Coal Companies Are Not Posting Bond as Required
By Will Wright
September 3, 2019 - Not a single coal company formed in Kentucky within the past five years has posted a bond required by state law to protect miners’ wages if the company suddenly shuts down, according to records obtained by the Lexington Herald-Leader. In addition, officials in Gov. Matt Bevin’s administration urged lawmakers last year to pass a bill that would have eliminated the requirement.
The bill did not get a vote in the House of Representatives, but critics say the Kentucky Labor Cabinet’s support of the measure raises questions about its failure to ensure a bond was posted by Blackjewel LLC, which left hundreds of Kentucky miners with cold checks last month when it declared bankruptcy with no advance notice.
In the weeks after Blackjewel filed for Chapter 11 bankruptcy, the Herald-Leader reported the company appeared to be in violation of a law requiring it to post a performance bond to protect wages. The violation allowed the company to close its mines without paying employees for three weeks of work.
According to records from the Labor Cabinet, acquired by the Herald-Leader through the state’s Open Records Act, Blackjewel likely isn’t the only coal company that was required to post the bond but didn’t.
KRS 337.200 requires “every employer engaged in construction work, or the severance, preparation, or transportation of minerals” that has continuously operated in Kentucky for less than five years to post a performance bond with the Labor Cabinet to cover its payroll for four weeks. If the company suddenly shuts down, the money could be used to pay employees.
Many Kentucky coal companies are exempt from the law because they’ve continuously operated in Kentucky longer than five years, but the Herald-Leader identified a handful that appear to meet the requirements for posting a bond.
On Thursday afternoon, Kentucky Attorney General Andy Beshear released a report identifying 30 companies that may be in violation of the law. Altogether, the 30 companies employ 932 people.
When the newspaper asked the Labor Cabinet for a list of companies in violation, it responded that it does not keep that list “because the cabinet is not required to maintain such a list.”
In all, 83 companies have posted the bond within the past five years. Many are construction companies. Others include small contractors, painters and electricians. None hold a permit to mine coal.
One company that began mining in Kentucky less than five years ago but hasn’t posted the bond is JRL Coal Inc., which operates mines in Harlan County, where the Blackjewel bankruptcy has had a devastating economic impact.
According to JRL’s website, the company began operating in 2016 and runs underground and surface mines on leases covering 15,000 acres. It has dozens of employees, and made news earlier this month when it laid off 50 workers.
Multiple calls to JRL’s corporate office by the Herald-Leader went unanswered. A general manager at its mines in Coalgood declined to comment.
“They should have to pay it, cause you’ve seen what it’s done to us,” said Darrell Raleigh, a former Blackjewel miner whose check bounced following the company’s bankruptcy.
Raleigh was one of a handful of Blackjewel miners and their wives who sat in a makeshift camp on a set of railroad tracks near the historic coal town of Cumberland Wednesday afternoon, where they’ve been blocking a train loaded with coal from one of the mines for weeks.
Raleigh, 64, who worked as an electrician in the mines, said he’s looking for other coal jobs in the region — “I’m too old to learn another trade,” he said — and has been scraping by on unemployment benefits and donations to buy groceries and pay utility bills. Unemployment benefits don’t cover even half of his total expenses, he said.
Raleigh said he wants other miners to have the protection he didn’t get.
“It may not help us right now, but it may help others down the road,” he said.
Just one company that has posted the bond within the past five years, Burlington Civil Inc., markets itself as a company that deals directly with the coal industry. According to its website, the company offers construction services for surface and underground mines. It does not hold any mining permits.
Beshear’s report identifies JRL as one of the companies that may be out of compliance. Others include McCoy Elkhorn Coal LLC; The Western Coal Company LLC; and Ember Energy LLC.
Some of the companies identified in Beshear’s report may have begun operating more than five years ago, but then reorganized within the past five years, Beshear said during a news conference.
“That does say that what we need to do is to delve a little deeper into each and every situation,” Beshear said. “There may be a company there that can provide an explanation for why they believe they are exempt, but the Labor Cabinet’s not doing that, and our goal is to identify the scope of the problem and ultimately make sure this Labor Cabinet gets to work.”
'Figure It Out'
Following an inquiry from the Herald-Leader in late July, the Labor Cabinet issued a notice of violation to Blackjewel and its former CEO Jeff Hoops for violating the bond law. The violation could carry a penalty of $366,500 if Blackjewel fails to post the bond.
Last month, Kentucky Labor Secretary David A. Dickerson said there is no system in place to notify his cabinet when a new business that would be subject to the bond incorporates in Kentucky. He said the Black-jewel case shows the state may need to set up such a system.
In a statement given to the Herald-Leader Thursday, Labor Cabinet spokeswoman Mary Robertson said the cabinet “is eager to work with the General Assembly to make changes to KRS 337.200 that allow the cabinet to track and enforce performance bond requirements.”
“Since this law went into effect 33 years ago, it has only allowed the cabinet to issue citations and seek civil penalties against employers who fail to pay the bond, which the cabinet aggressively pursued against Blackjewel,” Robertson said.
Bill Finn, State Director of the Kentucky State Building and Construction Trades Council, said the cabinet’s effort to repeal the law last year was part of Bevin’s Red Tape Reduction Initiative — an effort by the Republican governor to roll back regulations in hopes of fueling economic development in the state.
Finn, who testified against the bill that would have repealed the law last year, acknowledged that the bond would put an additional financial strain on new businesses. Still, he argued the government has a responsibility to protect workers because new mining and construction companies are so volatile in their first five years of business.
“With all the rollbacks that have been done for workers in Kentucky, this is the one item that’s probably out there to protect them,” Finn said. “It’s an important one to keep.”
Finn is critical of the Labor Cabinet for not enforcing the bond, and said its effort to repeal the law last year raises questions about its commitment to enforcing it going forward.
“I’d be curious to to know why somebody thought this was so important to go out and repeal this law, and now to come back and claim that ‘Well, it’s really hard to enforce,’ ” Finn said. “I’m kind of like: ‘Figure it out.’ ”
If the Labor Cabinet can find time to launch an investigation of teachers who called in sick to protest a Republican-backed pension overhaul bill, the cabinet should make time to protect workers in the coal and construction industries, Finn said.
“When the Labor Cabinet’s spending all of this time — resources, effort and man hours — to go out and chase down these 1,074 teachers and check their time cards and sick days, take that same amount of effort into enforcing this performance bond and those people wouldn’t be standing on those railroad tracks with a whole lot of families hurting right now,” Finn said.
Coal Industry Cites Financial Burden
Tyler White, President of the Kentucky Coal Association, said legislators and the Labor Cabinet should consider the serious financial impact that enforcement of the bond could have on businesses that may already be operating on tight budgets.
White said the best way to grow business within Eastern Kentucky is to limit regulations, not require new bonds under a law the government has previously declined to enforce. Despite Blackjewel’s negative impact on families, he said a knee-jerk reaction to one bad actor could harm other coal companies that treat their workers fairly, even without a bond.
White criticized Black-jewel for its mistreatment of employees, and called the mass bouncing of paychecks an oddity.
Many coal companies that file for Chapter 11, including Cambrian Coal and Blackhawk Mining, which both filed for Chapter 11 this year and operate within Eastern Kentucky, continue to employ and pay their workers during bankruptcy proceedings.
“It’s very unfortunate that an actor within this industry acted in the way that they did, which negatively impacted people and their lives,” White said. “With that being said, we see Chapter 11 happen all the time where this is not an issue, and it hasn’t been an issue.”
Neither Blackjewel nor JRL Coal are members of the Kentucky Coal Association.
Steve Earle, president of the District 12 United Mine Workers of America chapter, which represents miners in the Midwest, said “Governor Bevin and his administration made things worse by failing to enforce this vital protection for workers” during a time when coal miners already face unprecedented challenges.
“It’s clear they’re not on the side of our members and their families,” Earle said.
'Enforce the Law'
Beshear, the Democratic nominee for governor against Bevin, said the cabinet’s attempt to repeal the law shows it was aware that it had a duty to enforce it. Instead, cabinet officials ignored their obligation, he said.
“The Labor Cabinet has a duty to enforce the law, and it is not an excuse to say the law doesn’t tell us how to do it,” Beshear said. “They must begin enforcing these performance bonds to ensure that no one ever goes through what the Blackjewel miners are going through right now.”
Robertson, the cabinet spokeswoman, said it’s curious that Beshear “is just now weighing in with his after-the-fact advice.”
“Andy Beshear’s ‘Monday morning quarterbacking’ is typical of him,” Robertson said. “He casts stones for political purposes, while the Labor Cabinet is on the front lines ensuring that the Blackjewel miners get paid.”
Multiple state lawmakers have also called on the cabinet to begin enforcing the law, including Rep. Angie Hat-ton, D-Whitesburg, and Sen. Johnny Ray Turner, D-Prestonsburg, who plan to file bills in their respective chambers that would make enforcement easier.
Turner said he expects the bill to have bipartisan support when lawmakers convene in January. Rep. Chris Fugate, R-Chavies, and Bevin have both already expressed their support.
Both Turner and Hat-ton called on the Labor Cabinet to immediately enforce the law.
“I’m just wondering if (the Labor Cabinet) is being willfully blind, or if they’re fully aware that there’s another company operating under the same circumstances, and they’ve failed to require the bond,” Hatton said. “I remember the governor called upon them to investigate early on.”
“I wonder if that’s something he’s seeing through,” Hatton said.
A spokesperson for Bevin did not immediately respond to a request for comment.
Hatton, whose family operated a coal company, said she’s sympathetic to the financial burden the bond could place on new businesses, but said the impact that Blackjewel’s bankruptcy had on parts of Eastern Kentucky proves the law is needed.
“If the Labor Cabinet’s aware that there’s at least one other company that’s operating without the performance bond, that’s pretty hard to understand,” she said.