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Valuing Employment Damages
Damages in employee
discrimination cases can be difficult to quantify and require the expertise of an experienced financial consultant. Often
referred to as “compensatory” damages and consisting of either back pay, front pay or both, these damages usually are based
on what would be required to return the employee claiming discrimination to the position he or she would have attained if
the discrimination had not occurred. Several factors are involved in making this determination.
Back Pay
The expert
generally calculates back pay from the date of the alleged wrongful termination to the date of the trial. Depending on the
type of discrimination, back pay may also be extended for a certain period before the termination. It may incorporate wages,
salary, fringe benefits, overtime pay, raises, cost-of-living adjustments, bonuses, shift differentials, health insurance,
retirement contributions and stock options.
Front Pay
Victims of discrimination usually also suffer future, or front
pay, damages. If such a victim is not able to obtain his or her rightful position as a result of the alleged discrimination,
and that position paid a higher salary than the position now available to that individual, he or she may be entitled to compensation
based on this discrepancy. Front pay usually consists of lost wages that a victim is reasonably certain to incur in the future,
less any income from other employment.
Determining Damages Is a Complex Process
Each employee damages case has
a unique set of assumptions based on its own particular circumstances, and must be approached individually. If you have any
questions about the valuation process or would like help in determining the amount of damages in specific cases, please give
us a call. We have experience in valuing damages, and may be able to provide advice tailored to your situation.
Calculating
Back Pay
To calculate the back pay amount via the individualized method, the expert may need to:
• Reconstruct the
victim’s employment history
• Determine the appropriate time period
• Identify all wage and fringe benefits
to include in the calculation
• List any amounts that should reduce the award, such as salary from other employment
or interim earnings
• Subtract these amounts from the dollar amount
After the expert determines the damages,
legal counsel may need to evaluate the impact of liability or other legal issues on this amount.
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