Judge Reduces $6 Million Jury Award in Wrongful Termination Case

A jury awarded $6 million to an employee in a wrongful termination action, but a California appeals court lowered the award by $140,000, finding that the employee's damages should have been reduced by the amount of income she earned from other employment after she was fired.  

On March 27, 2018, a Los Angeles County Superior Court jury found the employer liable for just over $6 million after concluding that it had wrongfully terminated the employee, who had worked for the employer, a pharmacy chain, for 23 years. The employee had suffered an incident at work that caused her to have an emotional reaction and be transported to the hospital. After returning to work following medical leave, the employer transferred her to four different stores over a two-and-a-half-year period before terminating her for alleged poor work performance and attitude.

The employer appealed the jury award. 

On appeal, the parties agreed that the employee earned $140,840 from post-termination employment. The employee claimed that she earned those wages from jobs inferior and not substantially similar to her position with the employer, and that, therefore, the earnings should not be deducted from her award for wrongful termination. The employer claimed that the post-termination earnings should be deducted from the award, and the appeals court agreed with the employer.

Rule on Mitigation of Damages

The general rule is that the measure of recovery by a wrongfully discharged employee is the amount of salary the parties had agreed on for the period of service, less the amount that the employer proves the employee has earned or with reasonable effort might have earned from other employment, the court first noted.

Contrary to the employee's claim, the court said, there is no requirement that the wages the employee earns come from a position that is not inferior to the one she held with the employer. The court explicitly rejected the idea that because the jury could reasonably have concluded that the employee's substitute job was inferior to her prior job, the wages the employee earned at the substitute job should not be applied to mitigate the employer's damages. 

When an employer seeks to reduce a discharged employee's damages by amounts the employer claims the employee could have earned from other employment, the employer must prove, among other things, that employment substantially similar to the employee's former position was available to the employee, the court explained. 

If no such similar employment is available, a trial court should not deduct from the plaintiff's recovery the amount that she might have earned in employment that was substantially inferior to her position with defendant. However, this does not mean that the amounts a plaintiff has actually earned from substitute employment, even inferior employment, are not applied to mitigate damages for lost earnings, the court said.

Although an employee may not be obliged to accept inferior employment, if an employee accepts employment and receives earnings, those actual earnings should be deducted from an award of past lost earnings, the court said.    

The appeals court modified the lower court judgment to reduce the damages for wrongful termination by $140,840.

Martinez v. Rite Aid Corp., Calif. Ct. App., No. B292672 (April 30, 2021).

Professional Pointer: Employers should welcome this decision, particularly because a different California appeals court reached a different conclusion on the same issue raised here—ruling in 2013 that income earned from "inferior" employment did not have to be deducted from an award of damages in a wrongful termination action. Villacorta v. Cemex Cement Inc., 221 Cal. App. 4th 1425 (2013).

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.