Part I of the article explained why the valuation of economic damages under Title VII is unique and requires a special report format. It also discussed how some companies use employee benefit plans to avoid discrimination issues. Part II of the article describes the key issues that must be considered before conducting a Title VII valuation, including the different components of loss and how to value them. It also explains the importance of identifying seniority-based benefits in the valuation process. Many people don’t realize they lose a lot of money when they leave a job, especially in lost vacation pay and retirement benefits. For example, someone who was eligible for four weeks’ vacation per year at their old job may only be eligible for one week at their new job, and it could take another 20 years to earn four weeks again. Also, retirement benefits can be a big loss because they’re based on your salary near the time you retire. So, someone who earned $20,000 per year with 20 years of service could lose out on $80,000 in benefits if they leave their job. If an employee loses out on 18 months of wages worth $30,000, it might seem like a big deal. But if they also lose seniority benefits worth $110,000, that’s a much bigger loss in the long run. Seniority-based benefits give the most value in the last 10 years before retirement. These losses are different from future losses and should be treated separately. There are other benefits that are based on how long someone has worked for the employer, like sick days and reimbursement plans. When these are lost, it’s important to categorize them correctly to make sure the employee is compensated fairly. Sometimes when someone loses their job, they can also face other financial losses. This might include things like having to spend more time and money on commuting to a new job, or having to refinance a house because of the job loss. These extra expenses and losses should be added up and included in the total amount of money the person is owed. In some cases, the person might also have other expenses from the job loss, like legal fees or visits to a psychologist. However, any money the person receives from odd jobs or unemployment benefits can be subtracted from the total amount they are owed. So, when figuring out how much someone should be compensated for losing their job, it’s important to consider all of these different factors. When an employee loses their job and has to find new work, there are different ways they can approach it. They can change careers, but this would likely mean starting at a lower level and earning less money. They could also be honest with potential employers about their past, but this might make it hard to find a new job. Or they could lie on job applications, but this can cause problems later on if they’re found out.
Even if they do find new work, there’s still a risk of being let go during a probationary period. So, the amount of money they could earn in the future might not be as much as they were making before. It depends on how in-demand their skills are.
Overall, finding new work after losing a job can be tough, and the future income might not be as much as it was before. It’s a good idea to consider the skills and years of service of the person who was fired when deciding how long their probationary period should be. Instead of just subtracting potential future income from their damages, it might be better to calculate the loss of professional reputation separately. This could help the court see it as a real loss. When calculating future benefits, we need to take into account the benefits the person would have received based on their seniority at their old job. We also need to consider the cost of benefits for new employees over age 50, like pension and health benefits. This will help us explain the future loss more clearly. Economic experts use the Alaskan Method to calculate losses, but it’s not the best method for cases involving Title VII discrimination. This method can overestimate future damages and make it easier for the defense to argue against the extent of the loss. It also undervalues certain parts of the future loss, like health care benefits and seniority-based benefits. Health care costs are going up faster than inflation, and it’s hard for older employees to find new jobs that offer the same benefits. This makes it difficult for them to make up for their lost retirement benefits. The way retirement benefits are calculated can also make it hard to figure out how much money someone will lose. To show this, let’s look at an example. Let’s say someone was earning $50,000 a year when they were let go from their job at age 41. They were supposed to retire at 65 and had 24 years left of work. In this case, it’s hard to figure out exactly how much money they will lose in retirement benefits. A worker was fired and lost out on a lot of money in retirement benefits. They sued for back pay and front pay, and the court used different methods to calculate the amount owed. The standard method gave them $258,296, while the Alaskan Method gave them $268,285. The Alaskan Method gave them more money overall, but it’s not as certain as the standard method. This can affect how much the worker actually gets in the end. Accurately predicting front pay loss is really hard because there isn’t enough data for certain calculations. Even with data, it’s still really tough to predict individual losses, but overall, the calculations are pretty accurate for a big group of people. In some court cases, there is confusion about how to calculate back pay and front pay for employees who were unlawfully terminated. This is because there is not enough data to accurately predict future pay, especially for older employees who may lose important benefits. However, certain benefits, like seniority-based benefits, are easier to calculate because they are near-certain losses. These should be shown separately in the report. Similarly, older employees may also lose valuable welfare benefits, which should also be calculated separately because there is a good chance they won’t be replaced. This will help the court make a fair decision about the damages owed to the employee. If someone loses their job due to discrimination, it can be hard for them to find a new job and they may suffer mentally and physically. To figure out how much money they should get, we can use a formula to estimate the time it would take for them to find a new job and multiply it by their salary. We can also separate out the amount of money they lost because of their reputation being hurt. This way, the court can decide how much money to award for each type of damage. The company lost $110,000 due to seniority-based vacation time and benefits being lost when an employee was terminated. This loss is considered a past loss, and the impact is greatest in the early years. The cost of providing pensions and health insurance increases as employees get older. The company faced speculation about potential future costs and damages, and this was used as a reason to deny certain damages in a legal case. Jerry Reiss is certified to do valuation work under ERISA and is also certified as an associate of the Society of Actuaries. He has written many articles on valuation topics and provides expert testimony and support services from his office in Ft. Lauderdale.
Source: https://www.floridabar.org/the-florida-bar-journal/valuing-economic-damages-in-employment-litigation-from-a-plaintiffs-perspective-part-ii/
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