Damage Caps In Employment Law Cases

Litigation
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Bringing an employment civil suit as an employee is a difficult proposition. Not only is there the emotional and financial cost of litigation, but the chances of success at trial is relatively low.

About 10 years ago, the Harvard Law & Policy Review published a paper that found that from 1979 to 2006, plaintiffs won their job employment discrimination cases 15% of the time in federal court. However, federal court plaintiffs in all other civil suits won their cases 51% of the time.

Those numbers are probably a little different now, but the overall disparity is still present. As if things weren’t bad enough for employees, there’s another challenge: limits on recoverable damages in an employment lawsuit.

Types of Damages Available In an Employment Civil Suit

In the vast majority of employment cases brought by an employee against an employer, an employee can potentially recover the following types of damages.

First, there are back wages (sometimes called lost wages). This is money that the employee would have earned had they not been legally wronged. These damages often amount to wages lost from the moment of wrongful conduct (such as a firing) to the point where the employee wins his or her case.

Second, there is front pay. Front pay is different from back wages because it’s intended to replace lost wages after the plaintiff wins his or her case and until they find a new job with comparable work and pay.

Third, there is emotional distress. This refers to the psychological trauma endured by the employee, but it does not include the mental pain from the employment litigation itself. As you might expect, the more disturbing the conduct by the employer the more damages an employee may recover for emotional distress.

Fourth, there are consequential damages. These are damages designed to compensate the employee for financial harm that occurs as a consequence of the employer’s actions. These can include moving costs, damage to credit history and out-of-pocket medical or therapy bills.

Fifth, there are punitive damages. These exist to punish an employer for really bad behavior. Punitive damages are usually only awarded when the employer acts maliciously or recklessly. Some federal anti-discrimination laws may only allow punitive damages in the form of liquidated damages. Liquidated damages double the overall damage award in situations where punitive damages would otherwise be warranted.

Finally, there are non-monetary damages. This includes things like reinstatement to a lost position or the court ordering an employer to grant the promotion improperly denied to the employee.

Federal Employment Discrimination Damage Caps

When bringing an employment discrimination lawsuit against an employer, many employees will rely on Title VII of the Civil Rights Act of 1964 (Title VII). Title VII bans employer discrimination on the basis of:

  • Race
  • National origin
  • Sex (including gender identity, sexual orientation and pregnancy)
  • Color
  • Religion

How much a successful plaintiff can recover depends not just on the discrimination they face, but the size of the employer with respect to the number of its employees.  When it comes to compensatory and punitive damages, a Title VII plaintiff is subject to the following damage caps:

  • 15 to 100 employees: $50,000
  • 101 to 200 employees: $100,000
  • 201 to 500 employees: $200,000
  • 501 and more employees: $300,000

These caps do not apply to front pay, back wages or consequential damages. Other federal antidiscrimination laws that have damage caps include:

These three laws also have the same damage caps as Title VII.

There are also “indirect” damage caps in that not every type of damage is available under each federal law. For example, under the Family and Medical Leave Act (FMLA), emotional distress and punitive damages are unavailable for recovery. However, the employee may be eligible for liquidated damages.

Why These Damage Caps Matter

The simple and obvious answer is that they can reduce any damage award an employee can potentially recover in an employment lawsuit. Two unfortunate examples of this can be found in the following cases.

In Jensen v. West Jordan City, the jury awarded the plaintiff $2.77 million in damages for his Title VII, First Amendment retaliation, malicious prosecution and breach of contract claims. But when asked to allocate this lump sum among the various legal claims, the jury divided the award such that approximately $2.44 million went to his Title VII claim and $34,000 for all his other claims.

Because the defendant had more than 500 employees, the Title VII damage cap was $300,000. This meant that the plaintiff’s $2.77 million award fell to just $344,000.

In Lowe v. Atlas Logistics Group Retail Services, the jury granted about $2.25 million to both plaintiffs for their GINA claims. But due to the damage caps, both plaintiffs received only $300,000 each. This is the somewhat famous, “devious defecator” case that you may have heard about some time ago.

Given such drastic shifts in damages, these limits do more than just reduce what a plaintiff can recover. They can also affect employment law in several ways.

First, they can create legal issues that might not otherwise exist. For instance, does an employer have 195 employees to 205 employees? In many Title VII cases, as long as the employer has at least 15 employees, this question doesn’t matter. But if the plaintiff wins a hefty punitive and compensatory damage award, the answer to this question will be worth $100,000.

Second, they make it harder to find an employment attorney who represents employees. With a key antidiscrimination law placing a limit on what employees can recover, many would-be attorneys for employees instead decide to either defend employers in discrimination lawsuits or choose a different legal field to practice in.

Third, they can drastically reduce the deterrent effect on employers, especially large ones. While having some caps for smaller employers might make sense, what about the much larger ones?

A $50,000 compensatory and punitive damage award limit for a small business with 15 employees might be adequate motivation to follow the law. But $300,000 (plus uncapped damages, which are often lower than capped damages) to a company with thousands of employees and billions of dollars in revenue will hardly mean anything.

Oh, and there’s the fact that the damage caps under Title VII have not been adjusted for inflation since they were enacted in 1991. To put this in perspective, the average cost of a new car in 1991 was $15,473. In May 2019, it was $36,718.

Finally, and most importantly, damage caps may dictate the laws an employee relies on when suing an employer. A single instance of employer misconduct can potentially result in state, local and federal liability. This means bringing suit under antidiscrimination laws from multiple jurisdictions. Often, state and local antidiscrimination employment laws have higher or absent damage caps.

Examples of More Employee-Friendly State and Local Damage Caps

Each state is different in how their antidiscrimination employment law caps work. In Washington, D.C., the D.C. Human Rights Act (DCHRA) places no caps on punitive or compensatory damages. Most jurisdictions aren’t this generous, although they’re still better than federal law.

Virginia has made some very recent changes to its Virginia Human Rights Act (VHRA). Thanks to SB 868, the VHRA now has more teeth, including no caps on compensatory and punitive damages. However, an existing Virginia law that places a $350,000 cap on punitive damages in civil suits may apply to the VHRA.

And in Montgomery County, Maryland, there are no caps on the actual damages an employee sustains. But there is a $500,000 cap on damages for humiliation and embarrassment.

Conclusion

The damage caps in place under federal law can drastically diminish an employee’s ability to obtain compensation for employment violations. But employees fortunate enough to be in jurisdictions with more generous employment laws may have additional avenues of recovery.