In an employee-friendly unanimous decision issued on October 22, 2010 (Kentucky River Medical Center, 356 NLRB No. 8), the National Labor Relations Board (the “Board”) ruled that interest on backpay and other monetary awards will be compounded on a daily basis. For more than 20 years, the Board had ordered simple interest on backpay awards. The Board announced that the new policy would be applied in all pending cases “in whatever stage, given the absence of any ‘manifest injustice’ in doing so.”
In the Kentucky River decision, the Board explained that the change will better serve the Board’s “primary focus” “on making employees whole” for losses suffered as a result of an unfair labor practice. According to the Board, employees will now be more fully compensated for the loss of use of money that should have been paid to employees in the past. The Board further supported its decision by noting that the new interest calculation is the norm for private lending practices and many monetary obligations under federal law. The Board also stated that the new method of calculating interest would not be an administrative burden on the Board and the Board’s General Counsel. And even if it were a burden, the Board believes that the benefits of the change outweigh any such burden.