• Awards of Front Pay to Employees -- Under Title VII Not Subject to Compensatory Damages Cap Set By Civil Rights Act of 1991
  • May 2, 2003 | Author: Michael A. Manzler
  • Law Firm: Dinsmore & Shohl LLP - Cincinnati Office
  • Expanding the potential liability of employers found to have violated Title VII of the Civil Rights Act of 1964, the United States Supreme Court ruled that front pay awarded to an employee who has proven that he or she was discriminated against on the basis of race, color, national origin, sex or religion, is not limited by the compensatory and punitive damages caps contained in the 1991 amendments to Title VII. See Pollard v. E.I. du Pont de Nemours & Co., Case No. 00-763 (June 4, 2001).

    The flip side of back pay, front pay is money that a court can award to a prevailing plaintiff either:

    1. for lost wages and benefits during the period between judgment and reinstatement -- for example, when an appropriate position for the plaintiff is not immediately available without displacing an incumbent employee - or

    2. as a substitute for reinstatement in situations where the court decides that reinstatement is not feasible (e.g., due to continuing hostility between the plaintiff and the employer or its workers, or because of psychological injuries suffered by the plaintiff as a result of the discrimination).

    In the Pollard case, the plaintiff alleged that she had been subjected to a hostile work environment based on her sex. Following trial, the district court found that Pollard had been sexually harassed by co-workers and that her supervisors were aware of the harassment but failed to remedy it. The harassment had resulted in a medical leave of absence for Pollard and her eventual dismissal for refusing to return to the same hostile work environment.

    The district court awarded Pollard approximately $107,000 in back pay and benefits. Finding that the favored remedy of reinstatement was not appropriate, the court also awarded Pollard front pay, but limited the amount to $300,000 based on the compensatory damages cap contained in the Civil Rights Act of 1991. The Sixth Circuit Court of Appeals, which has jurisdiction over all federal courts in Ohio, Kentucky, Tennessee and Michigan, affirmed the decision based on a prior Sixth Circuit case, Hudson v. Reno, 130 F.3d 1193 (6th Cir. 1997), which had held that front pay was subject to the compensatory damages cap. Several other federal courts of appeals, however, had found that front pay was not "compensatory damages" and thus not subject to this cap. The Supreme Court agreed to hear the case to resolve the split among the lower courts.

    Under Title VII of the Civil Rights Act of 1964 as originally enacted when a court found that an employer had engaged employment discrimination, the court was authorized to order, among other remedies, the reinstatement of the employee either with or without back pay. At that time, back pay was understood to include compensation for lost pay and benefits not only from the time of the adverse employment action up to the date of the court ruling but also for the period, if any, from the date of the court ruling to the date the employee was actually reinstated.

    In 1972, Congress amended Title VII to allow courts to award "any other equitable relief as the court deems appropriate" as part of the "make whole" relief mandated under Title VII. After this amendment, courts began endorsing a broader view of front pay. Instead of limiting front pay to the period before an employee was reinstated, courts increasingly found that reinstatement was not a viable option in some cases and therefore began supplementing back pay with a monetary front pay award equal to the present value of estimated future lost earnings caused by the discrimination.

    In 1991, Congress again expanded the remedies available to plaintiffs under Title VII, this time to include "compensatory" (as well as punitive) damages.

    Compensatory damages were defined as "future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other non-pecuniary losses." The 1991 amendments also provided, however, that the compensatory and punitive damages available under Title VII could not exceed certain specified caps. The caps start at $50,000 (for employers of 100 employees or less) and increase in steps to the maximum amount of $300,000, which applies to employers of more than 500 employees.

    In Hudson, the Sixth Circuit had reasoned that front pay was compensation for "future pecuniary losses" and therefore was subject to the statutory caps set forth in the 1991 amendments. In Pollard, however, the Supreme Court rejected that view, finding that the 1991 amendments were intended to create additional remedies for Title VII plaintiffs, not to limit pre-existing remedies. Since front pay was already available under Title VII prior to 1991, the Supreme Court reasoned Congress must not have intended front pay to be included within the damages caps, which applied only to the new remedies of compensatory and punitive damages.

    Because the Sixth Circuit's decision in Hudson has been overruled by Pollard, employers in Ohio, Kentucky, Tennessee and Michigan can no longer rely on the statutory caps to limit front pay awards. Unfortunately, this ruling exposes employers to the possibility of paying years and years of additional wages to a plaintiff claiming Title VII discrimination. While back pay alone can be considerable, since it is typically several years between the time of an employee's termination and the time that his or her case ultimately goes to trial, front pay can cover a much longer period, potentially even until the employee's normal retirement age. It is thus more important than ever for employers to consult with legal counsel prior to taking any adverse employment action, to be sure that issues are carefully documented, and the company will be able to explain the legitimate, non-discriminatory business reasons for each employment action should it ever be challenged.