Adele Abrams

A few new developments suggest that Mine Safety and Health Administration (MSHA) civil penalties — which increased enormously starting in 2007 when MSHA’s final rule eliminated the “single penalty” fine for non significant and substantial (S&S) citations and implemented new penalty criteria to add points for repeat violations and flagrant violations — may be going up again soon. This, coupled with two recent decisions and positions taken by the Department of Labor’s Solicitor’s Office, could make it much more difficult for smaller operators to stay in business under the weight of MSHA sanctions and brings the issue of the statutory criteria concerning impact on the operator’s ability to continue in business to the forefront.

The first development involves the MSHA reorganization to centralize its assessments and accountability programs. This was announced on February 8, 2012, and creates a new Office of Assessments, Accountability, Special Enforcement and Investigations (OAASEI) that will better coordinate the handling, investigation and assessment of flagrant violations, retaliation claims under Section 105(c) of the Mine Act, impact inspections, pattern of violations, and even civil and criminal actions under Section 110(c) (those involving personal penalties against salaried and hourly “agents of management” as well as the threat of incarceration arising from unwarrantable failure violations).

To put it plainly, everything that mine operators most fear about MSHA will be put into a single office, so that right hand will more fully know what the left hand is doing. As MSHA put it, “The formation of OAASEI will enable MSHA to better manage and coordinate its use of special enforcement tools against the most serious violators.”

The next development was announced on January 20, 2012, when the agency’s semi-annual regulatory agenda was released. MSHA announced its plans to (again) revise its criteria and procedures for assessment of civil penalties.

In the regulatory narrative, the agency stated: “MSHA plans to publish a proposed rule to revise the process for proposing civil penalties. The assessment of civil penalties is a key component in MSHA’s strategy to enforce safety and health standards. The Congress intended that the imposition of civil penalties would induce mine operators to be proactive in their approach to mine safety and health, and take necessary action to prevent safety and health hazards before they occur. MSHA believes that the procedures for assessing civil penalties can be revised to improve the efficiency of the Agency’s efforts and to facilitate the resolution of enforcement issues.” It is apparent to anyone reading this that penalties will only go one way as a result of this rulemaking: upward!

The last increase, in 2007, was a major contributor to creating the huge backlog of contested cases at the Federal Mine Safety & Health Review Commission (FMSHRC), which at one point topped 19,000 cases.

The Commission began FY 2011 with a backlog of 18,170 cases, and 10,594 new cases were filed during the year. By the start of FY 2012, the backlogged cases numbered just under 16,000, despite the addition of many new Administrative Law Judges. Congress, in turn, is considering legislation (the Republican “Capito” bill, HR. 3697, and the Democratic “Byrd” bills, HR 1579 and S 153) that would start imposing interest on any contested penalties from the date of contest until the case was finally adjudicated. Given the backlog, if these bills pass, several years’ worth of interest would accrue on any contested cases where MSHA prevailed or the citations were sustained in settlement. Currently, interest is only charged starting 30 days after a civil penalty order becomes final.

MSHA has also been making headlines for using collection agencies against operators who are delinquent in paying their civil penalties that have become final, as well as for using their powers in federal court to seek injunctions and close down mines for failure to pay significant penalties. This is permitted under Section 108(a)(1)(A) of the Mine Act, because it is viewed as failing to comply with a civil penalty order that has been finalized.

Now, things have gotten even more challenging for mine operators who are looking to argue for reduction of penalties based on the statutory criteria. Court rulings that ave consistently held that civil penalties are to have a deterrent effect, not be punitive. But arranging payment plans has gotten much more difficult, and MSHA attorneys who once routinely agreed to payment schedules for smaller operators have gotten tougher — demanding financial records going back five years or more, and not accepting that a mining company is in dire straits where it has run at a significant loss for several years, claiming that “things can turn around.”

I have had multiple cases recently where the MSHA attorney has argued that, if a company does not affirmatively plead financial hardship in their initial Answers filed in response to MSHA’s Petition for Assessment, that “affirmative defense” is waived. Fortunately, in those situations to date, the Administrative Law Judge has accepted an amended answer, but operators representing themselves should be on notice that they need to consider and articulate their position on economic hardship from day one, and be prepared to back it up with financial documentation (and, for sole proprietors and partnerships, personal tax returns and financial disclose as well).

A pair of decisions provides some insight into what the ALJs are looking for if a case comes to trial and economic hardship is being used as an argument for reduction of penalties and/or for approval of a payment plan. In the first, Apex Quarry LLC (ALJ McCarthy, December 2011), the operator’s owner, Todd Harris, appeared representing himself in a case involving just under $20,000 in proposed penalties. The operator admitted the violations and only challenged the amount of penalties, claiming he was unable to pay them and still remain in business. The Secretary admitted that the operator was small in size, had a moderate history of prior violations, and had abated the violations at issue in good faith.