Wrongful Termination

When a court finds that an employee was wrongfully terminated, the employee may be awarded equitable relief and/or several types of damages. The employer may be ordered to reinstate the employee with back pay and benefits.[1] If the court determines that reinstatement is not reasonable, the employee may receive damages for back pay, front pay, and benefits.  Both back and front pay include salaries or wages and bonuses. Benefits include employer paid insurance, retirement plans, accrued leave lost at termination, and stock options. The court may also award punitive damages and non-pecuniary compensatory damages. In Texas, there are limits on total damages for front pay and benefits, non-pecuniary compensatory damages, and punitive damages based on the employer’s number of employees.[2] The court may also award attorney’s fees, expert fees, and court costs.

Calculating Pecuniary Damages

To calculate the pecuniary damages from loss of back pay, front pay, and benefits, RPC   compares two scenarios.

• What would the injured party have earned (including benefits) but for the alleged termination?
• How much is the injured party expected to earn given the wrongful termination?

The pecuniary damages are the difference between these two scenarios, discounted to present value.

When calculating “but-for” earnings, the usual assumption is Plaintiff would have stayed at the same job with an uninterrupted earnings stream. However, factors such as turnover rate at the employer’s place of business and the Plaintiff’s age can justify changing this assumption.

Calculating pecuniary damages involves determining the base pay at time of termination, expected changes in base pay due to expected promotions and raises, determining the value of employer-paid benefits, valuing retirement plans, bonuses, and stock options. Front pay and benefits must be reduced to discounted present value, and back pay damages may need to be adjusted for interest. Finally, attorneys may want tax adjustments of all damages in considering potential settlements. RPC’s economists and accountants can perform these calculations.

Pecuniary damages are offset by any interim earnings and benefits, workers’ compensation benefits, and unemployment compensation benefits received. The wrongfully terminated employee must mitigate damages by seeking sufficiently remunerative replacement employment. RPC’s vocational consultants are best-suited to testify on what employment opportunities exist in the relevant labor market and whether the Plaintiff made a good faith job search effort.

Duration of Pecuniary Damages

Often, pecuniary damages from losing front and back pay and benefits are calculated for a limited duration. If an employee can reasonably be expected to find the same or similar employment with another firm, damages may end after a limited period of unemployment. An RPC economist or vocational consultant can determine this appropriate duration.

Sometimes, the pecuniary damages period may be much longer. The following are examples of situations where pecuniary damages may be calculated for a Plaintiff’s remaining work life:

• A Plaintiff employee may have suffered permanent damage to his or her reputations, limiting his or her ability to find the same or similar job.
• A Plaintiff may have lost retirement benefits or stock options that cannot be replaced at an available, similar job.
• There may be no other potential employers in the geographic area where the Plaintiff lives that have a substantially similar job.

In these cases, damages may extend through the Plaintiff’s work life expectancy and retirement. RPC economists and vocational consultants can determine when pecuniary damages may extend beyond a normal job search period.

RPC understands each wrongful termination case has its unique set of facts. Our vocational evaluators, economists, and accountants can analyze those facts and provide plaintiff and defense counsel expert reports and testimony.

Contact us for a preliminary review of documents and a discussion of the wrongful termination case at no obligation.

[1] Texas Labor Code. §21.258

[2] Texas Labor Code. §21.258, §21.2585, and §21.259