Damages in Wrongful Discharge Cases in Michigan

This post is from the materials produced by myself and Michelle P. Crockett, an attorney with the law firm of Miller Canfield, at the Insititute of Continuing Education's 35th Annual Labor & Employment Law Institute presented on Friday, April 30,2010. Michelle practices employment law from the management side.

I. Introduction

Although the damages available in a wrongful discharge case will vary somewhat depending on the forum (federal v state) and the claims being pursued, some general rules apply. In most every case, the primary source of damages will be the difference between the employees' earnings before and after the event (typically termination). In other words, what was the employee earning before the termination and what she could have reasonably expected to earn if she had not been terminated. From this sum, the amount earned in the employee's new job or what she reasonably could have been expected to earn, if the employee was diligent in looking for comparable work, is subtracted. See, Parker v. West Bloomfield Twp., 60 Mich. App. 583, 600 (1975). See also, Am Jur 2d, Master and Servant, § 70, pp 104-106. The product of this calculation is the “back pay” or lost wages of the employee, if calculated through the date of trial. The lost wages earned after the trial or into the future are considered “front pay.”

Additions to the back pay and front pay may include: the value of fringe benefits lost, the expenses incurred in looking for alternative employment, damages for emotional distress and humiliation, and litigation expenses, including attorney fees and costs. Some statutory claims may allow doubling of compensatory damages, others permit both compensatory and punitive damages. Other statutory claims provide for “reinstatement of the employee, the payment of back wages, full reinstatement of fringe benefits and seniority rights, actual damages, or any combination of these remedies.” See, e.g., Whistleblowers' Protection Act (“WPA”), MCL § 15.364.

II. Available Damages and Set-Offs.

A. Back Pay.

1. Generally.

Back pay includes all forms of compensation and is typically the largest portion of economic damages plaintiffs generally claim to have incurred as a result of an employer's purported breach, tort, or discriminatory conduct. Rasheed v. Chrysler Corp., 445 Mich. 109, 117, 517 N.W.2d 19 (1994) (determining that back pay includes “all monetary awards based on earnings and other fiscal benefits that the plaintiff would have received but for the unlawful employment practice.”). Thus, a back pay award can include salary, sick leave, vacation pay, overtime, pension benefits, and/or any raises that the plaintiff may have received during his/her employment. See, Renny v. Port Huron Hosp, 427 Mich. 415, 439, 398 N.W.2d 327 (1986); Schafke v. Chrysler Corp., 147 Mich. App. 751, 383 N.W.2d 141 (1985); Gutzwiler v. Fenik, 860 F.2d 1317, 1333 (6th Cir. 1988); Grysen v. Dykstra, 591 F. Supp 282, 292-293 (W.D. Mich. 1984). The Michigan Supreme Court has determined that the period of back pay generally runs form the date of discharge to the date of trial. Stearns v. Lake Shore & Michigan Southern Ry. Co., 112 Mich. 651, 71 N.W. 148 (1897). Once a plaintiff satisfies her burden of proving the financial loss she claims to have suffered, she is presumed to be entitled to the amount claimed unless the employer can prove otherwise. EEOC v. Wilson Metal Casket Co, 24 F.3d 836 (6th Cir. 1994).

2. Reductions from Back Pay.

Michigan courts have determined that the amount of back pay a plaintiff is entitled to receive is “the difference between the salary the plaintiffs would have received but for their discriminatory treatment and the money actually earned during the appropriate backpay period.” EEOC v. Harper Grace Hosps., 689 F. Supp 708, 716 (E.D. Mich. 1988); Parker v. West Bloomfield, 60 Mich. App. 583, 231 N.W.2d 424 (1975). In other words, if a plaintiff receives wages from other employment during the backpay period, that amount is deducted from any award of backpay they may receive.

Employers will sometimes try to reduce the amount of a backpay award by arguing that plaintiff's compensation would have been reduced for reasons other than their discharge. For example, arguments have been made that planned transfers or demotions should be taken into consideration when determining back pay awards. See e.g., In re Lewis, 845 F.2d 624 (6th Cir. 1988); Melchi v. Burns Int'l Sec Servs., Inc., 597 F. Supp 575 (E.D. Mich. 1984).

When an at-will plaintiff sues an employer for breach of contract after being discharged, and subsequently receives unemployment compensation, their back pay award must be reduced by the amount of unemployment they received. See, Corl v. Huron Castings, Inc.., 450 Mich. 620, 544 N.W.2d 278 (1996). This is not the case for discrimination cases. Michigan courts generally hold that back pay awards should not be reduced by unemployment compensation benefits. Thurman v. Yellow Freight Systems, 90 F3.d 1160, reh'g, en bac, denied, adhered to, and amended on other grounds, 97 F.3d 833 (6th Cir. 1996); Adama v. Doehler-Jarvis Div of NL Indus, Inc., 144 Mich App 764, 376 N.W.2d 406 (1985).

Worker's compensation benefits must be deducted from a back pay award for all claims filed under the Michigan Persons With Disabilities Act. MCL 37.1606(4). However, in Title VII claims, it has been determined that, like unemployment benefits, worker's compensation benefits may not offset an award of back pay. Knafel v. Pepsi-Cola Bottlers, In.c, 899 F.2d 1473 (6th Cir. 1990).

Social Security and other retirement benefits may also reduce the amount of a back pay award. In Hamlin v. Charter Township of Flint, 165 F.3d 426 (6th Cir. 1999) the Sixth Circuit concluded that pension benefits may constitute collateral source payments and accordingly set forth the following factors to determine whether pension benefits are collateral: 1) whether the employee makes any contribution to funding of the disability payment; 2) whether the benefit plan arises as a result of a collective bargaining agreement; 3) whether the plan and payments under it cover both work-related and non-work related injuries; 4) whether payments from the plan are contingent on the employee's length of service; and 5) whether the plan includes any specific language contemplating a setoff of benefits received under the plan against a judgment received in a tort action.

3. Mitigation Requirements.

Plaintiffs in wrongful discharge cases must make all reasonable efforts to secure other employment following termination. Higgins v. Lawrence, 107 Mich. App. 178, 309 N.W.2d 194 (1981); Morris v. Clawson Tank Co, 459 Mich. 256, 587 N.W.2d 253 (1998). Thus, pursuant to both federal and state law, plaintiffs are precluded from attempting to maximize their back pay award by purposefully remaining unemployed. See, Suggs v ServiceMaster Educ Food Mgmt., 72 F.3d 1228 (6th Cir. 1996); MERC v Kleen-O-Rama, 60 Mich. App. 61, 230 N.W.2d 308 (1975).

The burden of proving a plaintiff's failure to mitigate damages rests with the employer. Katch v. Speidel, Div. of Testron, In.c, 746 F.2d 1136 (6th Cir. 1984); Fothergill v. McKay Press, 374 Mich. 138, 132 N.W.2d 144 (1965). To prevail, an employer must show that other employment was available and that plaintiff failed to take reasonable care and exercise due diligence in securing that employment. Riethmiller v. Blue Cross & Blue Shield, 151 Mich. App. 188, 390 N.W.2d 227 (1986). In Title VII cases an employer must show the following in order to prevail: 1) that substantially equivalent positions were available; and 2) that the plaintiff failed to use reasonable care and diligence in seeking those positions. Wooldridge v. Marlene Indus Corp, 875 F.2d 540 (6th Cir. 1989). Therefore, in order to effectively mitigate damages, a plaintiff must make efforts that are reasonable to minimize economic loss, and if offered employment of a like nature that is subsequently turned down, all claims to further back pay is forfeited. Morris v. Clawson Tank Co., 459 Mich. 256, 587 N.W.2d 253 (1998).

Courts determine if employment is of a “like nature” by evaluating the type of work, hours associated with the position, wages, tenure and working conditions. MERC v. Kleen-O-Rama, 60 Mich. App. at 64. The reasonableness of a plaintiff's efforts to seek or accept employment is a question for the trier of fact. Morris, supra.

When determining whether employment is “substantially equivalent” in Title VII cases, federal courts have followed the standard set forth by the Supreme Court in Ford Motor Co v. EEOC, 458 U.S. 219 (1982): “the substantial equivalent of the position from which the claimant was discriminatorily terminated must afford the claimant virtually identical promotional opportunities, compensation, job responsibilities, working conditions, and status.” See, U.S . v. City of Warren, 138 F.3d 1083 (6th Ci.r 1998); NLRB v. Westin Hotel, 758 F.2d 1126 (6th Cir. 1985). This does not mean however, that a plaintiff must accept employment that she finds demeaning, is an unreasonable distance from her residence, or is a lower position in order to mitigate damages. Morris, supra; Rasheed v. Chrysler Corp, 445 Mich. 109, 517 N.W.2d 19 (1994); Wolff v. Automobile Club, 194 Mich. App. 6, 486 N.W.2d 75 (1992). Nevertheless, it should be noted that federal courts have held that at some point a plaintiff must lower her sights when seeking subsequent employment after an extended period of unemployment. NLRB v. Southern Silk Mills, Inc., 242 F.2d 697 (6th Cir.) cert denied, 355 U.S .821 (1957); NLRB v. Moss Planning Mill C.o, 224 F.2d 702 (4th Cir. 1955).

C. Front Pay.

1. Availability.

Front pay should be awarded only when reinstatement is not appropriate or feasible. See, Suggs v. Service Master Educ. Food Mgt., 72 F.3d 1228 (6th Cir. 1996). If the defendant employer has or asserts that there are no open positions for the plaintiff, then the court should award front pay. See, Roush v. KFC Nat. Mgmt. Co., 10 F3d 392, 398 (6th Cir. 1993) (District Court should have determined whether front pay was appropriate); Faber v. Massillon Bd. Of Educ., 917 F2d 1391, 1397 (6th Cir. 1990) ("Front Pay is a remedy presumed appropriate unless record evidence clearly demonstrates to the contrary").

2. Rejected Offers of Reinstatement.

Front pay is not available to an employee who unreasonably refused an offer of reinstatement. “[I]t is the duty of the trier of fact to weigh the evidence to determine whether a reasonable person would refuse the offer of reinstatement.” McKelvy v. Geren, 2009 US Dist. LEXIS 93567 (D. Mich. 2009). The employer bears “the burden of demonstrating [that the rejection of the employer's reinstatement offer] was so unreasonable as to constitute a failure to mitigate damages.” Rasimas v Mich. Department of Mental Health, 714 F.2d 614, 625 (6th Cir. 1983). The reasonableness of the offer is determined by reviewing the terms of the offer and totality of the circumstances surrounding it. Toledo v. Nobel-Sysco, Inc., 892 F.2d 1481, 1493 (10th Cir. 1989). A plaintiff is justified in rejecting a reinstatement offer that is not made in “good faith.” Stanfield v. Answering Service, Inc., 867 F.2d 1277 (11th Cir. 1992).

2. Length of Payment.

In Shore v. Federal Express Corp., 777 F.2d 1155, 1160 (6th Cir. 1985), the court addressed factors which courts may consider in determining the amount and length of a front pay award: Some of the factors which district courts have applied to alleviate the speculative nature of future damage awards include an employee's duty to mitigate, "the availability of employment opportunities, the period within which one by reason efforts may be re employed, the employee's work and life expectancy, the discount tables to determine the present value of future damages, and other factors that are pertinent on prospective damage awards." Id. at 1160. The 6th Circuit has upheld an award of five years of front pay in an FMLA interference bench trial. See, Killian v. Yorozu Automotive Tennessee, Inc., 454 F.3d 549, 558 (6th Cir. 2006).

In Cooley v. Carmike Cinemas, Inc., 25 F.3d 1325, the jury awarded the plaintiff $116,363 in back pay and $249,741 in front pay. The 6th Circuit Court of Appeals upheld the award. The court noted that Mr. Cooley was 53 years old when he was fired, he had made substantial efforts to find new work after his termination, and "He eventually found work as a service technician in the maintenance department of a school." Id. at 1334. The jury in the Cooley case heard expert testimony regarding the plaintiff's economic damages and the damages were reduced to present value.

D. Liquidated Damages.

Under the Fair Labor Standards Act (“FLSA), the Age Discrimination in Employment Act (“ADEA”) and the Family and Medical Leave Act (“FMLA”), liquidated damages are available. Under these statutes, the plaintiff is entitled to an award of liquidated damages, unless the defendant can prove that it acted in good faith and had objectively reasonable grounds to believe that their actions did not violate the act. See, e.g., 29 USC § 2617(a)(1)(A)(iii). The liquidated damages are equal to the total compensation paid, including interest, but excluding attorney fees. ("[A]n additional amount as liquidated damages equal to the sum of the amount described in clause (i) [the amount of wages, salary, employment benefits, or other compensation] and interest described in (ii)"). Thus, liquidated damages essentially double the award due for damages and prejudgment interest.

There is a "strong presumption under the statute in favor of doubling." Hite v. Vermeer Mfg. Co., 446 F.3d 858, 868 69 (8th Cir. 2006). See also, Arban v. West Pub. Co., 345 F.3d 390, 408 (6th Cir. 2003) (reversing the trial court for failing to award liquidated damages in an interference and retaliation case involving the failure to reinstate following FMLA leave).

E. Emotional Distress Damages.

It is well established under Michigan law that emotional distress damages are not recoverable in breach of employment contract actions, even if the breach is found to be willful or malicious. Franzel v. Kerr Mfg Co., 234 Mich. App. 600, 600 N.W.2d 66 (1999); Stopczynski v. Ford Motor Co., 200 Mich. App. 190, 503 N.W.2d 912 (1993); Mourad v. Automobile Club Ins Ass'n., 186 Mich. App. 715, 465 N.W.2d 395 (1991); Rouse v Pepsi-Cola Metro Bottling Co., 642 F.Supp 34 (E.D. Mich. 1985). However, emotional distress damages are available to plaintiffs who recover under a tort theory of wrongful discharge or employment discrimination. See e.g., Phillips v. butterball Farms Co., 448 Mich. 239, 531 N.W.2d 144 (1995) (plaintiff prevailing in retaliatory discharge case for filing worker's compensation claim rests in tort and therefore she is entitled to emotional distress damages in addition to various economic damages).

If found to be a victim of discrimination, plaintiffs can accordingly recover for humiliation, embarrassment, outrage, disappointment, and other forms of mental anguish that result from the discrimination. Reisman v. Regents of Wayne State Univ., 188 Mich. App. 526, 470 N.W.2d 678 (1991). For example, in Lilley v. B.T.M. Corp., 958 F.2d 746 (6th Cir.) cert den'd, 506 U.S. 940 (1992), an age discrimination case brought under ADEA and ELCRA, the court found that there was sufficient evidence to uphold a jury award of $350,000 for mental anguish to a plaintiff who established that 1) he felt anguished and embarrassed following his discharge, which was corroborated by his wife; 2) he was unable to secure employment; 3) the discharge affected his marriage; 4) he lost weight and had difficulty sleeping; and 5) he was treated by a psychiatrist.

It should be noted that difficulty in determining damages does not bar recovery, although an award may not be based on mere speculation and conjecture. Id. Thus, in a hostile work environment case, for example, a plaintiff's general comments about the impact of an alleged hostile environment will not be enough to support an award for emotional damages. Betts v. Costco Wholesale Corp., 558 F.3d 461 (6th Cir. 2009).

F. Punitive Damages.

Under Michigan ELCRA claims, punitive damages are not available. Eide v Kelsey Hayes, Co., 431 Mich. 26, 28029 (1998). The WPA permits an award of “actual damages.” The term "actual damages" in tort cases includes compensation for mental distress and anguish. Phinney v. Perlmutter, 222 Mich. App. 513, 532 (1997). See also, Shaw v. Cassar, 558 F. Supp. 303, 311 (ED Mich, 1983). Exemplary damages are also available under Michigan law, so long as they do not duplicate the emotional distress damages that are awarded. See, Phillips v. Butterball Farms Co., Inc. (After Second Remand), 448 Mich. 239, 251 252 (1995).

Punitive damages are available under Title VII and the ADA pursuant to the Civil Rights Act 1991. The Act, 42 U.S.C. § 1981a, provides for the imposition of punitive damages against non-governmental entities where the employer “engaged in a discriminatory practice or discriminatory practices with malice or reckless indifference to the to the federally protected rights of an aggrieved individual.” The employee is not required to prove that the employer acted in an outrageous or egregious manner. Kolstad v. American Dental Ass'n., 119 S.Ct. 2118 (1999).

Section 1981a(b)(3) caps the damages for compensatory and punitive damages combined to $50,000 for employers with 15 to 100 employees, $100,000 for employers with 101 to 200 employees, $200,000 for employers with 201 to 500 employees and $300,000 for employers with more than 500 employees. These caps are in addition to amounts awarded to an employee for back pay and prejudgment interest.

G. Remittitur.

[T]he role of the district court is to determine whether the jury's verdict is within the confines set by state law..." Gasperini v. Center for Humanities, Inc., 518 U.S. 414, 437 (1996), citing Browning Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 279 (1989).

Under Michigan law, "a court may not substitute its judgment on damages for that of the jury." Palenkas v. Beaumont Hosp., 432 Mich. 527, 538 (1989). The primary issue for the court's consideration in deciding a motion for remittitur is whether the jury's award is supported by the evidence or whether it was "excessive." Id at 532. See also, MCR 2.611 (E)(1). The trial court's inquiry must be limited to objective considerations. The Palenkas court, in rejecting the more subjective "shock the conscious" test, stated:

While we agree with the established case law that a trial court, in making a decision on remittitur, should examine a number of factors (such as whether the verdict was induced by bias or prejudice), we believe its inquiry should be limited to objective considerations relating to the actual conduct of the trial or the evidence adduced.

Id., p 532.

The court should consider three factors in ruling on a motion for remittitur. Gilbert v. DaimlerChrysler Corp., 470 Mich. 749, 764 (2004). First, whether the verdict was the result of improper methods, prejudice, passion, partiality, sympathy, corruption, or mistake of law or fact. Second, whether the verdict was within the limits of what reasonable minds would deem just compensation for the injury sustained. Third, whether the amount actually awarded is comparable to awards in similar cases within the state and in other jurisdictions. Id. Cf, Gilbert, 470 Mich. 770 71 ($21 million dollar verdict in a sexual harassment case reduced because the plaintiff's counsel "deliberately tried to provoke the jury by supplanting law, fact, and reason with prejudice, misleading arguments, and repeated ad hominem attacks against defendant based on its corporate status.").

In reviewing the second factor, what is "just compensation," the court's inquiry should be limited to the damages evidence that was presented to the jury and whether the jury's decision was higher than the "highest possible amount that the evidence will support." Clemens v. Lesnek, 219 Mich. App. 245, 247 (1996). In making this decision, the court should review the verdict in the light most favorable to the plaintiff. Diamond v. Witherspoon, 265 Mich. App. 673, 693 (2005). A verdict awarding damages should not be set aside simply because the method of computation used by the jury in assessing damages cannot be determined, unless it is not within the range of evidence presented at trial. Id., p 694.

Courts should also be mindful of the rule that the award of non economic damages, such as emotional distress or pain and suffering must ordinarily rest in the sound judgment of the jury. Gilbert v. DaimlerChrysler Corp., 470 Mich. 749, 763 64 (2004). This rule is a corollary of the rule that the "authority to measure damages inheres in the jury's role as trier of fact." Id.

The third and final factor is a comparison of the award to other comparable cases and jury verdicts. Michigan courts have awarded substantial sums in employment cases. In Diamond v. Witherspoon, 265 Mich. App. 673, 693 (2005), the court upheld a jury verdict of $2.625 million in a sexual harassment case brought under the ELCRA. In Olsen v. Toyota Technical Center, U.S.A., Inc., ___ Mich. App. ___, 2002 WL 31958183 (2002), the court upheld a $5 million dollar award for emotional distress damages in a case involving the Persons with Disabilities Civil Right Act. In Phinney v. Perlmutter, 222 Mich. App. 513 (1997), the court found that a $989,200 verdict in a WPA case was not excessive. In Heckman v. City of Detroit, ____ Mich. App. _____ 2007 WL 1989518 (2007), the court upheld the denial of the remittitur motion in a WPA case and found that a $600,000 jury verdict was not excessive. In Badalucco v. City of Auburn Hills, ___ Mich. App. ____ 2001 WL 1699700 (2001), another WPA case, the court upheld a judgment based on a jury verdict in the amount of $859,365.22.

H. Attorney Fees and Costs.

Plaintiffs who are successful in actions filed under ELCRA are entitled to recoup attorney fees. The Michigan Court of Appeals has determined that the attorney fee provision of ELRA: 1) encourages individuals deprived of their civil rights to seek legal redress; 2) provides victims of employment discrimination access to the courts; and 3) ensures compliance with the goals of the act i.e., deterring discrimination in the workforce. King v. GMC, 136 Mich. App. 301, 356 N.W.2d 626 (1984). Attorney fees are also available to plaintiffs who are successful in claims filed under the PDCRA. See, MCL § 37.1606(3); Yuhase v. Macomb County, 176 Mich. App. 9, 439 N.W.2d 267 (1989). Likewise, under Title VII, plaintiffs who prevail may recover attorney fees under certain circumstances. According to Section 706(k) of Title VII, “the court, in its discretion may allow the prevailing party, other than the Commission or the United States, a reasonable attorney's fee….” 42 U.S.C. 2000e-5(k). Attorney fees are also available under ADEA.

It is important to not however, that an attorney fee award is not mandatory. Thus, the decision to grant or deny an award of attorney fees under ELCRA is within the discretion of the court. Grow v WA Thomas Co., 236 Mich. App 696, 601 N.W.2d 426 (1999). The Michigan Supreme Court has established a non-exclusive list of factors to help guide a court's discretion in determining the reasonableness of an attorney fee request: “1) the professional standing and experience of the attorney; 2) the skill, time and labor involved; 3) the amount in question and the results achieved; 4) the difficulty of the case; 5) the expenses incurred; and 6) the nature and length of the professional relationship with the client.” Wood v. DAIIE, 413 Mich. 573, 321 N/.W.2d 653 (1982). These factors have been used in the employment discrimination context. Department of Civil Rights v. Horizon Tube Fabricating, Inc., 148 Mich. App. 633, 385 N.W.2d 685 (1986).

Typically, the lodestar method is the most common starting point when determining the amount of a reasonable attorney fee, i.e., the number of hours reasonably expended on a case multiplied by a reasonable hourly rate. Thus, it is incumbent upon a party seeking attorney fees to establish entitlement to an award by documenting the hours expended and the hourly rates applied. See, Howard v. Canteen Corp., 192 Mich. App. 427, 481 N.W.2d 718 (1991) (concluding that while contemporaneous time records are not required, the lack of such records leaves room for doubt abut the reasonableness of the hours the attorney claims to have expended).

The Sixth Circuit has set forth the following factors to be considered when determining the reasonableness of the hours and rate for an attorney fee award under federal law: 1) the time and labor required; 2) the difficulty and novelty of the questions presented; 3) the skill needed to perform the legal services properly; 4) the preclusion of the attorney's employment due to the acceptance of the case; 5) the customary fee; 6) whether the fee is fixed or contingent; 7) time and limitations imposed by the client or circumstances; 8) the amount involved and the results obtained; 9) the experience, reputation, and ability of the attorneys; 10) the “under-desirability” of the case; 11) the nature and length of the professional relationship with the client; 12) awards in similar cases. Isabel v City of Memphis, 404 F.3d 404 (6th Cir. 2005). The Isabel court specifically noted that the most important factor is the degree of success in a case. Consequently, in Thurman v. Yellow Freight Sys., supra, the district court used the lodestar method and reduced plaintiff's attorney fee award by 5% due to plaintiff's partial success on his claim.

The existence of a contingent fee agreement in an ELCRA case does not necessarily preclude an attorney fee award. Grow supra; Hamlin, supra. However, the Michigan Court of Appeals has determined that ELCRA simply provides for the award of a reasonable attorney fee, and not a fee enhanced by a premium for assuming risks inherent in a contingent fee case. See Wilson v. GMC, supra.
III. Conclusion.

An initial damages assessment by plaintiffs' counsel and defense counsel is key to determining whether at the onset, a cause of action should be initiated, and going forward, what strategy should be employed to establish and/or defend against a plaintiff's damages claims. Assessment of economic damages is not enough. As discussed above, plaintiffs may be entitled to emotional distress damages, punitive damages, liquidated damages, and may also be able to recoup attorney fees and costs. Thus, in the employment context, the failure to consider all that may be at stake at the beginning of litigation can result in a nuisance value case evaluation award, or conversely, an astronomical award that is comprised of economic and non-economic damages. Consequently, the lesson that all employment practitioners should learn and diligently apply (especially in today's economic climate) is to: Always assess damages at the beginning of a case as opposed to the end; since at the point – it may truly be too late!!!!

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