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Wednesday, December 05, 2012

How Much Is My Employment Discrimination Case Worth?

As an employment lawyer, I regularly am consulted by people who believe they have been discriminated against at work.  After describing the facts to me, they always ask, first, "do I have a case?" and, second, "how much is my case worth?"  In this blog entry, I am going to discuss the second question.  In short, how do employment lawyers assess the "value" of a potential discrimination case?

The answer to this question begins with the statutory framework that applies to a person's case.

There are many statutes, federal, state, and local, that prohibit various forms of workplace discrimination.  The most frequently litigated anti-discrimination laws in New York courts are Title VII of the Civil Rights Act of 1964 (Title VII) (which prohibits discrimination based on race, color, religion, sex, and national origin), the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), 42 U.S.C. § 1981 (which prohibits discrimination based on race), the New York State Human Rights Law (NYSHRL) (which prohibits a wide variety of discrimination), and the New York City Human Rights Law (NYCHRL) (which also prohibits a wide variety of discrimination).  Importantly, these different statutes provide different remedies.  That is, they entitle an employee whose rights are violated to different kinds of relief.

For example, an employee who proves his or her rights were violated under Title VII may recover monetary damages, including lost income and benefits, reimbursement for out of pocket expenses, compensatory damages for mental and emotional pain and suffering, and punitive damages (except against a government defendant).  The employee also may be entitled to "equitable" relief, including hiring, promotion, and reinstatement, depending on the circumstances.  A prevailing plaintiff (or his or her attorney) also is entitled to receive reasonable attorney's fees and costs.  The purpose of these remedies is to make the plaintiff "whole" -- that is, to restore the plaintiff to the same position he or she would have been in, assuming the discrimination never had happened.  However, under Title VII compensatory and punitive damages are capped, depending on the size of the employer.  The maximum combined compensatory and punitive damages is $300,000 (for employers with more than 500 employees).  The same scheme applies to the ADA. 

Both Section 1981 and the New York City Human Rights Law provide the same array of relief as Title VII, but there are no caps under these statutes.

Under the ADEA, no compensatory or punitive damages are available.  The ADEA only provides for the recovery of lost income damages, plus an equal amount in "liquidated damages" (intended as a substitute for compensatory damages), as well as attorney's fees and costs. 

The New York State Human Rights Law, like the ADEA, provides more limited remedies, including lost income damages and compensatory damages (without a cap), but no punitive damages or attorney's fees.

In short, evaluating how much a case is worth depends on which statute applies to the person's claim.  A claim covered only by the New York State Human Rights Law, for example, may be "worth" less than a claim covered by the New York City Human Rights Law.  For purposes of this discussion, I will assume that the New York City Human Rights Law -- which provides the broadest relief available to employees -- applies to a hypothetical claim for wrongful termination based on age discrimination.

The first step is to determine (estimate is a better word) a person's lost income damages.  Lost income damages are the most "objective" and "proveable" form of a plaintiff's damages.  Technically, lost income includes back pay and front pay.

"Back pay" refers to the amount of money that a person lost from the time of the adverse employment action (e.g., termination) to the time he or she obtains a court judgment (or to the present moment).  "Front pay" refers to the amount of money that the person will lose in the future, usually for some period of time after he or she obtains a court judgment.  Front pay is awarded when reinstatement is not a viable option.  Front pay can be more complicated and more speculative, and is less likely to be awarded in a lawsuit.  But the basic analysis for both back pay and front pay is the same:  How much was the person earning when fired?  How much would the person have earned in the future if still on the job?  Now subtract from that number the amount of money earned at another job or in the form of government benefits.  The difference is lost income damages.

For example, suppose a person was making $50,000 when fired and is out of work for one year, but earns $15,000 from occasional consulting work.  The estimated lost income damages is $35,000.  Repeat the analysis, as necessary, for as long as the person suffers lost pay as a result of the discriminatory termination.

Note:  If a person has not suffered any lost income as a result of the employer's discrimination -- for example, in cases involving only workplace harassment or where a fired employee quickly finds a better paying job -- then this component of the plaintiff's damages will be zero. 

Next, are there any actual damages, e.g., unpaid bills for needed psychological counseling?  If so, how much?

This brings us to compensatory damages, which are more difficult to estimate.  For "garden variety" cases, where the plaintiff does not suffer from any diagnosed mental health problems, they can range from $10,000 (or less) to $50,000 (or more).  However, amounts greater than $50K rarely are awarded for "garden variety" cases (and courts often will limit such awards to no more than $100,000).  Of course, plaintiffs who experience more severe forms of mental and emotional pain and suffering may be able to recover larger amounts of compensatory damages.  But these cases almost always require supporting testimony by a mental health professional as well as relatives and friends.  As a general rule, when evaluating the "worth" of an employment discrimination case, it is prudent to assume an amount of compensatory damages on the low end of the possible range.

Like compensatory damages, punitive damages are very difficult to estimate.  Punitive damages are awarded to punish a defendant for maliciously mistreating an employee, but are not automatically awarded whenever a plaintiff wins a discrimination case.  Assuming such damages are awarded, they can range anywhere from a token amount, say $100, to many tens of thousands of dollars (or more).  Nevertheless, when evaluating the "worth" of a case, it is prudent to assume zero punitive damages, except in egregious circumstances.

Lastly, attorney's fees and costs, while recoverable, are not really part of the "worth" of the case, but simply reimburse the plaintiff (or his or her attorney) for the expenses of bringing a lawsuit against the employer.  Accordingly, I do not think that attorney's fees and costs should be factored into the "worth" of the case, insofar as this is an estimate of the monetary payment that the plaintiff might receive in the case.  Nevertheless, the availability of attorney's fees provides an incentive for attorneys to handle cases that may be "worth" relatively little money and also provides an inventive for defendants to settle cases before the plaintiff incurs large amounts of attorney's fees that the defendant will have to reimburse if it loses the case. 

In sum, lost income damages are the single most important component in assessing the "value" of a typical employment discrimination case.  Compensatory damages -- conservatively estimated -- are the second most important component.  Actual damages, if any, also should be considered.  In my opinion, punitive damages should not be considered for the typical case.  Neither should attorney's fees and costs (with the caveat mentioend above).  Of course, estimating the "worth" of a case in this manner will result in a lower number than the plaintiff may want to hear.  But I think this is appropriate when balancing the overall costs and benefits of pursuing litigation against an employer.   

Unfortunately, estimating the "worth" of an employment discrimination case is difficult and imprecise.  Unlike personal injury cases, which have a fairly well-defined range of monetary values for different kinds of physical injuries (mainly determined by insurance companies), the recoveries in employment discrimination cases vary quite widely.  This is why I believe that employment lawyers and their clients should take a cautious, conservative approach to estimating the value of their cases. 


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