November 12, 2010
NLRB Rules that Interest on Backpay Awards Must be Compounded on a Daily Basis
On October 22, 2010, the National Labor Relations Board (“Board”), in a dramatic shift in Board policy, unanimously ruled that interest on backpay and other monetary awards must now be compounded on a daily basis. (Jackson Hospital Corp. d/b/a Ky. River Med. Ctr., 3 356 N.L.R.B. No. 8, 10/22/10). For nearly the last 50 years, the Board had routinely declined to compound interest for monetary awards. The Board reconsidered its previous position concluding, “that compound interest better effectuates the remedial policies of the [National Labor Relations] Act than does the Board’s traditional practice of ordering only simple interest and that, for the same reasons, interest should be computed on a daily basis rather than annually or quarterly.” The new policy will be applied in all pending cases. The Board did not disturb the traditional methods for computing back pay and the applicable rate of interest. In light of this ruling, employers should expect to see larger payments to prevailing employees.
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