DATE:  March 17, 1995
CASE NO. 89-ERA-00012


IN THE MATTER OF

FRANK C. SMITH,

     and

MICHAEL H. FITZPATRICK,

          COMPLAINANTS,

     v.

TENNESSEE VALLEY AUTHORITY,

          RESPONDENT.


BEFORE:   THE SECRETARY OF LABOR


                              ORDER OF REMAND

     This case arises under the employee protection provision of
the Energy Reorganization Act of 1974, as amended (ERA), 42
U.S.C. § 5851 (1988).  On October 1, 1991, the
Administrative Law Judge (ALJ) issued a Recommended Decision and
Order (R.D. and O.) finding that Complainant was unlawfully
discriminated against in retaliation for engaging in activity
protected under the ERA.[1]   He recommended reinstatement,
recovery of back pay with interest, compensatory damages,
attorney fees, costs and expenses.
     The R.D. and O. was forwarded to me for review, and I
granted the parties' request for a stay of the briefing schedule
on the merits, pending issuance of the ALJ's supplemental
decision on damages.  See Sec. Order Granting Stay issued
on January 16, 1992.  Scheduled hearings before the ALJ on
damages were postponed at the joint request of the parties to
allow additional time to pursue settlement negotiations and
discovery.  
[PAGE 2]
The ALJ granted Complainant's request to reopen the record for
additional discovery on the issue of damages.  See
Complainant's Motion dated January 24, 1992; ALJ's Order
Summarizing Telephone Conference dated August 27, 1992.
     On April 20, 1993, Respondent (TVA) filed a Motion for
Summary Judgment before the ALJ, requesting dismissal of the
complaint based on evidence discovered during the damages inquiry
conducted after the October 1991 recommended decision finding a
violation of the ERA.  Respondent argued that Complainant could
not prevail in his ERA complaint in light of the after-acquired
evidence, which would have required Complainant's nonselection
and dismissal had it been known.[2] 
     The ALJ issued a Supplemental Recommended Decision and Order
Granting Motion for Summary Judgment (S.R.D.O.) on April 26,
1994, concluding that the complaint must be dismissed and that
Complainant was not entitled to reinstatement,[3]  backpay or
damages.  He found that: 1) Complainant made material
falsifications and wilful omissions to Respondent concerning his
diagnosis and treatment for emotional and psychological problems,
in violation of TVA policy and Nuclear Regulatory Commission
(NRC) regulations; and 2) Complainant could not have been
selected for the position in question and would have been
dismissed from his position had Respondent been aware of his
emotional and psychological problems, and also because of his
failure to accurately disclose his lengthy medical history of
such problems.  Finally, the ALJ concluded that Complainant could
not show that any genuine issue of material fact existed as to
his allegations of discriminatory discharge and nonselection, and
granted the motion for summary judgment.
     On June 2, 1994 I issued an Order Lifting Stay and
Establishing Briefing Schedule.  Respondent submitted a letter in
response, urging that the ALJ's S.R.D.O. should be adopted as the
final decision in this case, and that the R.D. and O. of 
October 1, 1991 is of no legal force and effect.  Respondent TVA
further reserved the right to file a reply brief should
Complainant submit a brief.  Complainant has not submitted a
brief on appeal.
     Respondent argued that Complainant must be denied recovery
in this case in accordance with a line of decisions of the U.S.
Court of Appeals for the Sixth Circuit.  Those decisions held
that no relief may be awarded in a discrimination complaint where
the complainant engaged in misconduct which would have precluded
his selection for a position, or engaged in misconduct which
would have led to his discharge, even where evidence of such
misconduct is not discovered until later.  See
Dotson v. U.S. Postal Service, 977 F.2d 976,
978 (6th Cir. 1992); Johnson v. Honeywell
Information Systems, Inc., 955 F.2d 409, 415 (6th Cir. 
[PAGE 3]
1988).
     While this matter was pending, the U.S. Supreme Court
decided to review the Sixth Circuit's decision in McKennon
v. Nashville Banner Publishing Co., 9 F.3d 539 (6th
Cir. 1993), cert. granted, 114 S. Ct. 2099 (1994).  The
Sixth Circuit in that case had reiterated its position that
after-acquired evidence is a complete bar to recovery in a
discriminatory discharge claim if the employer can show that it
would have fired the employee on the basis of the after-acquired
evidence.  The Supreme Court reversed the decision of the Sixth
Circuit.  McKennon v. Nashville Banner
Publishing Co., 1995 U.S. LEXIS 699 (Jan. 23,
1995)("McKennon").  In McKennon, a case arising
under the Age Discrimination in Employment Act of 1967,[4]  the
Supreme Court held that after-acquired evidence of the employee's
wrongdoing is not a complete bar to recovery by the employee.
     The Court further held, however, that the after-acquired
evidence must be taken into account in determining the
appropriate remedy.  The Court stated that it "must recognize the
duality between the legitimate interests of the employer and the
important claims of the employee."  1995 U.S. LEXIS 699 at *17. 
Accordingly, the Court concluded, the after-acquired evidence of
the employee's wrongdoing must be taken into account, "lest the
employer's legitimate concerns be ignored."  Id.
     The Court also addressed the types of remedial relief
available in cases involving after-acquired evidence of
wrongdoing.  The Court stated that the "proper boundaries of
remedial relief in the general class of cases, where, after
termination, it is discovered that the employee has engaged in
wrongdoing must be addressed by the judicial system in the
ordinary course of future decisions, for the factual permutations
and the equitable considerations they raise will vary from case
to case."  Id. at *18.  The Court emphasized, however,
that "as a general rule in cases of this type, neither
reinstatement nor front pay is an appropriate remedy." 
Id.
     Turning to the issue of backpay, the Court rejected an
absolute bar against recovery of backpay in cases involving
after-acquired evidence of employee wrongdoing.  As to the
appropriate measure of backpay, the Court stated that the
"beginning point of the trial court's formulation of a remedy
should be calculation of backpay from the date of the unlawful
discharge to the date the new information was discovered." 
Id. at *19-20.  The Court also permitted the trial court
to "consider taking into further account extraordinary equitable
circumstances that affect the legitimate interests of either
party."  Id. at *20.
     On February 21, 1995, the Office of Administrative Appeals
received an "Agreed Order of Remand" (copy appended) submitted 
[PAGE 4]
jointly by the parties in this case.  The proposed order stated
that the Supreme Court's decision in McKennon requires
reconsideration of the S.R.D.O. in this case in light of the
factors identified by the Court in McKennon and "as shown
by the record below."  The proposed order further stated that the
"parties jointly submit that the ALJ heard and received the
evidence in the record and should engage in an initial
reconsideration of the McKennon factors."  Accordingly,
the parties requested that this case be remanded to the ALJ.
     I agree with the parties that the Supreme Court's decision
in McKennon requires reconsideration of the S.R.D.O.
issued by the ALJ.  Accordingly, I remand this matter to the ALJ
for further proceedings in light of the Supreme Court's decision
in McKennon.
     SO ORDERED.




                              ROBERT B. REICH
                              Secretary of Labor

Washington, D.C.




[ENDNOTES]
           
[1]  The ALJ concluded that Respondent took retaliatory adverse
action against Complainant in violation of the ERA, when he was
not selected for the Site Security Manager position, but also
concluded that Complainant failed to establish that his inclusion
in the subsequent reduction in force (RIF) was in retaliation for
protected activity.

[2]  The additional procedural history of this case is reflected
in the Sec. Order to Show Cause issued on February 25, 1994, and
the ALJ's Memorandum of March 28, 1994.

[3]  It is noted that Complainant's medical problems now prevent
reinstatement to his previous employment with TVA.  See
Complainant's Response to Order of October 13, 1992.

[4]  29 U.S.C. § 621 et seq. (1988 ed. and Supp. V).