What Can I Expect in the Way of Severance if I am Terminated?

 

What Kind of Damages Can I Expect if I Sue My Employer?

 

What Do I Have to Pay to Bring a Lawsuit?

 

If I Settle or Win My Case in Court Will I Have to Pay Taxes?

Financial Issues . . .

What Can I Expect in the Way of Severance if I Am Terminated in a Reduction in Force?

Often employees assume that they have a right to severance pay if they are terminated through no fault of their own.  Unfortunately, they have no such right unless the policies of their company provide otherwise.  Although many companies provide employees severance, there is no entitlement and no magic formula.  Frequently, severance is tied to a formula based on years of service, but this is not always the case.   Sometimes long-time employees are laid off with little or no severance pay.

If employers do provide severance, they generally require you to sign a Release or Waiver of Claims whereby you give up all rights you may have to assert any legal claims against your employer.  Do not sign an agreement for severance pay unless you are sure that you are willing to waive your legal claims.  

Sometimes it is possible to negotiate additional severance pay or other terms in the agreement.  If you have any questions about a severance agreement provided by your employer, you should see an attorney for advice BEFORE you sign the agreement.

Finally, if you are terminated through no fault of your own, you are probably entitled to unemployment benefits.   

 

What Kind of Damages Can I Expect if I Sue My Employer?

If you sue your employer and win, your damages will depend on the type of claim that you bring.  Although we frequently read about huge verdicts for employees in the newspaper, in reality, employees may never get these damages.  Often the courts reduce the really large jury verdicts and in other cases, the damages may be overturned on appeal.

The following is a quick guide to the type of damages that are available in common employment claims:

Economic Damages

These are the lost salary and benefits resulting from your termination (or if applicable, from your employer’s failure to compensate you appropriately).  In calculating economic damages, you are required to MITIGATE.  This means that your salary and benefits earned after your termination must be subtracted from the economic damages you are seeking, and that you have an obligation to make reasonable efforts to seek comparable employment following your termination.

Emotional Distress Damages and Punitive Damages

These are available in most illegal discrimination cases except for age discrimination.  They are subject to caps in most cases.  Under Title VII, the federal statute prohibiting discrimination on the basis of sex, race, national origin and disability, you can get a maximum of $50,000 COMBINED emotional distress and punitive damages unless your employer has at least 100 employees.  Under no circumstances can you get more than $300,000 under Title VII. 

Liquidated Damages

These are available in age discrimination cases and a few other types of cases.  If the employee’s discrimination is “willful” in these cases, the employee may be able to recover double his economic damages from the date of termination through the date of trial.

Attorneys’ Fees

In most discrimination cases, you are entitled to receive a portion of your attorney fees and costs if you win.  If you lose your case, it is unlikely that you will be required to pay your employer's attorneys’ fees, but you will have to pay some of their costs. 

 

What Do I Have to Pay to Bring a Lawsuit?

Most employment lawyers in Colorado charge a fee for an initial consultation.  This fee helps ensure your initial commitment and also helps cover some of the time involved in meeting with you and providing advice about whether or not you have a legal claim.  After meeting with you, if you need further legal services, the attorney will work out a fee arrangement.  Depending on your case and the attorney, this arrangement can vary from representation on an hourly rate basis to a contingent fee arrangement where you pay a percentage of any recovery to your attorney. 

Even in a contingent fee arrangement, you will be usually expected to pay costs.  Costs include expenses other than for the services of your attorney.  If you are actually filing a lawsuit (as opposed to just filing an EEOC charge), the costs can be significant.

 

If I Settle or Win My Case in Court Will I Have to Pay Taxes?

Recoveries in employment cases are almost always fully taxable.  The only exception at this time is for damages resulting from physical injuries such as a sexual assault.  If the Civil Rights Tax Fairness Act which is now pending before Congress becomes a statute, that will change, and emotional distress damages in employment cases and attorneys’ fees will be excludable from taxable income.

If you have an employment claim that may be resolved soon, you should check with your tax advisor so that you can fully understand and plan for the tax consequences of your settlement or judgment.