilities. The penalties against Mr. Mize were similarly remanded for the judge to consider the individual penalties assessed based solely on Mize’s personal financial status without consideration of the corporate penalties or his corporation’s state of economic health.
About the author: Adele L. Abrams is an attorney, Certified Mine Safety Professional and trained mediator who is president of the Law Office of Adele L. Abrams P.C. in Beltsville, Md., a seven-attorney firm focusing on safety, health and employment law nationwide. Abrams also provides consultation, safety audits, and training services to MSHA- and OSHA-regulated companies. She is a member of the Maryland, D.C., and Pennsylvania Bars, the U.S. District Courts of Maryland and D.C., the U.S. Court of Appeals, D.C. Circuit and 4th Circuit, and the United States Supreme Court. She is a graduate of the George Washington University’s National Law Center, and earned her Bachelor of Science in Journalism from the University of Maryland, College Park. For more information, contact her at email@example.com or visit the The Law Office of Adele L. Abrams on the Web at www.safety-law.com.