EEOC General Counsel: Anti-Discrimination Damages Caps Are Too Low

[Editor’s note: The description of how back pay is limited has been corrected.]

Million-dollar jury verdicts in equal employment opportunity (EEO) cases sometimes mask large cuts in final judgments due to federal caps on compensatory and punitive damages. Karla Gilbride, general counsel of the U.S. Equal Employment Opportunity Commission (EEOC), has criticized the caps as too low to dissuade employers from breaking anti-discrimination laws.

Damages Caps Imposed

In a Jan. 11 order, a judge found that a truckload carrier, Werner Enterprises, intentionally discriminated against a truck driver, failing to hire him because he is deaf and denying him a reasonable accommodation. A jury awarded $36 million in punitive damages and $75,000 in compensatory damages, but due to the damages cap, the judge reduced the combined award of compensatory and punitive damages to $300,000. The judge also awarded $35,682 in lost wages.

The damages cap wasn’t even 1 percent of the jury’s intended award, Gilbride said.

“These caps, which were set by Congress decades ago, take away juries’ power to deter large employers from engaging in intentional discrimination against workers,” she said. “Juries who have heard the evidence should be able to push employers who knowingly or recklessly break the nation’s workplace civil rights laws without constraints from outdated caps on damages.”

Werner Enterprises declined to respond to a request for comment.

Compensatory damages are meant to cover the plaintiff’s out-of-pocket expenses—typically relocating, job search costs and medical bills, said James Hermon, an attorney with Dykema in Detroit. Punitive damages are intended to punish wrongful and intentional conduct.

The Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964 caps the combined amount of compensatory and punitive damages an individual may be awarded.

Those caps are:

• $50,000 for employers with 15 to 100 employees.
• $100,000 for employers with 101 to 200 employees.
• $200,000 for employers with 201 to 500 employees.
• $300,000 for employers with more than 500 employees.

There is no damages cap for race-based discrimination claims under Section 1981 of the Civil Rights Act of 1866, said Thomas Spiggle, a plaintiffs’ attorney with The Spiggle Law Firm in Alexandria, Va. Section 1981 doesn’t have a minimum-employee threshold, he noted. Some courts have held that Section 1981 also can apply to national origin discrimination, Spiggle added. Section 1981 doesn’t apply to any other discrimination claim, like disability, sex or religious discrimination.

Reasons for Raising the Caps

The caps applicable to compensatory and punitive damage awards under the ADA and Title VII “were set in 1991 and have not been raised since,” Spiggle said. These caps were put into place as a part of congressional compromise to ensure the passage of the Civil Rights Act of 1991. “Presumably, the caps exist to protect employers from excessive plaintiffs’ verdicts, though that policy objective has now been flipped on its head as the damages in today’s dollars provide little deterrence,” he said.

The damages caps also may dissuade some people with meritorious cases from suing. The smaller the possible award, the less likely workers are willing to go through the time, expense and trouble of paying for litigation, often over several years, particularly when the prospects of winning vary from court to court and are uncertain even with a strong case.

Moreover, many workers don’t wind up being represented by the EEOC and can’t afford plaintiffs’ lawyers in anti-discrimination cases unless they are represented by so-called contingency-fee attorneys. Rather than being paid by the workers for their services, these attorneys are paid a percentage of the judgment and rely on a big payout to make the potential years of litigation worthwhile. The smaller the possible award, the less incentive contingency-fee lawyers have to represent workers in anti-discrimination cases.

Due to inflation, $1 in January 1991 is worth about $2.28 in December 2023, according to the U.S. Bureau of Labor Statistics Consumer Price Index Inflation Calculator. “For these caps to be even remotely fair, they should be at least doubled and adjusted annually to inflation,” Spiggle said.

Caps Defended

Caps on damages are necessary to rein in juries that allot extraordinarily excessive awards, some management attorneys say.

“While not surprising, the general counsel’s comments are misguided,” said JT Charron, an attorney with Baker McKenzie in Chicago. “The jury in the Werner case levied a $36 million punitive damages award, which was 480 times larger than the $75,000 compensatory damages award.” The claims in that case related to a single instance of alleged discrimination, not a systemic practice or policy of the employer. “This is precisely the type of runaway jury award that damages caps are designed to prevent,” he said.

Charron added that it might be time to revisit the amount of the caps on compensatory and punitive damages, given the length of time since they were last adjusted. But, he said, “cases like Werner show that caps remain a necessary component.”

Uncapped Back and Front Pay

While compensatory and punitive damages are capped, uncapped damages in the form of back and front pay may make the plaintiff whole for actual economic harm, Hermon said.

Back and front pay awards correspond with an employee’s earnings, said Evan Parness, an attorney with Covington in New York City.

For attorney fees, the amounts must relate to reasonable time spent and hourly rates of similarly situated attorneys in the relevant market, he added.

“Even with these limits, awards in discrimination cases can be significant,” Parness said.

He said that under the ADA and Title VII, back pay is limited to the shorter of 1) the time between the date of the alleged discrimination and the date of a judgment for the plaintiff or 2) two years prior to the date the discrimination complaint was filed through judgment.

Front pay might be awarded when reinstatement isn’t possible. “Front pay is generally based on the employee’s likely earnings from the employer for the period he or she could reasonably have been expected to work for the employer but for any proven discrimination,” Parness said.

Courts typically award front pay for one to two years, said Kristen Gallagher, an attorney with McDonald Carano in Las Vegas. However, some front pay awards have represented 25 years of lost wages, she added.

“Employers should also be aware that state and common law claims may not impose caps and plaintiffs may be able to recover under multiple theories in their jurisdiction,” Gallagher said.