• NLRB Revises Backpay Formula
  • September 16, 2016
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • The National Labor Relations Board has revised its formula for calculating backpay for workers whose rights under the National Labor Relations Act were violated, finding that its traditional approach failed to make the workers whole.

    Background: Under Board law, workers who are unlawfully discharged have the duty to mitigate their losses by looking for and obtaining other, interim employment. (In other words, the backpay award is the total amount of backpay that the worker would have earned since the illegal discharge, minus the amount of interim earnings received). Regardless of whether their job search is successful, the workers may incur expenses such as transportation, room and board, relocation costs, and training costs for the interim job. Up until this point, those expenses were treated as an offset to the amount of interim earnings, if any, that would be deducted from the gross amount of backpay due.

    The Board’s Decision. In King Soopers, Inc., the Board found that its traditional backpay formula did not fully compensate the worker for the losses incurred as a result of the employer’s unlawful conduct. Therefore, the Board held that search-for-work and interim employment expenses must be reimbursed separately from any backpay award. In addition, the Board stated that separating these expenses from taxable back pay will avoid possible tax complications.

    Lessons Learned. Employers who are found to have illegally terminated a worker should be prepared to see an increase in the damages that they pay. Search-for-work and interim employment expenses can exceed interim earnings, if any, and the amount of these expenses was previously limited by the amount of the interim earnings through the offset. Now the full amount of such expenses will be awarded.