A coal company that wrote cold checks to several hundred Kentucky miners had not posted a bond to cover the cost of paying its workers, as required by state law.
Blackjewel LLC should have posted the bond, but it didn’t, said Kentucky Labor Cabinet Secretary David A. Dickerson.
If Blackjewel had complied with state law, there could have been money in place to cover the miners’ last two paychecks, said Sam Petsonk, a West Virginia attorney representing former Blackjewel miners in an effort to get them paid.
Failing to post the bond was among several ways Blackjewel ignored regulatory obligations, Petsonk said.
“That obligation protects the interests of the workers and the public at large — interests that are harmed by the nonpayment of wages, taxes, and benefits,” Petsonk said.
An attorney for Blackjewel did not respond to an email Wednesday. Efforts to contact former Blackjewel chief Jeff Hoops Sr. were not successful.
About 1,100 miners in Kentucky, Virginia and West Virginia lost their livelihoods when Blackjewel filed for bankruptcy July 1 and abruptly shut down operations. Dozens of those workers formed a blockade across a CSX train tack on Monday to stop a train moving coal from a Blackjewel mine in Harlan County. They allowed locomotive engines with no cargo to pass Wednesday afternoon before re-blocking the track.
“Following productive discussions with local stakeholders, the demonstrators agreed to briefly withdraw allowing a CSX crew to safely retrieve two locomotives from the blocked coal train so that we could continue serving other customers,” CSX said in a statement. “We continue to monitor the situation and are hopeful that a quick resolution can be reached.”
Blackjewel had issued paychecks to its miners on June 28, three days before declaring bankruptcy. It did not have cash on hand to cover its payroll in Appalachia, but requested approval for a loan July 1 that would have covered them, according to a court record.
When that request fell through, banks that had credited Blackjewel checks to miners’ accounts couldn’t get paid. The banks deducted the money from miners’ accounts during the first week of July, leaving them not only out of work but overdrawn by $1,000 or more in many cases because they had paid bills with the money.
State law — KRS 337.200 — says every Kentucky employer that is engaged in construction work or the severance, preparation or transportation of minerals, and has been in business less than five consecutive years, shall furnish a performance bond to the Labor Cabinet “to assure the payment of all wages due from the employer.”
Blackjewel incorporated in July 2017, so it had been in business about two years when it shut down.
The law says the surety for the bond must be enough to cover the company’s gross payroll operating at full capacity for four weeks.
Most of the Blackjewel miners are owed for three weeks and one day of work — two weeks on the June 28 check that bounced, and one week and one day they worked in the next pay period before the company shut down.
The law indicates employees whose wages are secured by a bond would have to get a court order to collect and present that to the Labor Cabinet.
The Blackjewel case exposes a shortcoming, however.
There is no mechanism in the law for the Labor Cabinet to figure out when a new company has opened in the state that is supposed to post a bond, Dickerson said.
The cabinet has many such bonds on file, but not all companies comply, said Dickerson, describing the rule as self-policing.
“There’s a requirement that they do it, but there’s no apparatus whereby we would know that a new company had come in,” Dickerson said.
The Kentucky Secretary of State’s office, where businesses file incorporation notices, is not required to tell the Labor Cabinet about new businesses that meet the criteria for posting a bond, Dickerson said.
The cabinet only learned within the last couple of weeks that Blackjewel hadn’t posted a bond to cover employee wages, after beginning an investigation of complaints about miners’ final checks bouncing, he said.
Dickerson said the case indicates the state may need to set up a system to identify new businesses subject to the bonding requirement.
One possibility would be for the Secretary of State’s office to send the Labor Cabinet a list of new businesses that it could filter to identify companies that must comply with the rule and then send them a notice, Dickerson said.
Dickerson said that given the coal company’s bankruptcy, it’s not certain that there would have been money to cover the employees’ bounced checks even if the company had posted a bond.
“You don’t know whether the bond they would’ve posted would’ve been good given the fact that they’re in bankruptcy,” he said.
If Blackjewel did have a wage bond in place, the bankruptcy judge would have jurisdiction to review any disbursement.
Petsonk said the wages could have been available more promptly with such a bond in place.
“The bond is there to ensure payment of the costs of labor which are necessary for preserving the value of the enterprise both before and during bankruptcy,” Petsonk said.
West Virginia once had a similar requirement on wage bonds but repealed it, Petsonk said.
The Kentucky Labor Cabinet has taken complaints from more than 400 Kentucky miners, allowing the state to act as their agent in trying to get them paid.
Dickerson said the cabinet issued subpoenas to Blackjewel for payroll information as part of that process, and is working with the federal Department of Labor on getting access for the miners’ 401(k) retirement accounts in case they need to take out money.
The cabinet is pursuing every avenue to help the miners get the money they are owed, Dickerson said.
“We’re being very aggressive with this,” he said.