Settlements provide a way for employees to obtain compensation more quickly and with less risk, and they prevent employers from exposing themselves to greater liability than they might otherwise face in court.
Wrongful termination lawsuits are among the most frequently discussed forms of employment litigation, yet they are also among the most misunderstood. While much is written to inform people about what wrongful termination is, and if they should seek an attorney’s help, they are often left wondering what can be achieved by following through with this process.
Employees who consider bringing such a claim are motivated by more than just the emotional impact of losing a job. While the desire to correct unfairness, humiliation, or retaliation experienced by an employee frequently factor into their decision to sue, the driving force in most cases is financial recovery.
A wrongful termination lawsuit is, at its core, an attempt to make an employee financially whole after an unlawful job loss. If we are to understand why people file these lawsuits and what they can realistically recover with legal action, we must consider the economic consequences of termination and the legal remedies available.
The Foundation of a Wrongful Termination Claim
People pursue wrongful termination claims when they believe their dismissal was illegal under state or federal law. This goes beyond an “unfair” termination because specific laws were in place to prevent termination under the conditions or circumstances in which it occurred.
Generally, employment in the United States is considered “at-will.” This means that either the employer or the employee may end the employment relationship at any time, with or without cause. This standard, however, isn’t absolute. When termination occurs for an illegal reason, employees may have sufficient grounds for a wrongful termination claim.
For example, an employer can’t terminate an employee for discriminatory reasons such as sex, race, age, disability, or other characteristics protected by law. An employer also can’t legally fire someone in retaliation for engaging in legally protected activities. These activities might include reporting sexual harassment, complaining about missing wages, or participating in a workplace accident investigation. Moreover, wrongful termination may occur when employees are fired in violation of an employment contract or a breach of public policy.
Financial Necessity Motivates Most to File
When an employee believes their termination occurred in spite of laws that should protect them, the decision to file a lawsuit is often based on financial necessity. Losing a job is more than just a professional insult because it causes serious financial hardship and disruption to someone’s life.
When paychecks stop coming, people can very quickly fall deep into debt trying to afford necessary expenses. Unemployment insurance is unlikely to cover all of it, and someone may be barred from receiving benefits depending on how their employer characterized the termination. For example, some states don’t offer unemployment benefits to people who were fired for-cause, and it can be an uphill battle lasting weeks to appeal an adverse decision that denied benefits.
Mortgage payments, rent, healthcare costs, student loans, and daily living expenses don’t pause simply because employment has ended or unemployment benefits are in limbo. For many, a wrongful termination lawsuit becomes a lifeboat for recovering lost income and stabilizing financial hardship as they seek new employment.
Back Pay: Recovering Lost Earnings
One of the main financial remedies in wrongful termination cases is back pay. This form of compensation is designed to cover the wages an employee would have earned from the date of termination until the resolution of the case. Back pay often includes not only base salary, but also bonuses, commissions, and overtime (when applicable).
Because legal cases can take a significant amount of time to resolve, and wrongful termination cases seeking backpay rest on the theory that an employee is missing out on pay that they should be receiving, back pay awards can be substantial. The longer the period of unemployment or underemployment, the greater the potential recovery.
Employees who file wrongful termination lawsuits, however, are generally required to mitigate their damages by seeking new employment. Any income earned after termination may reduce the amount of back pay awarded. This principle ensures that compensation reflects actual financial loss rather than a windfall.
Regardless, back pay is one of the most important financial components of a wrongful termination claim because it motivates employers to act in good faith. Without back pay as a potential award, employers might be inclined to drag out wrongful termination cases just to wear down employees and exhaust their legal resources.
Front Pay: Addressing What Would Have Been Earned
In situations where returning to the former job is not practical, courts may award front pay. This compensates the employee for future lost earnings over a defined period. Front pay is particularly relevant when workplace relationships have been damaged beyond repair or when the position is no longer available.
The calculation of front pay depends on several factors, including the employee’s career trajectory, the availability of similar jobs, and the expected time needed to secure comparable employment. For employees in niche industries or those nearing retirement, front pay can represent a significant portion of total damages.
Loss of Benefits & Long-Term Compensation
Beyond wages, employees often lose valuable benefits when they are terminated. These benefits may include health insurance, retirement contributions, stock options, and pension accruals. In many cases, the financial value of these benefits is substantial and forms an important part of the overall claim.
For example, losing employer-sponsored health coverage can result in immediate out-of-pocket medical expenses. Similarly, missed retirement contributions can have long-term financial effects due to lost investment growth. Wrongful termination lawsuits may seek to account for these losses as part of the total compensation.
The Financial Consequences of Emotional Distress
Although emotional distress damages are not purely economic, they often intersect with financial recovery. The stress and anxiety caused by wrongful termination can lead to medical or psychological treatment, resulting in additional expenses. In some cases, emotional harm may also affect an individual’s ability to work, further compounding financial loss.
Courts may award damages for emotional distress depending on the nature of the case and the available evidence. While these damages vary widely, they can contribute meaningfully to the overall financial recovery.
Financial Penalties for Employer Misconduct
In certain cases, employees may also recover punitive damages. These are awarded when the employer’s conduct is particularly egregious, such as intentional discrimination or retaliation. Punitive damages are not intended to compensate the employee directly but to punish the employer and deter similar behavior. Awarding these damages is not typical or possible in every jurisdiction, and the amount a judge can order is often limited in jurisdictions that allow punitive damages.
Financial Recovery Often Occurs with a Settlement
Most wrongful termination cases are resolved through settlement rather than trial. Settlement amounts are influenced by factors such as the strength of the evidence, the extent of financial loss, and the potential for additional damages.
Settlements provide a way for employees to obtain compensation more quickly and with less risk, and they prevent employers from exposing themselves to greater liability than they might otherwise face in court. They can certainly be victories for employees who are apprehensive about enduring lengthy court proceedings with uncertain outcomes, but they also might not account for the full extent of what an employee could achieve by taking their case to court.
The decision to settle a wrongful termination claim is up to the individual and the advice they receive from their lawyer. That’s why it’s essential that when someone chooses to move forward with their wrongful termination claim, they choose an attorney whom they trust to assist them.
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