Earlier this year, we wrote a blog discussing the case of King Soopers, Inc., NLRB, No. 27-CA-129598 (2/19/16) where the NLRB was considering overturning longstanding precedent on how damages for a wrongfully discharged employee should be calculated. Last week, the Board issued its decision and did overturn the method used to calculate damages for the last 80 years.
Prior to King Soopers, the NLRB used the same calculation methods that most other federal agencies, like the EEOC and the DOL, utilize. Under that method of calculation, interim earnings are deducted from the gross backpay amount due to the wrongfully discharged employee; and, where a discharged employee incurred expenses in obtaining interim employment, those expenses would be deducted from the employee’s interim earnings. This means, of course, that discharged employees who did not obtain any interim employment (even if they incurred expenses in searching for interim employment) were not compensated for their search for work expenses. However, for example, where an employee claims $5,000 in lost wages due to a wrongful discharge, but was able to secure interim employment by spending $250 on travel expenses for an interview and subsequently earned $1,000 at the new job, the employee would be owed $4,250.00 (calculation: $5,000-($1,000-$250)). If that same employee had not spent any money in obtaining interim employment, he would be owed $4,000 (calculation: $5,000-($1,000-0)). Here’s the twist: if that same employee spent $250 to obtain interim employment, obtained a better paying job than the one he was discharged from and earned $6,000, then he would not be due any damages since the employee had no financial loss.
Now, the NLRB will consider search for work expenses a “different injury” than lost wages. So, gross backpay will still be reduced by the amount of interim wages a wrongfully discharged employee earns, and that amount will be awarded to the employee. In addition, search for work expenses will be awarded. Thus, if an employee spends $250 searching for interim employment, but never finds a new job, he will be awarded gross backpay plus $250. If an employee spends $250 searching for a new job and finds a higher paying job and therefore is owed no backpay – he will still be awarded $250.
As recognized by the dissent, the goal in changing the way damages are calculated is a worthy one: it aims to fairly compensate employees who have been unfairly discharged. However, as further discussed by the dissent, accomplishing the goal is not as simple as changing the calculation method.
First, discharged employees will not be treated “fairly” where they obtain higher paying interim employment – instead they will obtain a windfall. Second, the new method of calculation adds complexity to the litigation phase which will actually delay what may be significant backpay awards while determining (what will often be) comparably trivial search for work expenses. Finally, when search for work expenses are unrelated to interim wages, there is no incentive for search for work expenses to be reasonably related to the potential for interim earnings associated with the search for work expenses. We fall back to the example we posed in April: if a discharged employee flies to Hawaii to interview for a position he has no realistic chance of obtaining – the employer may still be responsible for those “search for work” costs.
Further litigation is sure to follow the NLRB’s decision in King Soopers as “search for work expenses” are more clearly defined, and the NLRB grapples with the inevitable disproportionate and unreasonable search for work expenses that are sure to arise. Also keep in mind, the actual damages owed usually only get litigated in a backpay specification hearing, long after an appeal and decision on liability occurred. In settlements, however, the NLRB will increase the pressure and demand full backpay and “other damages,” and use the threat of litigation to coerce employers into paying greater amounts.
The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.