As seen in the July issue of The
State Journal.
If an employer engages in illegal discrimination when terminating
an employee, that employer should pay compensatory damages related
to that termination. Moreover, if the employer acted maliciously in
conducting the termination, it could also face punitive damages.
Should, however, an employer be subject to duplicative
punitive damages? No, because that would be patently unfair.
Recently, however, the WV Supreme Court upheld a $1.6 million
verdict in favor of an employee who claimed that his employer
wrongfully terminated him because of age discrimination. West
Virginia American Water Company v. James A. Nagy (No. 101229,
June 15, 2011). Mr. Nagy claimed that his employer wrongfully
discharged him, and the jury agreed. Among other damages, the jury
awarded Mr. Nagy $350,000 in punitive damages, and over $1 million
in past and future lost wages -- even though Mr. Nagy, age
54, found a job within months of his termination earning just less
than what he had earned before. Mr. Nagy's own economic expert
calculated Mr. Nagy's actual out-of-pocket lost income
– past and future – to be approximately
$52,000. How then, you may ask, could a jury award over $1 million
in lost wages if actual lost wages were no more than
$52,000?
The answer lies in a concept of law introduced years ago and
blindly followed and expanded upon since then. In 1982 the Court
decided in Mason County Bd of Educ. v. State Superintendent of
Schools that if an employer wrongfully and maliciously
discharged an employee, that employee could recover his lost wages,
whether or not the employee had received interim or replacement
income. The Court described such "unmitigated" or
"flat" wage loss awards as an effort "to
punish" employers who maliciously discharge employees.
Importantly, punitive damages were not available to the
employee in that case.
In a separate decision that same year, the Court held in
Harless v. First National Bank in Fairmont that punitive
damages may be appropriate in certain wrongful discharge cases.
Punitive damages are, of course, damages designed to punish a
defendant.
The result of these cases is that, today, an employee who proves
that his wrongful discharge was done maliciously may recover
both punitive damages and unmitigated lost income
damages. In recent years, these duplicative damages have led to
some astounding verdicts in wrongful discharge cases, including
several in the $2 million dollar range.
This is not a legislatively-created problem. The Court itself, by
blindly merging these two separate lines of authority, has created
this troubling situation. The Court had the opportunity to address
the problem head-on in the Nagy case, but declined to do
so, simply stating that an unmitigated wage loss award represents
"compensatory" damages and that both punitive damages and
unmitigated wage loss awards are available under West Virginia law.
In doing so, the Court maintained the fiction that the difference
between actual out-of-pocket lost wages and unmitigated
lost wages represents "compensatory" damages. Nonsense.
In the case of Mr. Nagy, the difference between the unmitigated
lost wages awarded by the jury (~$1 million) and his actual
out-of-pocket lost wages (~$52,000) do not "compensate"
him for anything. Rather, this amount serves "to punish"
the employer. The problem, of course, is that this is the exact
reason for permitting punitive damages, which Mr. Nagy also
received.
This situation is especially abhorrent in the Nagy case
where Mr. Nagy actually found gainful employment and, therefore,
sustained little actual lost income as a result of his termination.
In confirming that the jury must ignore all income that Mr.
Nagy earned, the Court ignored a fundamental principle of
employment law – an individual has a duty to mitigate his
lost income damages. Here, Mr. Nagy did just that, yet the Court
engaged in the fiction that he had not.
How did the Court explain its decision? It did not. Instead, it
decided Nagy through a "memorandum decision" in
accordance with its recent revisions to its own rules that were
meant to stave off establishment of an intermediate court of
appeals. Like most other memorandum decisions, the Nagy decision
provides very little in the way of analysis or rationale.
Certainly, the employer in this case, and West Virginia employers
in general, are entitled to full review of this issue. Until the
issue is addressed and fixed, however, the Nagy decision serves as
a warning that West Virginia continues to be a hostile legal
environment for employers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.