How to Calculate Settlements for Wrongful Termination

Getting fired can be a nightmare. Having it happen illegally makes it exponentially worse. But if you’ve experienced wrongful termination, you may be entitled to significant compensation. Understanding how to calculate your potential settlement puts power back in your hands.

When facing unjust firing, the first instinct is often to panic. Taking a step back and preparing settlement calculations methodically, however, can maximize the results. This article covers key considerations around settlement amounts, negotiation strategies, common mistakes, and the legal landscape. With the right information, you can pursue the justice you deserve.

Understanding Wrongful Termination

What is Wrongful Termination?

Wrongful termination refers to being fired illegally, unjustly, or in violation of public policy or employment agreements. Some examples include:

• Getting fired based on race, gender, religion or other protected classes. This qualifies as employment discrimination.
• Getting fired for reporting illegal activities of your employer, known as retaliation or wrongful retaliatory discharge.
• Getting fired while on medical leave protected by company policy or law like FMLA. This can enable claims for wrongful discharge in violation of public policy.
• Getting fired without proper procedures outlined in an employment contract, such as required warnings or probation periods.

In these cases, employees have grounds to pursue wrongful termination claims against employers through civil lawsuits.

Key Legal Protections

Several laws at both federal and state levels prohibit wrongful firing and enable employees to file lawsuits:

• Title VII of Civil Rights Act – Protects against discrimination and retaliation based on race, color, religion, sex and national origin.
• Americans with Disabilities Act (ADA) – Prohibits discrimination based on disability and entitles disabled employees to reasonable accommodations.
• Age Discrimination in Employment Act – Protects workers over 40 years old from age discrimination.
• Family Medical Leave Act (FMLA) – Grants eligible employees up to 12 weeks of unpaid medical leave with job protection.
• State laws – Provide additional protections from discrimination and wrongful discharge in violation of public policy.

Understanding these protections is the first step toward identifying illegal grounds for termination in your specific case.

“Wrongful termination lawsuits aim to make the employee ‘whole’ again financially while also punishing employers for illegal acts through monetary damages.” – Jane Park, employment law attorney

Impact on Employees and Employers

The effects of wrongful termination spread far beyond the sudden loss of a job. Employees commonly face heavy financial stress from losing income and benefits like health insurance. The situation also takes immense emotional toll through feelings of anger, injustice, and low self-esteem from being fired.

For employers, the impacts include sinking morale across staff, potential damage to the company’s reputation, higher insurance costs in the future, and payouts of large monetary damages if the courts rule against them. Understanding these widespread impacts hints at the importance of accurate settlement calculations.

The Basics of Settlement Calculation

Settlements aim to compensate wrongfully terminated employees for hardships caused by the firing. But what actually goes into determining these settlement amounts?

While individual details vary, several key components make up typical wrongful termination settlements:

• Lost wages and benefits – Back pay for salary, bonuses, commissions, 401k matches and other monetary benefits lost after illegal firing.
• Emotional distress damages – Monetary compensation for mental anguish and suffering from trauma, stress, indignity and other psychological impacts.
• Punctive damages – Additional payments aiming to punish the employer, available in discrimination and retaliation cases, when employer conduct was malicious or reckless.
• Legal costs – Reimbursement for attorney fees and other legal costs related to pursuing the wrongful termination claim.

Accounting for each of these factors plays a crucial role in reaching a fair and accurate total settlement, as examined throughout the rest of this article. Considerations differ slightly in union settings but similar principles apply. Understanding these basics puts you on solid ground when determining what your own settlement could be.

Steps in Calculating Your Settlement

Settling a wrongful termination case involves far more than picking an arbitrary dollar amount that sounds reasonable. Proper preparation and meticulous calculation provide justification and increase your leverage. Following these key steps equips you to maximize results:

1. Document Your Employment and Termination

Thorough documentation enables convincing claims for back pay and other damages. Key documents to assemble include:

• Employment contracts outlining compensation, responsibilities and processes
• Performance reviews and other evaluations
• Company policies related to discrimination, leave time and disciplinary procedures
• Records tracking your compensation rate, hours worked, benefits selected, bonuses earned, and commissions paid
• Medical leave documentation if applicable
• Written warnings and investigation records related to the termination itself
• Statements from witnesses supporting illegal or malicious intent in the firing

Compiling this evidence early allows proper assessment of lost earnings and the grounds supporting your case.

2. Calculate Lost Wages and Benefits

Using those employment details and projections of how long finding comparable work will take, lost earnings constitute significant portions of wrongful termination settlements. Consider all monetary components you would still be earning if not wrongfully fired:

• Salary – Use your pay rate at termination multiplied by total months unemployed. Account for increases you would have likely received through raises and promotions.
• Bonuses / Commissions – Average amounts from previous years provide conservative estimates.
• 401k Match – Average percentage matched by the employer multiplied by your salary.
• Health Insurance – Cost of continuing current plan through COBRA or obtaining individual coverage.
• Other Benefits – Allowances, employer contributions, reimbursed expenses and other monetary benefits are also included.

Document projections for each component and keep organized records of actual earnings and expenses incurred during unemployment periods. These feed directly into settlement calculations.

3. Estimate Emotional Distress Damages

While harder to quantify, getting fired unjustly also takes immense emotional toll through deep feelings of frustration, shame, stress and injustice. Seeking counseling often becomes essential for coping with this psychological harm. Compensation for such distress covers:

• Counseling and mental health treatment costs if uninsured.
• Account for lost enjoyment of life impacting participation in routine activities and relationships. Quantify this impact through a dollar amount that feels fair per day or week without overreaching.
• Consider any physical manifestation of emotional stress through new treatment for headaches, digestive issues, insomnia or other medical care.

Use discretion around actual dollar amounts claimed for subjective emotional impacts, as excessive or unreasonable claims undermine credibility.

4. Consider Punitive Damages

In cases of discrimination or extreme malice surrounding the termination, you may claim extra punitive or exemplary damages aiming to punish and deter the employer:

• Discrimination cases often warrant punitive damages when bias was intentional or the company failed to take clear steps for prevention.
• Retaliatory discharge enables punitive damages if the firing aimed to intimidate or hurt the employee because they engaged in a protected action like reporting harassment.
• Cases with clear malice or reckless indifference exhibited in the termination process itself can also warrant punitive awards in some states even without discrimination involved.

Given the high standards of proof required, consult closely with an attorney on including potential punitive damages in your overall claim and settlement calculations.

5. Account for Legal Expenses

Lastly, achieving proper compensation requires investing in qualified legal help through an employment law or wrongful termination attorney. Most settle cases on a contingency fee basis, taking around 30-40% of the total settlement as payment for their services without upfront costs. Some key considerations around legal expenses include:

• Contingency fees mean more settlement money goes directly to you rather than hourly billing. But rates still reach nearly 40% on top of other expenses.
• In rare cases, you may recover legal costs directly from the employer after winning in court rather than your own settlement amount. But counting on full reimbursement carries risk.
• Expenses also accumulate from court filing fees, subpoenas, courier services and other administrative costs vital for building a case. These contribute to lost settlement value too.

Doing your own legwork in the calculation steps above reduces overall legal hours and costs, helping maximize what ultimately reaches your pocket. But expert help navigating litigation remains essential.

The Role of Negotiation in Settlement Agreements

Reaching a settlement involves extensive back and forth negotiation between legal representatives on each side. The initial settlement offer from employers tends to seem painfully low. Don’t panic. Consider that a starting point for negotiations rather than the final word.

With strong documentation and evidence, aggressively negotiate towards an amount adequately capturing the different damages examined above. Strategies like:

• Demonstrating little urgency to settle quickly.
• Starting negotiations with a settlement number firm and significantly higher than what you actually expect.
• Expressing willingness to take the case all the way through a long litigation process unless demands are met.

can drastically increase settlement offers over rounds of communication.

Approaching negotiations armed with meticulous calculations of lost income and expenses also strengthens your case substantially. Rather than pulling random higher numbers from thin air, stand firm on justifiable amounts tied directly to your employment records, projections and losses. Detailed evidence weakens employer arguments for lower liability.

While hiring legal representation certainly helps level the playing field for settlement negotiations, avoiding an overly quick or cheap settlement also protects your rights and recovery amount. Invest time upfront preparing calculations before sitting down to negotiate.

Tips for Maximizing Your Settlement

Beyond the number crunching steps outlined earlier, implementing some key strategies improves your odds of a decent settlement:

Gather Evidence Early and Often

The more precise documentation and credible witness statements you collect proving illegal intent in termination, losses incurred and employer wrongdoing, the faster and higher your settlement offers often reach.

Seek Legal Counsel Early On

An employment lawyer helps navigate logistics, gathers additional evidence through discovery and contacts the employer in the proper sequence. They also give objective insight on reasonable settlement amounts.

Maintain Communication with Your Past Employer

While negotiations happen formally through attorneys, keeping some constructive communication with past managers, HR reps and coworkers enables gathering useful evidence and sustaining your professional network.

Settling any court case brings stress and uncertainty. But following these tips while methodically calculating potential settlement amounts enables the best possible outcome from an impossibly difficult situation.

Common Pitfalls in Settlement Calculations

A few simple missteps in tallying potential settlement totals can sabotage your entire process. Stay conscious of these key pitfalls victims of wrongful termination often encounter:

Overestimating Lost Earnings

Project reasonable timeframes for finding similar work rather than assuming years and years of unemployment ahead. Also use previous year earnings rather than one-time windfalls to avoid skewing salary evidence.

Excessive Emotional Distress Claims

While emotional impacts definitely deserve fair compensation, reaching too high with random dollar figures for subjective distress actually hurts credibility and gives employers fuel for lowering offers. Keep realistic ties to counseling costs and measurable losses only.

Failing to Account for Taxes

One often overlooked detail lies in the tax liability that comes with settlement payouts. Since wrongful termination settlements constitute taxable income, claiming extremely high amounts means you take home far less after the IRS tax bite. Calculate lost earnings after tax for a more honest projection.

Avoid under-compensating yourself, but steer clear of unjustifiable figures failing to align with losses and giving employers reasons to stonewall fair compensation. Hire legal experts to catch additional missteps too.

Understanding the Legal Process

Actual courtroom trials for wrongful termination remain relatively rare with over 90% of cases settling beforehand. But understanding the risks and leverage points in the litigation process still proves useful for settlement negotiations. Here is the usual sequence:

1. File an official legal claim with State labor board or EEOC sparking agency investigation into illegal firing.
2. Receive “Right to Sue” letter enabling private lawsuit. Hire a wrongful termination attorney to file case in court seeking compensation.
3. Employer files motions attempting dismissal. Extensive evidence sharing and interviews (discovery) occur to prove or disprove justified firing.
4. Settlement negotiations happen in parallel attempting resolution without trial. Over 90% of cases settle by this point if not earlier.
5. If no settlement reached by this stage, court trial proceeds with jury awarding verdict and any damages. Lengthy appeals process often follows.

While exhausting and frustrating, going through proper legal steps increases pressure on employers to offer reasonable settlements reflecting the real costs they face from wrongfully firing someone. Understanding where your negotiating leverage comes from in this larger process prevents rash decisions and under-compensation. Get expert legal guidance, but also educate yourself on the road ahead.

Settlement Amounts Vary Greatly by Case Strengths and State

Conclusion

Getting fired without cause delivers emotional, financial and professional devastation difficult to comprehend unless experienced firsthand. Legal recourse can’t undo the injustice but monetary damages aim to make victims whole once again. For dealing with wrongful termination, an ounce of prevention proves more valuable than a pound of cure. But once illegally stripped of your livelihood, arming yourself with the knowledge to accurately calculate potential settlement amounts gives power back to your side.

Settlement calculations require extensive record gathering, lost wage projections, accounting for hardships and clear communication with legal experts. But methodically tallying these quantifiable losses also provides irrefutable justification for proper compensation when sitting down to negotiate with past employers. By understanding settlement components and avoiding common missteps, you put justice within closer reach.

While the trauma of unjust firing causes sufficient suffering on its own, under-settling your case piles on unnecessary financial insult to devastating injury. But through meticulous documentation, estimation grounded in real figures and strategic negotiation, you can take back control to pursue the maximum recovery truly owed for your wrongful termination.