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Beware ‘front pay’ trap when job-seekers sue

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in Discrimination and Harassment,Human Resources

Employees you don’t hire can’t cause too much legal trouble, right? Wrong!

In today’s tough economy, frustrated job-seekers are more likely than ever to sue. And if they sue for discrimination and win, courts are increasingly likely to award both back pay and lost future earnings—what they would have made going forward if they had been hired. That trend can cost employers big bucks.

Here’s how it works: Assume you turn down an applicant, who goes back out into the marketplace looking for a job. Her job search takes awhile, but she finally lands a position paying much less than you would have paid. In the meantime, she has also sued you for discrimination.

If she wins, the jury will be asked to calculate how much you owe her in back pay (from the date of the trial back to the time when you rejected her). That’s the difference between what you would have paid her and what she actually earns.

Then there’s “front pay”—the difference between what you would have paid her in the future, minus what her current job will pay going forward. And here’s where it gets tricky: The court decides how far into the future it will go when figuring front pay.

Recent case: Colleen Donlin went to work as a temporary employee for Philips Lighting, but soon applied for a permanent position. Philips didn’t select her.

When she successfully sued for sex discrimination, the jury awarded her $63,000 in back pay. It then projected forward for 25 years, providing her with an additional $395,000 in front pay.

The court reduced the front pay to 10 years of wages. On appeal, the 3rd Circuit said a 10-year award was reasonable. (Donlin v. Philips Lighting, No. 07-4060, 3rd Cir., 2009)

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