Damage Estimation in Wrongful Termination Cases: Impact of the Great Recession

29 March 2012
By Dr. Stephanie Plancich et al.

The recent financial crisis was marked by the highest unemployment rates that the US has witnessed in more than 25 years, with the number of workers displaced from jobs that they held for at least three years doubling during the period from January 2007 through December 2009, relative to the period from January 2005 through December 2007. At the same time, there was substantial growth in the rate of wrongful termination filings claiming discrimination, leading to an increased likelihood during the recession that a displaced worker would bring a wrongful termination claim. This NERA paper evaluates the impact of the economic downturn in the estimation of alleged damages for wrongful termination claims. Although, in aggregate, more wrongful termination claims stemming from discrimination were brought during the recent recession, any individual claim must be evaluated on its own merits. To do such an evaluation, the authors identify each of the several inputs that go into the calculation of economic loss and evaluate how each input may be affected by the economic downturn. Using several stylized illustrations and examples, the authors show that, for any individual case, the economic downturn may imply either higher or lower alleged damages than would have been expected in the absence of the recession.