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Articles From Brisbane Consulting Group

COVID-19 Causes Upswing in Wrongful Termination Claims

Many employers have furloughed or laid off workers during the COVID-19 crisis. Some of these actions have spurred wrongful termination claims and other types of employment litigation.

Why Have Claims Risen in the COVID-19 Era?

Today’s unprecedented conditions have led to a surge in employment lawsuits. In one case, an office worker who had requested to work from home to comply with a local stay-at-home order was laid off. She subsequently filed a wrongful termination lawsuit, alleging that she was pressured by her employer to report to work in defiance of local orders (a criminal act) — and then was terminated when she refused. Similar lawsuits have been filed by employees claiming that they were fired for complaining about lack of personal protective equipment or for voicing concerns about co-workers who reported COVID-19 symptoms.

Likewise, terminated employees may file discrimination lawsuits related to the COVID-19 crisis. For example, former employees might allege that their employers used the pandemic as an excuse to purge the workplace of older people, people of color or members of the LGBTQ+ community. Additional discrimination claims may happen as companies decide the order in which furloughed employees will return to work.

Which Financial Estimates are Needed?

When estimating lost earnings, financial experts must account for the following types of compensation:

Actual and projected earnings. To determine “base earnings,” experts may consider 1) actual earnings in the year before an employee was terminated, 2) projected earnings for the year the termination occurred, or 3) the expected rate of earnings for a year in the future. Adjustments may be required for seasonal variations, commissions, sick pay and nonrecurring payments, such as a nonperformance-based bonus and overtime.

Pension and benefit plans. Compensation for lost pension benefits depends on the type of plan involved. For defined contribution plans, employer contributions are considered as a portion of lost earnings in the years the contributions would have been made. Rather than projecting the postretirement benefits to be paid, the expert calculates the sum of the but-for employer contributions and the but-for earnings.

Calculations for defined benefit plans, on the other hand, may require projection of the actual benefit stream following the employee’s retirement. Relevant factors include years of service, salary levels, retirement date, and life expectancy.

Fringe benefits and perks. To determine the value of fringe benefits, experts compare the benefits received before the alleged wrong to those received after — possibly accounting for the replacement cost of the lost benefits. For example, individual insurance rates may be higher than those paid under an employer-sponsored group plan. Experts distinguish between benefits that depend on the recipient’s level of income and benefits that depend merely on being employed.

Time frame. The loss period can range from several months to the plaintiff’s remaining work life. Selecting an appropriate period requires an analysis of such factors as the plaintiff’s likelihood of securing comparable employment and the need for specialized training to qualify for a new job.

Experts also must consider an employee’s duty to mitigate his or her damages. Defendants may argue that the employee took an unreasonable amount of time to land a new job or accepted a position at an unreasonably low pay rate.

Need Help?

Financial expertise is often critical in employment litigation. Hire a credentialed expert early to help you assess your options and evidentiary needs.

COVID-19 Causes Upswing in Wrongful Termination Claims

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Bill is a partner with Brisbane Consulting Group Business Valuation Division, providing business valuation, forensic accounting, and litigation support services. His valuation experience includes the valuation of closely held companies, covering a wide range of industries and engagements including: marital dissolution, dissenting shareholder disputes, estates and gift tax planning, merger/acquisition, and due diligence reporting.

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