Wrongful Termination Damages

The damages available to a winning employee in a wrongful termination lawsuit depends on whether the employee is suing for breach of contract, discrimination, or some other legal claim.

Wrongful termination is a catchall term that refers to all the types of legal claims employees can make against employers for firing them for illegal reasons. Most employees in the United States work at will, which means they can quit at any time and they can be fired at any time, for any reason that’s not illegal. At-will employees generally can’t sue just because they were fired, even if they were fired for reasons that seem frivolous or unfair (for example, because the employer wanted to hire a friend for the position or just didn’t like the employee).

However, at-will employees can sue for wrongful termination if they were fired for illegal reasons, such as discrimination or retaliation. (For more on these exceptions to the general at-will rule, see What Is Wrongful Termination?) And, employees who don’t work at will — those who have an employment contract that limits the reasons for which they can be fired — can also sue for breach of contract. (See our section on employment contracts for more information.)

When an employee sues for wrongful termination, the damages available depend on the employee’s legal claims.

If an employee has a contract limiting the employer’s right to end the relationship, the employee can sue for breach of contract if the employer fires the employee in violation of the agreement. For example, if an employee has a two-year contract stating that the employee can be fired only for committing a crime, and the employer fires the employee after only one year for poor performance, the employee has a breach of contract claim.

When an employer loses a breach of contract lawsuit, it can be ordered to pay what the employee was entitled to under the contract. If, for example, an employee is fired after the first year of a two-year contract, the employee is entitled to the remaining year of pay, as well as any benefits the employee would have received during that time. However, an employee who sues for breach of contract has an obligation to minimize (“mitigate,” in legal terms) these damages by looking for other work. The employee can’t simply sit out the year on the sofa, collecting a paycheck. The employee’s ultimate measure of damages will be what the employer owed under the contract less what the employee actually earned (or should have earned) from other work.

Example: Bob has a one-year employment contract, and is paid a monthly salary of $10,000. Bob is fired, in breach of the contract, after nine months. He spends a couple of months looking for a new job, and finally has to accept a position that pays only $6,000 per month. Bob’s damages are $24,000: two months of full pay while he looked for work, and one month of pay for the difference between his old salary and his new salary. If Bob did nothing to find a new job, the judge or jury would have to decide whether he could have found other work. If so, his damages will be reduced by the amount he should have earned by taking another job.

An employee who wins a discrimination lawsuit is entitled to these damages, for most types of discrimination:

• back pay (for the wages the employee has already lost by the time of a lawsuit judgment)
• front pay (for wages lost from the date of the lawsuit judgment until the date the employee is reinstated to his or her former position; if the employee can’t be reinstated, these damages might continue until the employee finds new work)
• the cost of health insurance and other benefits the employee would have received if still employed
• court costs and attorneys’ fees
• injunctive relief (a court order requiring the employer to take or stop taking certain actions, such as an order to reinstate the employee or stop using discriminatory criteria for deciding whom to lay off)
• compensatory damages (for out-of-pocket expenses caused by the discrimination, such as job search costs or medical bills, as well as pain and suffering), and
• punitive damages (to punish the employer for wrongdoing).

Federal law caps these last two categories of damages. Together, they cannot exceed an amount from $50,000 to $300,000, depending on the size of the employer. Some states also cap these damages; others don’t. If an employee sues under a state law that doesn’t impose a cap, these damages are unlimited, which can result in multi-million-dollar awards.

Under federal law, the damages available for age discrimination are different. Compensatory and punitive damages are not available to employees who win age discrimination claims. However, employers may be subject to a penalty (called “liquidated damages”) equal to the back pay award, if the employer knew its conduct was illegal or recklessly disregarded that possibility. Again, state laws may allow for different damages.

Some laws prohibit employers from firing employees for exercising certain rights under the labor laws. For example, the Family and Medical Leave Act (FMLA) doesn’t just give employees the right to take time off work; it also prohibits employers from firing employees who take advantage of this right. Similarly, employees may not be fired for reporting an OSHA violation, making an overtime claim, or filing for workers’ compensation.

In these situations, the employee’s damages for wrongful termination are set out in the statute.

An employee may also have a personal injury (tort) lawsuit against the employer. Contrary to how it might sound, these cases don’t have to involve a physical injury — although they can. An employee who is injured while being physically forced out of the workplace might have a battery claim against the employer, for example.

More often, these claims involve injury to the employee’s reputation or livelihood. For example, a number of states allow employees to sue for wrongful termination in violation of public policy. In this type of lawsuit, the employee argues that he or she was fired for reasons that most people would find morally or ethically wrong. For example, an employee who is fired for exercising a legal right (such as the right to vote), refusing to do something illegal (such as submit false tax returns or lie on government reports) or reporting illegal conduct within the company, may be able to sue for violation of public policy.

Another common employment-related tort claim is defamation. In these cases, the employee claims that the employer intentionally made a false statement about the employee that damaged the employee’s reputation. Often, these claims are based on providing a negative reference while the employee is searching for a new job. (For more information on defamation claims, see Dealing With a Negative Reference.)

In a personal injury case, the employee’s damages include back pay, lost benefits, court costs, and attorney fees. Typically, an employee can also be awarded noneconomic damages (for pain and suffering) and punitive damages (to punish the employer for misconduct).

As you can see, the damages available for wrongful termination depend on the legal theories underlying the case, the statute that was violated, and the laws of the state where the employee worked. To find out whether you have a viable claim for wrongful termination — and what remedies might be available to you — you should talk to an experienced employment lawyer.