Tag: employment termination

Back Pay and Front Pay Calculations in Employment Termination Cases

Most plaintiffs in employment termination cases will ultimately become re-employed. This article discusses the factors that comprise a standard economic damage model in an employment termination case.

Download Dr. Dwight Steward’s paper on Back Pay and Front Pay Calculations in Employment Termination Cases here!

Back Pay and Front Pay Calculations in Employment Termination Cases

Determining Mitigation efforts in Wrongful Termination cases

In determining if a Plaintiff made extensive efforts in their job search following their alleged wrongful termination, economic experts should look into several key factors.  Lawyer’s should be very familiar with these factors in order to best represent their client, whether Plaintiff or Defense.

  1. How many jobs has your client applied to and are they similar to the position they were terminated from?  A major point of attack experts should address in their reports will examine if the Plaintiff has performed a sufficiently diligent replacement job search. In Texas, individuals are granted unemployment benefits provided they apply for a minimum of three jobs per week.  This number can be used as the threshold for determining if a Plaintiff has done his or her due diligence in finding replacement employment after the alleged wrongful termination.
  2. How long has the Plaintiff been unemployed?  Widely accepted labor market data from the U.S. Bureau of Labor Statistics can be utilized to determine the average range an individual with a similar job position, in the same job market, would expect to be unemployed.  If the Plaintiff has been unable to find replacement employment within the typical unemployment duration, it is not likely they have performed a sufficient job search.
  3. How many job openings were available in the Plaintiff’s job market at the time of their termination?  Again, data from the U.S. Bureau of Labor Statistics can be utilized to determine job openings per month that the Plaintiff would have been qualified to hold.  In many cases, there are a significant number of job openings in the area the Plaintiff is searching.  Occasionally, a Plaintiff’s job search records will reveal that they have applied to jobs in multiple job markets, sometimes spanning across several states.  To a defense attorney requesting a mitigation analysis, this is music to their ears.  The more markets a Plaintiff makes themselves available to, the more markets experts can include when determining a number of job openings.  This only increases the number of jobs the Plaintiff could have held had they performed a sufficient job search and strengthens the argument that they have not performed such as search.

Recalculating a jury award in a California Med Mal case

The Medical Injury Compensation Reform Act (MICRA) of 1975 was a statute enacted by the California Legislature in August 1975.  One of the provisions of the statute was to allow doctors to make periodic payments of awards in Med Mal cases.
Accordingly, in California in those instances, the jury is required to award/come back with both un-discounted and present value discounted amounts. If the defendant chooses to make periodic payments, then the un-discounted award amounts come into play.
In a recent the jury came back with an award but only mentioned present value numbers and no future values.
The Court and the attorneys agreed that it was better to not send the jury back to give a future value award.  Instead they decided to have the economists figure out what the undiscounted future values are based on the present value numbers that the jury awarded.
So the following approach was offered.
Both economists used the ratio of the award to the present value numbers to future value numbers to back into the jury’s implicit undiscounted amount.  For example, if the award was about 25% more than what testified to, then the future value was increased by the same percentage.
So for example if  you two both used a 3% rate and calculated the present value of a loss over 10 years, the PV factor is 8.5302 (old school approach using tables!).  If you calculated a $50,000 loss and the opposing expert calculated a $75,000 loss that would give you present value amounts of $426,510 and $639,765 respectively.
If the jury came back with a present value number in between the two experts then this would be about $539,137,. The annual loss that the jury implicitly used to arrive at the $533,137 figure is about $62,500.  The annual loss number is right in the middle of the two experts.
Annual Loss PV factor PV of Award
Economist 1  $        50,000 8.5302  $        426,510
Economist 2  $        75,000 8.5302  $        639,765
Jury  $  533,137.50
Your 50% Guess (based on Jury award)  $    62,500.0 8.5302  $        533,138

Age-earnings profiles for MBAs

A person’s earnings will tend to increase as they age…to a certain point.  After that point, which is around age 46 or so depending on the person’s education level and occupation, the person’s earnings will tend to decrease as the age.

The age-earnings profile captures this phenomenon. The age-earnings profile is calculated from data sources like the Current Population Survey from the U.S. BLS

Here is a question that we recently addressed:

Q: Any idea on how to create an age-earnings profile for someone specifically with an MBA?  Are there data somewhere that have created such a profile?  I can see using the ACS (American Community Survey) to look at people by age who have a master’s degree and are employed in management occupations.  Anything more specific? 

A: The ACS would be a good start and would allow you to estimate an age-earnings profile more specific to the facts in your case.  In our cases we generally estimate the age earnings profiling using a regression model.  In our cases, there are generally not enough observations to filter for all the specific facts that we want to account for so a regression approach has been useful for us.

Standard age earnings profile regressions from labor economics models, see for example papers by  Mincer et al., Lazear et al, ,  Welch et al. and many more,  regress earnings on experience, experience squared, occupation variables, geographical variables, and education variables. 

 

Four plus one take-aways from 12/12/2014 Houston OFCCP Presentation

1. Impact Ratio Analysis (IRA) is still important to the OFCCP’s workforce analyses.  The 80% rule is still a tool.  However, the current compliance manual requires that a more holistic approach using statistical analysis and the calculation of standard deviations, be used in the final analysis and during the investigation.

2. Ethnic and sub group analysis is becoming more and more important.  The diversification of the U.S. workforce is creating a situation where smaller racial or ethnic groups are now large enough to study (2% rule)

3. Pre-Employment background checks can be used with care.  Employers should ensure that criminal history checks are germane and relevant to the jobs at issue.  Guidance on credit history checks is expected in the coming months.

4. Military Vet. goals and more guidance are expected in March 2014.  Some guidance was provided in 2013.

 Plus one take away…

It is amazing how far and wide the concepts of statistical significance have traveled over the last 20 years.  The OFCCP compliance officers were conversant in the concepts as well as small and large sample ratio statistical tests.  20 years ago these concepts were just making there way out for public consumption.

Stacked employee ratings and performance bell-curves

Some employers grade their employee’s job performance on a curve.  In these systems, like back in college, the employer generally sets the number of A, B,C’s etc. to assign to the employees performance.  Proponents argue that the system is more fair and adds to employee moral in the long run.  Neal Buethe of

Briggs and Morgan,

and

 

 

 

Nancy Gunzenhauser and Jeffrey Landes of Epstein Becker Green

discuss some of the legal issues to consider when adopting these types of systems.

 

How long should it take the plaintiff to obtain comparable re-employment?

Title Page -2013 Back Pay and Front Pay CalculationsThat is a central question in many wrongful employment termination lawsuits.  The plaintiff’s back and front pay earnings claims revolve around the answer to this question.  The length of an individual’s job search time depends on a number of factors.  These factors include the individual’s work background, type of job, number of other qualified job searchers, and geographical area.  The individual’s job search methods and efforts are also important factors.

In our work we study these types of job search factors in conjunction with the number of job searchers and employer demand for the relevant job position.

We have studied the labor market conditions for many job positions.  In recent analyses we have studied the labor market for accountants, network computer administrators, and operations managers.  The number of statewide job openings and searchers per job openings is shown in the table below.  Searchers per job openings ratios that are less than 1.0 indicate that there are more job openings than job searchers for the particular job.  Job searcher per job openings ratios greater than 1.0 indicate that there are more job searchers than job openings for the particular job..

jobopeningstable

Methodology

Number of job openings (Labor demand by employers): Based on the distribution of specific job openings in an industry, city and occupational classification.  Data sources include U.S. Bureau of Labor Statistics databases:  JOLT, CPS, and LAUS.

Number of job searchers (Labor supply by individuals): Based on geographical area(s) labor force, percentage of the labor force in each occupation, unemployment rate, and an unemployment rate adjustment factor associated with the occupation.  Data sources include U.S. Bureau of Labor Statistics databases:  JOLT, CPS, and LAUS.

Learn more read the article.