Employment Law Legal Topics

Fired Employees Can’t Just Sue and Wait for a Payout

ThinkstockPhotos-187980110An employee who’s been laid off or fired and believes that it’s due to unlawful discrimination can’t simply sue and then sit around waiting for a payout from his or her former employer. Rather, the law requires that he or she get out there and look for another job—or risk a hit to any back pay damages.

Under Title VII, a plaintiff’s “[i]nterim earnings or amounts earnable with reasonable diligence … shall operate to reduce the back pay otherwise allowable.” 42 USC §2000e–5(g)(1). This means that a former employee’s post-termination earnings will cut down any back pay award. And that legal reality can’t be avoided by staying unemployed, because both federal and California law also requires a plaintiff to make reasonable efforts to mitigate her or his damages, which is generally done by seeking and accepting comparable employment.

This mitigation requirement begs a couple of questions: (1) What are “reasonable efforts” the employee must make? and (2) What constitutes comparable employment?

The question of what are “reasonable efforts” is basically one of fact: Has the employee been actively seeking and applying for comparable employment? The employer has the burden to show the failure to mitigate by establishing that comparable jobs were available for which the plaintiff was qualified and the plaintiff didn’t make reasonable efforts to get them. Parker v Twentieth Century-Fox Film Corp. (1970) 3 C3d 176, 182.

The law doesn’t require the employee to mitigate damages by taking a job with undue risk, burden, or humiliation. In fact, the employee doesn’t have to accept inferior employment, work of a substantially different kind, or work that requires relocation. Keep in mind that the employee’s duty to mitigate doesn’t require success, only an honest, good faith effort. Smith v Great Am. Restaurants, Inc. (7th Cir 1992) 969 F2d 430, 438.

And once the employee gets another job, he or she has to try to keep it. In deciding the reasonableness of a plaintiff’s efforts to mitigate damages, the court may take into account the efforts to retain comparable employment once it’s secured.

Defining “comparable position” is somewhat clearer: There’s a list of factors to consider in deciding whether a particular position is comparable or substantially similar in CACI 2407. Included among these factors are whether salary, benefits, and hours on the job are similar; whether the new position requires similar skills, background, and experience; similarity of job responsibilities; and job locale.

A comparable position is not one that’s substantially inferior or one for which the employee lacks the required skills. And a position with an identical base salary, but with a lower total compensation rate, isn’t a comparable position, nor is one without equivalent responsibilities.

For a terminated employee, the mitigation requirement can be a double-edged sword: The employee must mitigate damages by finding new and comparable employment, yet his or her damage recovery will be reduced by the wages earned in the new employment. And if the employee doesn’t make reasonable efforts to find comparable employment, that fact may be used to offset what otherwise would be recoverable back wages.

The key point to make clear to all terminated employees who are considering suing their former employers is that sitting around waiting for a payout—even a well-deserved one—isn’t going to fly.

If you handle employment cases on either side, check out CEB’s Employment Damages and Remedies for clear explanations on the availability and limitations for each remedy and item of damages.

Other CEBblog™ posts you may find useful:

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3 replies on “Fired Employees Can’t Just Sue and Wait for a Payout”

My sister recently got fired, and she has been expressing all kinds of complaints about the unfairness of the whole thing. I’m glad that I read this because she is under the impression right now that she can sue her former company and get paid off. I’ll make sure she understands that she needs to actively look for a new job. Thanks for sharing this post.

While mitigation of damages has always been the law in general, it seems at least a little bit unfair to require the wrongfully-terminated employee to undertake the burden of looking for work (which is an onerous task in and of itself) and then when the employee finally succeeds in getting another job, 100% of her earnings inure to the benefit of the employer who wrongfully fired her.

I would suggest that if you’re going to have a law like that, where the employer gets 100% of the benefit of the wrongfully terminated employee’s efforts in securing replacement employment, then at least the employee ought to be reimbursed for her attorney’s fees when she wins her wrongful termination case, so she can at least get the full benefit of whatever limited financial recovery she obtains. Otherwise, it’s kind of a “heads I win, tails you lose” kind of situation, with the system unfairly tilted in favor of the employer.

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