PERB Says Interest On Backpay Compounds On A Daily Basis Rather Than Annually

CATEGORY: Client Update for Public Agencies, Fire Watch, Public Education Matters
CLIENT TYPE: Public Education, Public Employers, Public Safety
DATE: Apr 05, 2024

The El Centro Regional Medical Center (ECRMC) challenged the proposed decision of an administrative law judge (ALJ).  The ALJ concluded that the hospital violated the Meyers-Milias-Brown Act (MMBA) when it failed to pay its Laboratory Unit employees an annual raise.  The ALJ determined that the hospital’s decision to not pay the wage increase was a unilateral change that also constituted discrimination and interference.

The ALJ’s proposed decision included a backpay award for all current and former Laboratory Unit employees who began employment before January 1, 2021, for an amount equal to two percent of any wages earned between July 4, 2021 and July 26, 2022, augmented by interest at a rate of seven percent per annum.

The Public Employment Relations Board (PERB) affirmed the ALJ’s determinations and proposed remedy, but modified the remedy.  PERB found that interest on the backpay compounds on a daily basis (rather than annually).  PERB further stated that daily compounding of interest applied retroactively to this case and in all pending cases in whatever stage, given the absence of manifest injustice in doing so.

PERB cited several policy reasons for moving away from the seven percent simple interest rate in favor of daily compounding interest.  One reason was that remedial delay harms employees, but directing the augmentation of monetary awards by daily compounding interest will reduce the harm by more accurately compensating employees for that delay.  In addition, PERB said that awarding daily compounding interest would cause employers to comply with their legal obligations more carefully.

El Centro Regional Medical Center (2/21/2024) PERB Dec. No. 2890.

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