The purpose of damages is to put an employee back in same place they would have been if it weren’t for the employer’s actions or inaction. There are several ways a court tries to do this, including back pay, front pay, and punitive damages. To learn more about damages and your rights related to damages, read below:
The damages a court can award depend on the type of claim. Damages include all of the financial and emotional losses a person suffers as the result of an employment dispute. The purpose of a damages award is generally to put the individual back into the same place they would have been had they not lost their job. In most state and federal discrimination cases, the employee is entitled to receive the following types of damages: back pay; front pay; lost benefits such as health, vacation, sick leave, and pension; reinstatement; reasonable accommodations; and compensatory and punitive damages.
Back pay and benefits are among the types of damages most typically awarded in successful employment cases. Back pay includes all of the wages, salary, bonuses, commissions, and benefits lost because of an unlawful dismissal or discrimination, minus any amount the employee was able to earn in the interim. This offset is known as “mitigation,” which is explained in more detail on our site’s page on mitigation.
Back pay includes much more than your salary or wages. It includes interest, overtime, shift differentials, and raises you would have received. The value of employer-provided housing lost because of the discrimination is part of a back pay award. Back pay is calculated from the date of the discrimination or job loss to the date of the court’s decision.
All of the benefits an individual lost because of the discrimination or unlawful action are included in the amount of back pay. For example, you should be paid for unused earned vacation time plus vacation time accrued up to the court’s decision. If your company allots a certain number of sick days per year, you are entitled to the value for the number of unused sick days you have earned. If the company pays for health or life insurance benefits, you should receive the value of the premiums or benefits the company would have paid had you continued to be employed. Your former employer may also be required to pay any unreimbursed medical expenses which would have been covered by the employer’s health plan.
Back pay also includes all forms of pension benefits that you have earned or accrued. Adjustment to pension benefits made during the time period of your case would also be included. Essentially, anything that was part of the compensation and benefits provided by your employer may be part of the back pay award.
Reinstating employees into the jobs they lost is the preferred remedy by courts in discrimination cases, and may be a remedy in other kinds of cases as well. Sometimes, however, courts will not order reinstatement because of the now-hostile relationship between the former employer and employee, or because there is no longer a job available.
What qualifies as a “reasonable accommodation” depends on the employer. A reasonable accommodation is anything that enables a disabled employee to do their job and does not create an undue hardship for the employer. An undue hardship varies depending on the size and structure of the employer and the difficulty of providing the accommodation.”
If a court believes that reinstatement is not appropriate given the circumstances, it generally awards “front pay,” which is the amount of compensation and benefits the court views necessary to make up for the difference in pay that the employee would have earned in the future. The amount of front pay depends on how long the court finds it will take the employee to return to the same level of pay that he had when he was terminated. Front pay includes all lost benefits, just as back pay does.
The purpose behind compensatory money damages is that they are intended to make you “whole.” Compensatory damages are also called actual damages. In employment cases, they refer to the damages that are harder to measure, such as the following:
- Emotional distress
- Pain and suffering (such as grief, fright, anxiety, humiliation, and depression)
- Permanent disability
- Mental impairment
- Medical bills
In employment discrimination cases brought under the federal anti-discrimination law, Title VII, the compensatory and punitive damages (but not back pay) that a jury could award to plaintiffs for discrimination are capped. If the employer has
- 15-100 employees, the cap is $50,000
- 101-200 employees, the cap is $100,000
- 201-500 employees, the cap is $200,000
- 500 employees and up, the cap is $300,000
Other types of cases, and cases brought under some state laws may not be subject to these caps, however.
Punitive damages are damages awarded in cases of malicious wrongdoing to punish or deter the wrongdoer or deter others from behaving similarly. In employment cases, punitive damages are designed to punish the employer and make it an example for others, where it can be shown that the employer intentionally discriminated with malice or reckless indifference.
Despite a popular misconception, the employer’s conduct need not be “egregious” to allow an award of punitive damages. It is not the seriousness of an employer’s conduct that governs whether punitive damages will be awarded, but its intentions: did the employer “discriminate in the face of a perceived risk that its actions will violate federal law.” Put simply: did the employer know that a particular action was discrimination that was against the law, and still decide to do it anyway?
Employers who adopt an anti-discrimination policy, effectively enforce the policy, and thoroughly document the policy’s strict enforcement may use the policy as a “good-faith” defense against punitive damage awards, as well as decrease the likelihood that discriminatory conduct will occur in the first place.
Punitive damages are not available against the federal, state or local governments, but only against private employers. Punitive damages are very rarely awarded by courts. Many employers choose to settle cases in which their exposure to punitive damages is significant, to avoid the potentially large financial liability as well as the negative publicity resulting from a public award of punitive damages imposed by a jury.
However, when punitive damages are awarded, the amount can be significant. As discussed in the previous question, the combination of punitive and compensatory damages is capped in federal discrimination cases under Title VII according to the employer’s size. These caps may not apply, however, to cases brought under laws other than Title VII, including other federal and state laws.
Liquidated damages are a type of punitive damages, where the penalty amount for a proven violation of a law or a contract provision is designated in advance.
Under the law, a penalty amount such as “double damages” or “treble damages” is a common liquidated damages penalty. For example, while the Age Discrimination in Employment Act (ADEA) and the Fair Labor Standards Act (FLSA) do not provide for punitive damages, liquidated damages of up to twice the amount of back pay may be awarded in the event of a “willful” violation, if the employee proves that employer knowingly violated the ADEA or acted in “reckless disregard” of its provisions, or willfully violated the FLSA. (For more information, see our site’s pages on age discrimination and pay and hours.)
Liquidated damages provisions are also common in contracts. For example, if you settle your lawsuit against your employer with a confidentiality provision, which requires you to keep the amount and certain facts about the resolution of your case a secret, the settlement agreement may have a liquidated damages clause which requires you to pay the employer a pre-designated amount for violating the agreement.
Although a liquidated damages provision eliminates the need to prove damages of a particular amount, if the liquidated damages amount is unreasonable and excessive when compared to the damage for which it was designed to compensate, it may be declared void.
Yes. In employment cases, you must make a good faith effort to reduce the money that you have lost in wages because your former employer caused you to lose your job. As a discharged worker, you have two obligations:
- to make reasonable efforts to find employment and
- to accept employment of a “like nature,” if offered.
If the other side can convince the judge or jury that you did not do what was reasonable, you could win your case, but still be awarded only one dollar (called “nominal damages”). However, if you did reasonably look for other work, you will not be denied damages for lost wages just because your efforts were unsuccessful and even if your efforts could have been “more exhaustive.” For more information, see our site’s page on mitigation.
Multi-million dollar awards are rare in discrimination cases. They can happen in class actions where the claims of many employees are combined or in cases involving highly paid executives. For more information, see our site’s page on valuing your case.
In most cases, employees who have lost their jobs due to discrimination are entitled to their lost wages and benefits. Employees can also seek punitive and compensatory damages in cases alleging discrimination based on race, sex, religion, national origin, color, creed, or disability under Title VII. The employee must prove that the employer engaged in a discriminatory practice with “malice or with reckless disregard” for the employee’s rights. Intentional actions by an employer causing the embarrassment, mental distress or humiliation of a person because of race or sex will support an award of punitive damages. An employer’s failure to take action to protect employees from racial or ethnic slurs of fellow employees can also entitle the employee to punitive damages. As referenced above, there are dollar limits on the amount of punitive and compensatory damages that can be awarded in cases alleging discrimination based on race, sex, religion, national origin, color, creed, or disability under Title VII.
In cases under the federal Age Discrimination in Employment Act (ADEA) and the Equal Pay Act, individuals who win their cases and can prove that the discrimination was “willful” can get liquidated damages, which is double the back pay award. Employees alleging retaliation under the ADEA can also get compensatory damages.
Yes. Under the federal discrimination laws and most state laws, the employer must pay your attorneys’ reasonable fees if you prevail in your case. However, if you lose, a court would not order you to pay the employer’s attorneys’ fees and expenses unless your claim was frivolous and wholly without merit. The employer could recover its court costs, including the expenses for depositions, which can total thousands of dollars. For more information, see our site’s page on attorneys’ fees.
Yes, courts typically award prejudgment interest as an essential part of the back pay award. Prejudgment interest serves to compensate for the loss of the use of money you would have had absent the discrimination or loss of your job. The courts have substantial discretion in the calculation of prejudgment interest, including the interest rates to apply and the manner of compounding the interest.
The entire damages award is subject to federal taxes to be paid by the individual, except for the portions allocated to prejudgment interest and attorneys’ fees. (The attorney pays taxes on his or her fees.) However, back pay under some state laws is not taxable.