NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
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Grievance of Darwin Merrill Supreme Court
On Appeal from
Labor Relations Board
February Term, 1991
Charles H. McHugh, Chairman
Norman R. Blais of Blais, Cain, Keller & Fowler, Inc., Burlington, for
Jeffrey L. Amestoy, Attorney General, and Michael Seibert, Assistant
Attorney General, Montpelier, for defendant-appellant
Michael R. Zimmerman, Montpelier, for amicus curiae VSEA
PRESENT: Allen, C.J., Gibson, Dooley and Johnson, JJ.
JOHNSON, J. The State of Vermont appeals from an order of the Vermont
Labor Relations Board awarding grievant back pay, following the Board's 1985
decision reinstating him to his position as chief of the CRASH program and
this Court's affirmance of that decision in In re Merrill, 151 Vt. 270, 559 A.2d 651 (1989). We affirm in part and reverse in part and remand the
matter for further consideration in light of this opinion.
Grievant was fired from his job on October 5, 1984, and on October 3,
1985, the Board ruled that he had been unjustly fired and reinstated him to
his former position. The State appealed that decision to this Court and
successfully opposed grievant's superior court motion for reinstatement
While awaiting the outcome of his appeal, grievant first worked for
more than two years as a truck driver. In 1987 he and a partner began a
business selling breathalizer devices. Grievant loaned the venture $21,000.
The partnership agreement provided that grievant's partner would receive a
salary of $12,000 per year, and that grievant would receive no salary.
Grievant began by working nights and weekends for the business, while his
partner worked full-time. Grievant devoted full-time to the partnership,
however, from May 1988 to April 1989, when this Court affirmed the Board's
decision upholding his grievance and he resumed his position. The
partnership grossed $75,000 during 1988, and, after deduction of the $12,000
salary for grievant's partner, showed a net loss of $3,820 for that year.
During the life of the partnership, there were no funds to repay the loan or
to pay grievant any salary.
Upon reinstatement, grievant sold his interest in the business to his
partner. The sale agreement provided that grievant would recover his
initial investment of $21,000 and receive another $14,000, which the Board
found was "in recognition of the value of the partnership." A note, secured
by a second mortgage on the partner's house, called for interest payments
only for the first twelve months, and payments of principal and interest
thereafter. Grievant received no other return from his investment in the
The Board conducted a hearing on back pay on July 20, 1989, and issued
a preliminary order on October 5, 1989, which rejected the State's argument
that the $14,000 excess return over grievant's loan to the partnership
should be considered earnings in computing the mitigation of damages. A
final order was issued on November 2, 1989, after the parties stipulated to
an interest calculation based on net pay during the period, rather than
gross pay, which would have favored grievant.
The State appealed to this Court, but later moved for a partial remand
to correct the amount arrived at by stipulation, after it discovered a
mathematical error that dramatically increased the total interest on the
accumulated back pay. Grievant opposed the remand, but this Court ordered
the Board to consider the claim of mistake, and the Board conducted a
hearing on March 22, 1990. On May 31, 1990, the Board permitted correction
of the error, but also amended the prior order to allow computation of
interest on the basis of gross, rather than net, pay, in accordance with an
argument raised by grievant at the hearing on the State's motion.
Adding to its original appeal, which had been retained by this Court,
the State took exception to that part of the Board's order on remand recom-
puting interest on the basis of gross pay. The State argued that the Board
went beyond the terms of the limited remand in considering the question.
The State argues on appeal that the Board should have restricted its
reopened proceedings to the issue raised by the State, namely the mathe-
matical error. We do not agree. It is true that this Court granted the
State's "motion for an order remanding the instant matter to the Vermont
Labor Relations Board in order to rule on [the State's] motion to reopen."
(Emphasis added.) Upon remand, the Board decided to reopen its November 2,
1989 order and to correct "the obvious error made by the State in
calculating interest due on back pay." It was careful to point out that in
reopening the order, it was exercising its discretion, based on V.R.C.P.
60(b)(6), (FN1) which allows for relief from a final order for "any other reason
justifying relief from the operation of a judgment." The central theme of
this provision is the prevention of hardship or injustice. Greenmoss
Builders, Inc. v. Dun & Bradstreet, Inc., 149 Vt. 365, 368, 543 A.2d 1320,
1322 (1988). A grant of relief from judgment under Rule 60(b) "is not
subject to appellate review unless it clearly and affirmatively appears from
the record that such discretion was withheld or otherwise abused." R. Brown
& Sons, Inc. v. International Harvester Corp., 142 Vt. 140, 143, 453 A.2d 83, 85 (1982).
In the present case, the Board's November 2, 1989 order was based on a
stipulation that included a concession by grievant to calculation of
interest on the basis of net pay. But that concession was made in the
context of an aggregate amount of back pay that was satisfactory to
grievant, albeit based on a mistaken calculation. The State is asking the
Board and this Court to alter a mutual agreement in the State's favor
without allowing grievant to withdraw a concession that was based on that
agreement. To the extent the stipulation constituted a waiver of the claim
to interest on gross back pay, the waiver was conditional and was discharged
by the State's own motion to reopen. In light of the Board's duty under
Rule 60(b)(6) to prevent injustice in reopening, it did not err in
considering issues of equity raised by both parties.
On the merits, this Court will not disturb the Board's findings unless
they are clearly erroneous. In re Muzzy, 141 Vt. 463, 470, 449 A.2d 970,
973 (1982). The practice of awarding interest on back pay awards under the
National Labor Relations Act (FELA) dates back to at least 1962. See Isis
Plumbing & Heating Co., 138 N.L.R.B. 716 passim (1962), enforcement denied
on other grounds, 322 F.2d 913 (9th Cir. 1963). It has been the practice of
the National Labor Relations Board (hereinafter NLRB) to consider the entire
amount of back pay as the basis for interest awards. See, e.g., Florida
Steel Corp., 231 N.L.R.B. 651, 652 (1977)("interest to accrue . . . on the
total amount then due and owing"). We are aware of only one case under the
FELA that has considered the question of whether interest on back pay should
apply to net or gross pay, Inta-Roto, Inc., 267 N.L.R.B. 1026 (1983). The
NLRB in that case upheld the decision of the administrative law judge,
rejecting the employer's plea that interest be applied to the net back pay,
after deduction of amounts withheld. While the employer in the present case
argues that the reason for the decision in Inta-Roto was the absence of
pertinent data on the deductions, that decision rested on the more
conclusive rationale that the longstanding "established practice" of the
NLRB made sense in light of the uncertainty of the taxation of a large lump
sum award to the cash-basis grievant in that case. Id. at 1029.
Even more fundamental to the matter before us, it was within the
Board's discretion to use the gross amount of back pay as a starting point
for determining interest, since that was the amount which the employer
failed either to pay grievant or to withhold on his account. In formulating
remedial orders, the Board has wide discretion as to the method of back pay
calculation, and reversal is only warranted if "the method chosen was so
irrational as to amount to an abuse of discretion." Bagel Bakers Council v.
NLRB, 555 F.2d 304, 305 (2d Cir. 1977)(per curiam); see NLRB v. Brown &
Root, Inc., 311 F.2d 447, 452 (8th Cir. 1963)(Board's method of back pay
calculation will be upheld unless it is arbitrary or unreasonable). As the
court said in Bagel Bakers Council:
A back pay award is only an approximation, necessitated
by the employer's wrongful conduct. In any case, there
may be several equally valid methods of computation,
each yielding a somewhat different result. . . . The
fact that the Board necessarily chose to proceed by one
method rather than another hardly makes out a case of
abuse of discretion.
555 F.2d at 305. The Board is not compelled to consider adjustments which
themselves are clouded by uncertainty and which need not be considered to
yield a result that is fair and equitable under all of the circumstances of
The State next challenges the Board's failure to reduce grievant's
award by the $14,000 he received upon sale of his share of the business to
his former partner. The proper remedy for improper discharge includes an
award of "back pay and other emoluments from the date of the improper dis-
charge less sums of money earned or that without excuse should have been
earned since that date." In re Brooks, 135 Vt. 563, 570, 382 A.2d 204, 209
(1977); see In re Hurlburt, 9 VLRB 229 (1986). "Sums of money earned" is
not limited to wages earned from an employer. If an employee engages in
self-employment after improper discharge, the net profits of the self-
employment may be chargeable against a back pay award. Golden State
Bottling Co. v. NLRB, 414 U.S. 168, 188 (1973); Heinrich Motors, Inc. v.
NLRB, 403 F.2d 145, 148 (2d Cir. 1968). The State contends that the $14,000
constituted net profits of grievant's self-employment.
The Board concluded that the State did not meet "its burden of
demonstrating that the $14,000 was 'money earned' during the life of the
partnership." It gave no reason for its conclusion but stated:
It is particularly compelling to us that Grievant has
yet to receive any cash payment from the partnership
and, based on the evidence before us, we cannot conclude
with reasonable certainty that he will actually receive
the $14,000 from the sale of the partnership. Such a
possibility is speculative.
In disregarding the $14,000, the Board ruled, in effect, that the note
grievant received for his interest in the partnership was worthless. The
record does not support that conclusion. It appears that the note is
collateralized by a second mortgage on the former partner's house, though
the former partner's equity in the property does not appear in the record.
Other than this erroneous statement, the Board gave no reasons for its
conclusion that the $14,000 was not "money earned." Since we will not be
left to speculate about the effect of the Board's erroneous determination on
its decision, we must reverse and remand for further findings regarding the
nature of the $14,000. See Saufroy v. Town of Danville, 148 Vt. 624, 626,
538 A.2d 168, 169 (1987). Grievant's back pay award should be reduced by
any portion of the $14,000 that the Board determines constitutes net profits
to grievant from his self-employment in the partnership. The Board's
decision is otherwise affirmed.
The decision of the Board is affirmed in part and reversed in part and
remanded for further proceedings in accordance with this opinion.
FOR THE COURT:
FN1. V.R.C.P. 60 was adopted by the Board in Section 12.1 of its Rules
of Practice (1987).