A federal appeals court has upheld an award of $250,000 in punitive damages against Pan Am Railways after a lower court found that the railroad illegally retaliated against an employee for reporting a safety hazard and injury at the company’s Waterville rail yard.

The ruling by the 1st U.S. Circuit Court of Appeals in Boston upholds the finding of an administrative law judge after a conductor, Jason Raye, told supervisors about a pile of old railroad ties next to a track in the yard in Waterville in 2011. A couple of weeks later, Raye stepped off his train onto the pile of ties and sprained his ankle.

Raye missed a day of work because of the sprain, and that required Pan Am to report the injury to the Federal Railroad Administration.

The railroad called Raye to a disciplinary hearing because, the company said, Pan Am’s safety rules require workers to carefully assess conditions and make sure their footing will be firm before getting on or off a train. At the hearing, Raye said he stepped cautiously from the train, but lost his balance and sat down on the ground to avoid falling. Still, Pan Am determined that Raye failed to follow its safety rules and gave him a formal reprimand, which was entered into his employment file.

Raye got a lawyer, who filed a complaint with the Occupational Safety and Health Administration, but that complaint said Raye fell hard to the ground after stepping on the ties. He had told supervisors in the company hearing that he sat down after spraining his ankle to avoid a fall.

Pan Am called those two different statements a “major discrepancy” in Raye’s account of the injury and brought another set of disciplinary charges against him, threatening him with firing for providing “false statements” about the injury.

Raye’s lawyer contended that what Pan Am was really doing was retaliating against the employee for filing the OSHA complaint.

Pan Am ultimately took no further action against Raye, but an OSHA panel said that Pan Am was retaliating against Raye with the disciplinary charges, and that led to a hearing before an administrative law judge, who agreed that Raye was being retaliated against. The judge awarded Raye $10,000 for emotional distress and $250,000 in punitive damages, finding that Pan Am used disciplinary hearings to intimidate and discourage Ray and other employees from reporting safety hazards and injuries.

Pan Am appealed the ruling to a Labor Department board and then to the appeals court, which last week sided with the administrative law judge and the board and refused to review the findings.

The appeals court said there was “substantial evidence” to support the administrative law judge’s conclusion that Pan Am “overstated the significance of the discrepancy” in Raye’s accounts of the injury and that Pan Am appeared to have “a corporate culture more focused on retaliation than on safety.” In fact, the judge had found that 99 percent of the injuries to Pan Am employees that required a report to the railway administration led to the company filing disciplinary charges against the worker.

While awarding $250,000 in punitive damages “seems high,” the appeals court said, it also deferred to the administrative judge’s discretion in setting the amount.

Calls to Pan Am’s lawyer and the federal Department of Labor, which defended the findings of the administrative law judge and the department board, were not returned Monday.

Edward D. Murphy can be contacted at 791-6465 or at:

emurphy@pressherald.com