KENTUCKY RIVER MEDICAL CENTER

National Labor Relations Board - Board Decisions

Oct 22, 2010

356 N.L.R.B. 6 (N.L.R.B. 2010)

DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 6
Jackson Hospital Corporation d/b/a Kentucky River
Medical Center and United Steel, Paper & For-
estry, Rubber, Manufacturing, Energy, Allied
Industrial & Service Workers International Un-
ion, AFL–CIO–CLC. Cases 9–CA–42249, 9–
CA–43128, 9–CA–43165, and 9–CA–43397
October 22, 2010
SUPPLEMENTAL DECISION AND ORDER
BY CHAIRMAN LIEBMAN AND MEMBERS BECKER,
PEARCE, AND HAYES
On August 27, 2010, the National Labor Relations
Board issued a Decision and Order in this case finding,
inter alia, that the Respondent violated Section 8(a)(3)
and (1) of the National Labor Relations Act by placing
employee Frances Lynn Combs on an indefinite investi-
gatory suspension. 355 NLRB 643. We ordered, inter
alia, that Combs be made whole for any loss of earnings
or other benefits suffered as a result of the discrimination
against her, with interest. We severed the issue of
whether the Board should order that interest be com-
pounded. Earlier, on May 14, 2010, we had invited all
interested parties to file briefs in this and two other cas-
es1 regarding the question of whether the Board should
routinely order compound interest on backpay and other
monetary awards in backpay cases and if so, what the
standard period for compounding should be.
For nearly 50 years, the Board has ordered interest to
be paid on backpay awards under the Act.2 For more
than 20 years, a succession of NLRB General Counsels
has urged the Board to order compound, rather than sim-
ple, interest.3 The Board has consistently declined to do
so—without ever addressing the merits of the issue, ex-
cept for a preliminary endorsement of daily compound-
ing in a notice of proposed rulemaking issued in 1992,4
which was withdrawn in 1998.5 Over the years, Board
1 Bashas’ Food City, Case 28–CA–21435 and Atlantic Scaffolding
Co., Case 16–CA–26108.
2 Isis Plumbing Co., 138 NLRB 716 (1962), enf. denied on other
grounds 322 F.2d 913 (9th Cir. 1963).
3 See General Counsel Memorandum 00-05, Compounding of Inter-
est on Backpay and Other Monetary Awards, 2000 WL 22958147 (July
20, 2000) (observing that “the General Counsel, beginning in 1989,
sought the adoption . . . of a policy pursuant to which interest on back-
pay . . . would be compounded on a daily basis”). See also General
Counsel Memorandum 07-07, Seeking Compound Interest on Board
Monetary Remedies, 2007 WL 1308381 (May 2, 2007) (announcing
intent to seek Board policy of adopting quarterly compound interest).
4 NLRB, Notice of Proposed Rulemaking, Codification of Standard-
ized Remedial Decisions in Board Decisions Regarding Offers of Rein-
statement, Make-Whole Remedies, Computation of Interest, and Post-
ing of Notices, 57 Fed.Reg. 7898, 7898–7899 (March 5, 1992).
5 NLRB, Withdrawal of Proposed Rulemakings, Rules Regarding
Standardized Remedial Provisions in Board Unfair Labor Practice
decisions have deferred a final ruling on the issue of
compounding, denying the General Counsel’s request for
that remedy, but always leaving open the possibility of a
change in policy.6 Today, we make that change, after
full briefing of the issue in response to our invitation.7
We adopt a policy under which interest on backpay will
be compounded on a daily basis, using the established
methods for computing backpay8 and for determining the
applicable rate of interest.9 As we will explain, the daily
compounding of interest is used under other comparable
legal regimes (including the Internal Revenue Code,
which the Board has followed in other respects related to
awards of interest), and it will better serve the remedial
policies of the National Labor Relations Act.
A.
Our decision today continues the Board’s judicially-
approved, evolutionary approach to remedial issues in-
volving interest on backpay awards.
In 1962, when the Isis Plumbing Board established our
practice of awarding interest on backpay awards, it ob-
served (citing the Supreme Court) that the “Board has the
right to draw on ‘enlightenment gained from experience’
in fashioning remedies to undo the effects of violations
Decisions and the Appropriateness of Single Location Bargaining Units
in Representation Cases, 63 Fed.Reg. 8890 (Feb. 23, 1998). The Board
explained that it was withdrawing the proposed rule so that it could
“focus its time and resources on reducing the backlog of adjudicated
cases pending before the Board.” Id. at 8891.
6 In 1990, for example, the Board stated that it was “not prepared at
this time to deviate from [its] current practice,” but was “taking the
matter under advisement.” Alaska Pulp Corp., 300 NLRB 232, 232 fn.
4 (1990), enfd. mem. 944 F.2d 909 (9th Cir. 1991). The Board has
continued to use the same language. See, e.g., Rogers Corp., 344
NLRB 504, 504 (2005) (Board “not prepared at this time to deviate
from [its] current practice”); Accurate Wire Harness, 335 NLRB 1096,
1096 fn. 1 (2001) (Board “not prepared at this time . . . to deviate from
[its} current practice,” with then Member Liebman and Member Walsh
stating that they did “not foreclose future consideration of the request,”
and Member Truesdale stating that rulemaking on the issue “would be
preferable”), enfd. 86 Fed. Appx. 815 (6th Cir. 2003).
7 In addition to briefs filed by the parties in this case and the com-
panion cases, amicus briefs were filed by the National Right to Work
Legal Defense Foundation (NRWLDF), the Service Employees Interna-
tional Union, and the American Federation of Labor and Congress of
Industrial Organizations. Only the employer respondents have opposed
the adoption of a policy requiring compound interest.
In its brief, NRWLDF takes no position on the compound-interest
issue, arguing only that any change in the Board’s policy should apply
to union respondents as well as to employer respondents when mone-
tary make-whole remedies are awarded. As NRWLDF acknowledges,
the Board has always applied its backpay and interest remedial policies
equally to employers and unions. We will continue to do so.
8 See F. W. Woolworth Co., 90 NLRB 289 (1950) (backpay comput-
ed on quarterly basis).
9 See New Horizons for the Retarded, 283 NLRB 1173 (1987)
(adopting Internal Revenue Service rate for underpayment of Federal
taxes).
356 NLRB No. 8

KENTUCKY RIVER MEDICAL CENTER 7
of the Act.”10 Adding interest to backpay awards, the
Board said, was a matter of “bringing [the Board’s]
practice into conformity with general principles of law,
. . . achieving a more equitable result, and . . . encourag-
ing compliance with Board orders.”11
Fifteen years later, in the 1977 Florida Steel decision,
the Board replaced the fixed interest rate originally
adopted with the sliding interest rate scale then used by
the Internal Revenue Service (IRS) (the “adjusted prime
rate”) in connection with the underpayment or overpay-
ment of Federal taxes.12 The Florida Steel Board cited
an inflationary trend leading to higher interest rates
charged by private lending institutions and resulting
Congressional and State-legislative concerns “over the
disparity between statutory interest rates and rates in the
private money market.”13 “A rate of interest more accu-
rately keyed to the private sector money market,” the
Board reasoned, “would have the effect of encouraging
timely compliance with Board orders, discouraging the
commission of unfair labor practices, and more fully
compensating discriminatees for their economic loss-
es.”14
Finally, in a 1987 decision, New Horizons for the Re-
tarded, the Board again altered its method of calculating
the interest rate, responding to a statutory change in the
method used by the IRS to calculate the rate applied to
an underpayment of Federal taxes under 26 U.S.C.
§ 6621 (the “short-term Federal rate” plus 3 percent, as
determined quarterly).15 The Board observed that this
rate was “influenced by private economic forces,” was
“subject to periodic adjustment,” and was “relatively
easy to administer.”16
The Board’s evolving approach in this area—the origi-
nal decision to award interest on backpay awards, the
decision to replace the fixed interest rate with the then-
current IRS rate, and the decision to adopt the modified
IRS rate—has been uniformly upheld by the Federal ap-
pellate courts.17 As the Supreme Court has explained,
10 Isis Plumbing, supra, 138 NLRB at 720, quoting NLRB v. Seven-
Up Bottling Co. of Miami, Inc., 344 U.S. 344, 346 (1953) (upholding
Board’s newly adopted F. W. Woolworth policy of calculating backpay
on quarterly basis). In the years before Isis Plumbing, the Board had
consistently declined to award interest, but had never offered a rea-
soned explanation for its policy. Id. at 717.
11 Id.
12 Florida Steel Corp., 231 NLRB 651 (1977), enf. denied on other
grounds 586 F.2d 436 (5th Cir. 1978).
13 Id. at 651.
14 Id.
15 New Horizons for the Retarded, supra.
16 Id. at 1173.
17 See 1992 NLRB Notice of Proposed Rulemaking, supra, 57
Fed.Reg. at 7898 (collecting cases). See, e.g., Philip Carey Mfg. Co. v.
Section 10(c) of the Act gives the Board “broad discre-
tionary” power to “devis[e] remedies to effectuate the
policies of the Act”; the Board is not “require[d] . . . to
make a quantitative appraisal of the relevant factors,” but
rather may use “its judgment and its knowledge.”18
In the present case, the Respondent19 argues that the
Board should address the compound-interest issue
through rulemaking, not adjudication. The Supreme
Court has held that the “choice between rulemaking and
adjudication lies in the first instance within the Board’s
discretion.”20 Here, we believe adjudication is appropri-
ate. The General Counsel, in these cases among many
others, has raised the compound-interest issue from the
beginning of the unfair labor practice proceedings, pur-
suant to a publicly-announced decision to pursue a
change in Board policy through adjudication.21 The is-
sue itself is neither novel, nor complex. It has been pre-
sented to the Board repeatedly over two decades, and it is
familiar to the labor-law community. Furthermore, as
earlier noted, the Board has three times previously de-
termined remedial interest issues through adjudication.
We see no persuasive reason for taking a different course
in this instance.
We also reject the argument that rather than establish-
ing a general rule with respect to compound interest, the
Board should exercise its discretion on a case-by-case
basis, as the Federal courts do with respect to both the
award of prejudgment interest and how it is calculated in
employment cases.22 The reasons supporting our new
policy apply categorically wherever a backpay award is
appropriate; they do not depend on the specific circum-
stances of an individual employee in a given Board case.
As an administrative agency establishing rules to govern
a particular field of law (within the limits of the statute it
administers), the Board has a different role than the
courts, operating “on a wider and fuller scale” that “dif-
NLRB, 331 F.2d 720, 731(6th Cir. 1964) (upholding Board’s authority
to award interest and collecting cases).
18 NLRB v. Seven-Up Bottling, supra, 344 U.S. at 346, 348. Sec.
10(c) authorizes the Board, upon finding an unfair labor practice, to
“take such affirmative action including reinstatement of employees
with or without backpay, as will effectuate the policies of th[e] Act.”
29 U.S.C. § 160(c).
19 Atlantic Scaffolding also made the same argument.
20 NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974).
21 See General Counsel Memorandum 07-07, Seeking Compound In-
terest on Board Monetary Remedies, 2007 WL 1308381 (May 2, 2007)
(announcing intent to seek Board policy of adopting quarterly com-
pound interest).
22 See cases cited infra. Notably, however, the Second Circuit has
held that compound interest should ordinarily be awarded prejudgment.
See, e.g., Sands v. Runyon, 28 F.3d 1323, 1328 (2d Cir. 1994) (Rehabil-
itation Act of 1973 case).

DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 8
ferentiates . . . the administrative from the judicial pro-
cess” in the Supreme Court’s words.23
B.
After careful consideration, and based on the Board’s
experience in the decades following the initial decision to
order interest on backpay awards, we have concluded
that compound interest better effectuates the remedial
policies of the Act than does the Board’s traditional prac-
tice of ordering only simple interest and that, for the
same reasons, interest should be compounded on a daily
basis, rather than annually or quarterly.
In this context, our primary focus clearly must be on
making employees whole. “A backpay order is a repara-
tion order designed to vindicate the public policy of the
statute by making employees whole for losses suffered
on account of an unfair labor practice.”24 For instance,
backpay is awarded for an unlawfully discharged em-
ployee only when the employee’s interim earnings fall
short of what he would have earned, had he not lost his
job.25 It remains the case, we think—as the F. W. Wool-
worth Board observed 60 years ago—that “[u]nemploy-
ment or employment at lesser wages may have resulted
in the exhaustion of the employee’s savings, his incur-
rence of debts, and even deprivation of the necessities of
life.”26 “The purpose of interest is to compensate the
[employee] for the loss of use of his or her money.”27
Money, of course, has a time value: it is more valuable
today than it is tomorrow—or next year. “If justice were
immediate, there would never be an award of . . . inter-
est;” instead, because justice takes time—and sometimes,
as students of the Board know, a long time—“interest is
added to the original judgment to ensure that compensa-
tion is complete.”28 Since 1962, the Board has recog-
nized that an award of interest is integral to achieving the
make-whole purpose of a backpay award, consistent with
the Supreme Court’s characterization of backpay as “an
indebtedness arising out of an obligation imposed by
statute,”29 and in the years that followed, the Board has
sought to measure the time value of money more fairly
and accurately by adjusting the interest rate paid on
backpay awards.
23 NLRB v. Seven-Up Bottling, supra, 344 U.S. at 349–350
24 NLRB v. J. H. Rutter-Rex Mfg. Co., 396 U.S. 258, 263 (1969),
quoting Nathanson v. NLRB, 344 U.S. 25, 27 (1952). As the Isis
Plumbing Board explained, backpay is “not a fine or penalty imposed
on the respondent by the Board.” 138 NLRB at 719.
25 See F. W. Woolworth, supra, 90 NLRB at 291–293.
26 Id. at 292.
27 Florida Steel, supra, 231 NLRB at 651.
28 Michael S. Knoll, A Primer on Prejudgment Interest, 75 Tex. L.
Rev. 293, 294 (1996).
29 Nathanson v. NLRB, supra, 344 U.S. at 27.
Today, compound interest, not simple interest, is the
norm in connection with private lending practices.30 For
example, interest on credit card debt is routinely com-
pounded daily.31 Compound interest has also become the
norm for many monetary obligations imposed by Federal
law. One statutory example of particular relevance here
is the Internal Revenue Code, to which the Board looks
in setting the interest rate on backpay awards. Under 26
U.S.C. § 6622(a), interest on tax underpayments (and
overpayments) is compounded daily. The legislative
history of the provision observes that compound interest
was deemed necessary to “conform computation of inter-
est . . . to commercial practice” and that without com-
pound interest, “neither the United States nor taxpayers
are adequately compensated for the value of the money
owing to them.”32
A second example also has persuasive weight here: In
the Back Pay Act, applicable in certain circumstances to
Federal employees who have suffered an “unjustified or
unwarranted personnel action” resulting in a loss of pay,
Congress required daily compound interest on backpay
awards.33 We see no reason why private-sector employ-
ees covered by the National Labor Relations Act should
be treated less favorably than Federal employees, or,
correspondingly, why violators of the National Labor
Relations Act should not be subject to the same remedies
as the United States in its capacity as an employer.34
30 See Onti, Inc. v. Integra Bank, Inc., 751 A.2d 904, 929 (Del. Ch.
1999) (“even passbook savings accounts now compound their interest
daily”); Frank J. Slagle, Accounting for Interest: An Analysis of Origi-
nal Issue Discount in the Sale of Property, 32 S.D.L. Rev. 1, 35 fn. 186
(1987) (“banks commonly offer interest rates on various forms of sav-
ings accounts which are compounded daily”).
31 Laurie A. Burlingame, Getting to the Truth of the Matter: Revisit-
ing the TILA Credit Card Disclosure Scheme to Better Protect Con-
sumers, 61 Consumer Finance Law Quarterly Report 308, 315 (Sum-
mer 2007), citing Mark Furletti, Credit Card Pricing Developments and
Their Disclosure, Federal Reserve Bank of Philadelphia Discussion
Paper, p. 15 (Jan. 2003) (available at www.phil.frb.org).
32 S. Rep. No. 97-494(I), 97th Cong., 2d Sess. (1982), 1982
U.S.C.C.A.N. 781, 1047. At the time of the Board’s New Horizons for
the Retarded decision, supra, this Internal Revenue Code provision was
in effect, but there is no indication that the Board was aware of it; the
issue of compound interest was not before the Board there.
33 5 U.S.C. § 5596(b)(1)(A) & (2).
34 In cases under other statutes governing the private-sector work-
place, the Federal courts regularly use their discretion to order com-
pound interest on backpay awards, although not always computed on a
daily basis. See, e.g., EEOC v. Joe’s Stone Crabs, 296 F.3d 1265, 1276
(11th Cir. 2002), cert. denied 539 U.S. 941 (2003) (Title VII); EEOC v.
Kentucky State Police Dept., 80 F.3d 1086, 1098 (6th Cir. 1996) (Age
Discrimination in Employment Act case), cert. denied 519 U.S. 963
(1996). Saulpaugh v. Monroe Community Hospital, 4 F.3d 134, 145
(2d Cir. 1993), cert. denied 510 U.S. 1164 (1994) (Title VII case, re-
versing district court’s failure to grant compound interest: “Given that
the purpose of back pay is to make the plaintiff whole, it can only be
achieved if interest is compounded.”); EEOC v. Gurnee Inn Corp., 914

KENTUCKY RIVER MEDICAL CENTER 9
There is no force to the argument, urged here, that
compound interest wrongly penalizes respondents for the
sometimes protracted nature of unfair labor practice pro-
ceedings. The Supreme Court has rejected a similar ar-
gument with respect to backpay awards generally, recog-
nizing that delay injures backpay claimants and that the
Board is “not required to place the consequences of its
own delay . . . upon wronged employees to the benefit of
wrongdoing employers.”35 Moreover, as the Federal
courts have observed, during the period before a backpay
award becomes effective, the respondent enjoys “an in-
terest-free loan for as long as [it can] delay paying out
back wages.” Clarke v. Frank, 960 F.2d 1146, 1154 (2d
Cir. 1992).36
We believe that daily compounding, which will lead to
more fully compensatory awards of interest and thus
come closest to achieving the make-whole purpose of the
remedy, is superior to either annual or quarterly com-
pounding. As we pointed out above, daily compounding
conforms to commercial practice, i.e., individuals and
institutions that lend money in the market are paid inter-
est compounded daily. In addition, as we further pointed
out above, daily compounding is used under both the
Internal Revenue Code, which the Board has treated as a
standard, and the Back Pay Act covering Federal em-
ployees. Finally, to the extent that enhanced monetary
remedies also serve to deter the commission of unfair
labor practices and to encourage compliance with Board
orders—factors the Board has considered in the past in
choosing to award interest and in choosing an interest
rate37—daily compounding is also preferable. Annual
compounding would be of very modest additional reme-
dial value over simple interest, and would not comport
with the predominant commercial practice. Similarly, in
choosing daily compounding over quarterly, we choose
the method that will more fully compensate victims of
unfair labor practices.
F.2d 815, 817, 819–820 (7th Cir. 1990) (Title VII); Parson v. Kaiser
Aluminum & Chemical Corp., 727 F.2d 473, 478 fn. 3 (5th Cir. 1984),
cert. denied 467 U.S. 1243 (1984) (Title VII).
35 NLRB v. J. H. Rutter-Rex Mfg. Co., supra, 396 U.S. at 265.
36 Arguably, a respondent could even invest the retained funds and
earn interest on them at the prevailing market rate, i.e., interest com-
pounded daily. Even if the employer chooses to replace an unlawfully
discharged employee, that decision presumably reflects a determination
that the wages paid to the replacement worker represent a better finan-
cial return to the employer than lending the money out at market rates.
Cf. In re Oil Spill by the Amoco Cadiz off the Coast of France on
March 16, 1978, 954 F.2d 1279, 1331 (7th Cir. 1992) (“Tortfeasors
who choose to reinvest their money in their business . . . must believe
that the returns in their enterprise exceed the market rate. Having
earned this higher rate of return for the duration of the litigation, they
are in no position to complain when called on to pay prejudgment inter-
est.”).
37 See, e.g., Florida Steel, supra, 231 NLRB at 651.
In arguing for compound interest, the General Counsel
advocates use of a quarterly period, primarily for admin-
istrative reasons. He correctly observes that the interest
rate used by the Board is updated quarterly38 and that the
Board computes backpay on the basis of separate quar-
terly periods.39 In this remedial context, the Board cer-
tainly has considered ease of administration, among other
factors.40 And, given his role in administering the back-
pay remedy in practice, we take the General Counsel’s
view seriously. But we remain unpersuaded. First, prior
occupants of the General Counsel’s office have sought
daily compounding,41 which suggests that any adminis-
trative difficulties associated with daily compounding
may be relatively minor. Second, in an era of sophisti-
cated computer software for financial calculations, we
believe that daily compounding can easily be integrated
into the computation of backpay. We see no necessary
connections between the compounding period, the inter-
est-rate adjustment period, and the backpay period.42
Each period serves its own purpose. Finally, even if dai-
ly compounding did impose a not insignificant adminis-
trative burden on the Board and the General Counsel, it
would be outweighed by the policy benefits we have
examined here.
C.
For all of these reasons, we adopt a new policy under
which interest on backpay will be compounded on a dai-
ly basis. Consistent with the Board’s long-established
practice—followed in Isis Plumbing, Florida Steel, and
New Horizons, among many other decisions—we will
apply this policy retroactively in this case and in all
pending cases in whatever stage, given the absence of
any “manifest injustice” in doing so.43
In determining whether retroactivity would be unjust,
we consider “the reliance of the parties on preexisting
law, the effect of retroactivity on the purposes of the Act,
and any particular injustice arising from retroactive ap-
plication.”44 There is no basis here for departing from
38 New Horizons for the Retarded, supra.
39 F. W. Woolworth, supra.
40 See, e.g., New Horizons for the Retarded, supra, 283 NLRB at
1171 (discussing use of IRS interest rate).
41 See General Counsel Memorandum 00-05, Compounding of Inter-
est on Backpay and Other Monetary Awards, 2000 WL 22958147 (July
20, 2000).
42 Cf. New Horizons for the Retarded, supra, 283 NLRB at 1174 fn.
12 (holding that Board will apply quarterly method for computing
interest even in cases where backpay is not determined quarterly, be-
cause “the determination of the rate of interest to be applied in any
given backpay period is not affected by the methods used to compute
backpay”).
43 E.g., SNE Enterprises, 344 NLRB 673, 673 (2005) (collecting
cases).
44 Id.

DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 10
the Board’s usual practice. We are deciding a remedial
issue, not adopting a new standard concerning whether
certain conduct is unlawful. No respondent, then, can
fairly be said to have relied on the Board’s prior rule of
awarding only simple interest on backpay awards in de-
ciding to take the unlawful action on which their liability
is based. Nor were the respondents entitled to rely on
preexisting law in deciding to contest the case: the Gen-
eral Counsel’s complaints put the respondents on notice
that compound interest was sought as a remedy. We see
no “particular injustice” to the respondents from retroac-
tivity either; this is not a case, for example, where a party
has belatedly invoked a new Board rule in order to raise
a new issue in the proceedings. Finally, retroactive ap-
plication of our new approach significantly promotes the
purposes of the Act, by improving a basic statutory rem-
edy.
For all these reasons, we shall order that any backpay
owed to Frances Lynn Combs shall be paid with interest
compounded on a daily basis.
ORDER
The National Labor Relations Board reaffirms its Or-
der set forth in 355 NLRB 643 (2010), except that any
backpay owed to Frances Lynn Combs shall be paid with
interest compounded on a daily basis.