The Trump administration’s move to back Kentucky coal miners who protested unpaid wages by blockading their employer relies on a powerful if rarely used tool criticized as overly punitive to businesses when President Barack Obama wielded it.
The tactic, called “hot goods,” seeks to freeze the movement of goods produced by workers who were shorted on pay. Under prior Republican and Democratic administrations, the Labor Department utilized it against employers in garment, agriculture and manufacturing industries, sometimes to considerable blowback. When it was used against an Oregon berry farm in 2014, the fruit was at risk of rotting and the department’s Wage and Hour Division administrator was hauled before Congress.
But even in a White House dedicated to overturning many of Obama’s policies, a mix of political forces and public outcry in Kentucky have cleared the path for a nonpartisan, positive reception.
“I think that’s a particularly good use of the hot goods provision—when they’re trying to make sure that whatever resources are available to the employer are used to pay people that produced the goods and make them whole,” said Michael Hancock, a former Labor Department official who now represents workers at plaintiff-side firm Cohen Milsten in New York. “DOL is very careful in its use of hot goods; it doesn’t use them unless there’s some good and compelling reason.”
Acting Labor Secretary
The department intervened after the miners worked in shifts to block railroad tracks and prevent a train from leaving the mine when they learned they wouldn’t get their final paychecks.
A former coal baron announced this week that he is donating $1 million, or $2,000 apiece to the 508 miners, but that won’t shield Blackjewel from paying the wages.
Aligning with Trump Campaign
It may help that coal, unlike berries, isn’t perishable. But in the case of Blackjewel, the laid-off employees are part of the Trump 2020 campaign’s core target of blue-collar workers. They also work in an industry that Trump promised to revive.
“The use of hot goods does seem to ebb and flow a bit depending on the politics of the day,” said Paul DeCamp, who ran the wage and hour division under President George W. Bush. “It’s a very heavy hammer to swing because hot goods stops the flow of product in interstate commerce. This can happen regardless of whether the particular company that happens to be holding the goods is at fault in any way.”
“For the department to use hot goods in this instance is not particularly surprising given the alignment of interests that we see in this matter,” said DeCamp, now an attorney representing businesses at Epstein Becker Green in Washington. “There seems to be somewhat broad support for helping the workers in this instance and hot goods is a powerful tool for doing that.”
Trump Wage Chief Halted Hot Goods
The hot goods provision appeared to be falling out of favor in the Trump administration only a few months ago.
Shortly after taking office this year, Cheryl Stanton, the Trump-appointed wage-and-hour chief, revoked her subordinates’ authority to exercise hot goods. In a sweeping email, Stanton declared any previously delegated authority given to her staff was no longer valid unless she personally approved it.
Stanton initially wouldn’t sign off on various enforcement mechanisms, including hot goods, that were part of the Obama administration’s playbook. But she has since started restoring some of those authorities, including the use of hot goods, to her offices across the country.
Senate Majority Leader
“This is an important step for the #Kentucky miners in Harlan. I applaud @USDOL for taking action & calling on a federal judge to stop #coal shipments until Blackjewel pays its workers,” McConnell wrote.
David Weil, the former Obama wage-hour chief who came under fire in the 2014 House hearing for using hot goods, agreed that the department is appropriately invoking the measure but found it noteworthy that Republicans are now endorsing it.
“It is a major irony that not only is the Trump Labor Department embracing the use of hot goods now, but people like Senator McConnell are coming out so strongly in its support, when our very careful use of it in the Obama administration was pilloried by the entire Republican establishment,” said Weil, who is now dean of the Heller School for Social Policy and Management at Brandeis University.
The leverage gained by government from invoking hot goods is so strong that the mere suggestion is usually enough to cause employers to cave, according to several former DOL officials. Typically, to achieve the desired results, the department doesn’t even need to file a motion as it did this week.
The Blackjewel case is complicated by its Chapter 11 filing earlier this summer. That means the final outcome could be determined by a bankruptcy judge who has other priorities besides protecting workers’ wages.
Still, the upper hand the tool instantly provides the government was on display Monday at a hearing in Charleston.
In response to the department’s filing, an attorney for Blackjewel told the judge that the company will hold some of the proceeds from the sale of coal in Harlan County until workers there are paid. The judge will continue to consider the hot goods motion when the bankruptcy proceeding resumes.
Yet to be determined is whether the DOL’s enforcement authority to recover back wages under the Fair Labor Standards Act qualifies for an exemption to federal bankruptcy law. Bankruptcy code includes an automatic stay of judicial proceedings against the company in debt, with certain exceptions. The department argued that blocking the movement of hot goods is exempted from the automatic stay because “it is an exercise of the Secretary’s police power.”
“It’s a strong argument and it’s a reasonable approach for the department to take for its attempt to redress what is an egregious situation,” said Michael Felsen, who recently retired as the Labor Department’s New England regional solicitor. For it to preside in bankruptcy court, makes it “somewhat unusual, but it makes sense under these circumstances.”
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