What goes into a wrongful termination settlement
- Back pay: wages and benefits lost from the firing to the settlement or judgment, minus what you earned elsewhere. You must make reasonable efforts to find comparable work (the duty to mitigate).
- Front pay: the gap between your old and new pay for a period after judgment, when reinstatement is not practical.
- Compensatory and punitive damages: emotional distress, harm to reputation and punishment for malicious conduct. Under Title VII and the ADA these are capped by employer size.[1]
- Liquidated damages: in age discrimination cases a willful violation doubles the back pay award.[3]
- Attorney fees can be awarded to a winning employee under most federal and state anti-discrimination laws, which increases settlement pressure.
Federal caps on discrimination damages
The combined cap on compensatory and punitive damages in Title VII and ADA cases depends on how many employees the employer had in each of 20 or more weeks in the current or preceding year.[1] Back pay, front pay and interest are not counted toward the cap.
| Employees | Cap on compensatory + punitive damages |
|---|---|
| 15–100 | $50,000 |
| 101–200 | $100,000 |
| 201–500 | $200,000 |
| More than 500 | $300,000 |
State laws can be more generous: California’s Fair Employment and Housing Act, for example, has no damages cap. Employers with fewer than 15 employees are not covered by Title VII, but many state laws cover them.
Discrimination lawsuit settlement calculator: worked example
An employee earning $60,000 is fired and finds a $50,000 job after 6 months; the employer has 120 employees. Back pay is $30,000; one year of front pay at the $10,000 gap adds $10,000 at the high end; emotional distress and punitive damages are capped at $100,000 for this employer size. The calculator shows $40,000 to $115,000 before attorney fees, a range a mediator would then discount for the strength of the evidence.
EEOC deadlines come first
To keep a federal claim, a charge must be filed with the EEOC within 180 days of the firing, or 300 days where a state or local agency enforces a similar law.[2] Most settlements happen during the EEOC process or after a right-to-sue notice. State deadlines differ; California’s are on the wrongful termination in California statute of limitations page.
Taxes on an employment settlement
Back pay and front pay are wages, reported on a W-2 with tax withholding. Emotional distress damages are taxable unless they flow from a physical injury, and punitive damages are taxable.[4] See the settlement calculator for fees and taxes on the final number.
A wrongful death claim is valued differently, mainly on the survivors’ lost financial support; see the wrongful death statute of limitations for deadlines, and the personal injury settlement calculator for the multiplier method.