Beshear to investigate whether coal companies comply with state law to protect wages

Attorney General Andy Beshear’s office will investigate whether coal companies that have secured mining permits in Kentucky over the past five years have posted performance bonds aimed at protecting miners’ wages.

The issue of performance bonds came to the forefront last month when the Herald-Leader reported that Blackjewel LLC., which filed for Chapter 11 bankruptcy July 1, had failed to post the bond with the Kentucky Labor Cabinet.

Blackjewel’s failure to post the bond, which is required by state law, left hundreds of Kentucky miners with bounced paychecks. Many miners and their wives said that left them with bank accounts overdrawn by more than $1,000, and concerns over upcoming bills and mortgage payments.

The law, KRS 337.200, requires coal and construction companies that have been doing business in Kentucky for less than five consecutive years to post the bond to ensure that the companies can cover wages if they shut down their operations.

Blackjewel incorporated in July 2017, so it had been in business about two years when it shut down.

Labor Cabinet Secretary David Dickserson told the Herald-Leader last month that there is no mechanism that allows the Labor Cabinet to figure out when companies required to post the bond open in Kentucky.

Dickerson described the rule as self-policing and said not all companies comply.

“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.

In a news release Tuesday, Beshear said his office will review a list of companies that are required to post the bond and will ensure that the companies comply.

“Given my concerns with the Labor Cabinet’s response, I have asked my office to seek the information necessary to determine if other workers and their families could be left in the same situation,” Beshear said. “Our Kentucky families deserve to be protected. I am going help make sure no other families are at risk.”

Companies are required to post enough money to cover payroll for four weeks.

Following Blackjewel’s bankruptcy, hundreds of miners were left without word of when or if they would return to work at the mines. Most Blackjewel miners are still owed wages for three weeks and one day of work.

The cabinet issued a formal citation dated July 30 to Blackjewel and its former CEO Jeff Hoops, who resigned amid the bankruptcy, for violation of the law.

A copy of the citation, provided to the Herald-Leader by a cabinet spokesperson, lists a penalty of $366,500.

If the company does not respond to the citation within 15 business days, the cabinet will initiate a civil action to collect the penalty, according to the citation.

“The Kentucky Labor Cabinet continues using every tool at our disposal to hold Blackjewel accountable,” said Labor Cabinet spokeswoman Mary Elizabeth Robertson.

Robertson said the cabinet has acted aggressively to issue the maximum fine against Blackjewel for failing to post the bond.

“If the Attorney General wants to ensure this doesn’t happen again, he should join with the cabinet and legislative leadership to amend the law, rather than trying to score political points by attacking the cabinet,” Robertson said.

Blackjewel received court approval last week to sell mines in Harlan and Letcher counties to Kopper Glo Mining, LLC., which has promised $450,000 as part of the deal to pay former Blackjewel employees for their unpaid wages. The company also said it will collect a per-ton fee that will accumulate up to $550,000 over the next two years, which it will also distribute to former Blackjewel employees.

That $1 million total is likely less than half of all wages owed to former Blackjewel miners in Kentucky.

Ned Pillersdorf, a Prestonsburg attorney who has assisted in a class action suit against Blackjewel, said miners do have a priority lien on the purchase price of the mines, which will provide an opportunity for miners to receive further compensation.

Dan Mosley, Harlan County Judge-Executive, said the county has been working with a number of non-profits and other groups to provide out-of-work Blackjewel miners with money to pay their electric bills, buy groceries, and buy shoes for their children before the school year begins.

Mosley urged legislators to reform the performance bond regulation and set up a framework to enforce it. Many companies and legislators likely weren’t aware of the bond requirement until Blackjewel’s bankruptcy last month, he said.

“There needs to be statutory reform on this particular statute to see that this doesn’t happen again,” Mosley said.

Mosley also commended the Labor Cabinet for pursuing penalties against Blackjewel, saying that Dickerson, the Labor Cabinet secretary, “has been on this since day one” and has worked tirelessly to make sure miners are paid the wages they’re owed.

“It doesn’t matter who the governor is or who the secretary of labor is — this could have happened four years ago or 16 years ago or whatever, but it didn’t,” Mosley said. “This is the first time this has happened, and it’s very unfortunate and it certainly needs to be cleaned up.”

Will Wright is a corps member with Report for America, a national service project made possible in Eastern Kentucky with support from the Galloway Family Foundation. Based in Pikeville, Wright joined the Herald-Leader in January 2018 and reports on Eastern Kentucky.