Employment Discrimination: Distinguishing between Equitable Remedies and Compensatory Damages

By Bowles, Tyler J. | Journal of Legal Economics, August 2008 | Go to article overview
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Employment Discrimination: Distinguishing between Equitable Remedies and Compensatory Damages


Bowles, Tyler J., Journal of Legal Economics


Abstract There may be a perception among some forensic economists that the time horizon for future damages in employment discrimination cases is the period the plaintiff would have remained employed with the defendant employer but for the discrimination. While the discrimination acts and interpretive case law concerning damages are nuanced as a result of the rather archaic distinction between equitable and legal remedies, it is clear that the law recognizes that discriminatory acts may injure an individual's earning capacity. Therefore, the law allows for the equitable relief of front pay and the distinct legal remedy of compensatory damages in the form of future lost earnings. While the former contemplates employment with a specific employer (i.e., the defendant), the latter does not.

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Introduction

The important distinction between equitable remedies (e.g., front pay and back pay) and compensatory damages (e.g., future lost earnings) in cases involving employment discrimination has not been addressed in the forensic economics literature. Indeed, some misconceptions related to this issue may have been perpetuated in a special issue of the Journal of Forensic Economics that focused on the issue of "Approaches to Damages Measurement in Employment Litigation" (See Volume 16, Number 1, Spring-Summer 2003). Tinari (2003) notes that:

One of the several ways employment damages calculations differ from damages calculations in personal injury and death cases is that, in wrongful discharge and other employment claims, loss of earnings is attributed solely to employment with the defendant employer (p. 151, emphasis added).

While this statement may be true for employment cases that are based on contract law, it is not correct for cases arising out of the federal discrimination statutes (i.e., the Civil Rights Act of 1964 as amended by the Civil Rights Act of 1991, hereafter the 1964 Act and the 1991 Act, respectively, or jointly as the Discrimination Acts). White, Abboud, and Holt (2003) also imply that future damages in discrimination cases are limited to the time period during which the plaintiff would have been employed by the defendant employer. In discussing cases involving employment discrimination, they state that "The economic losses are based upon the plaintiff's past and future income specific to the employer who committed the alleged discriminatory act" (p. 209, emphasis added).

This paper discusses the fact that economic damages under the Discrimination Acts are not restricted to the equitable remedies of back pay and front pay, which contemplate employment with the defendant employer; instead economic damages may include the compensatory damage of future lost earnings or earning capacity as generally defined in personal injury litigation. These compensatory damages are not specific to the defendant employer. It is argued, therefore, that the law supports the economic reality that a victim of job discrimination may incur future economic damages independent of the probability of continued employment with the defendant employer. Although much of the discussion that follows is more law than economics, forensic economists working in this area should be aware of the legal issues involved.

This paper is organized as follows. In the next section, the legal framework regarding damages in employment discrimination cases is reviewed. Following that, a conceptual model of future damages in discrimination cases is presented and discussed. Finally, the conclusions are summarized.

Legal Background

The Discrimination Acts make a distinction between legal and equitable remedies. Historically, there was a distinction in England between courts of law and courts of equity. The former provided legal remedies while the latter provided equitable relief. Legal remedies were restricted to land, items of value, or money; equitable remedies generally involved an order by the court requiring the defendant to perform or to refrain from performing some specific act.

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