Glossary of Human Resources Management and Employee Benefit Terms
Front pay refers to compensatory damages paid out to plaintiffs in employment discrimination or anti-retaliation cases. In other words, front pay is money that is awarded to a terminated employee to make up for lost compensation that:
Accumulates between the time when the plaintiff brings the employment discrimination case or anti-retaliation case and when the court comes to a decision in favor of the plaintiff.
Occurs while the plaintiff secures new employment.
Is due to unlawful termination, and may compensate an employee for loss of experience, harm to reputation, and other future effects.
The end goal is to financially restore the plaintiff as much as possible for the wages that were lost due to discrimination or retaliation.
To illustrate front pay, let’s look at two examples—one for an anti-discrimination case and one for an anti-retaliation case.
Aamil’s case described him enduring three years of discrimination (including his superior’s refusal to grant him hours or regularly sign his timesheet) while employed at a construction firm. Aamil reported these actions to human resources, but nothing was done to remedy the situation. Two weeks later, he was fired. The judge of his case awarded Aamil front pay for the wages he would have earned had he been granted the promised 40 hours per week of work and pay throughout his three years of employment. He was also awarded money to cover his lost wages for the four months it took Aamil to find a new job after he was fired.
Additionally, Aamil was awarded money to cover the years of work experience he lost out on due to the discrimination and for the anxiety he developed from having to work in a hostile environment.
Heather brought a whistleblower retaliation case to court. She was terminated after she endured repeated intimidation from her employer regarding her written reports on the company’s refusal to follow health and safety protocols. The judgment was in her favor, so Heather was entitled to front pay that covered her lost wages, reputational harm, and emotional distress after being fired and being unable to find comparable work for two years.
Reinstatement is the restoration of an employee to their former job position without loss of seniority, compensation, or benefits. Reinstatement is the “preferred equitable remedy for unlawful employment discrimination…[but] does not always serve the interest of the victims of discrimination, the employers, or society.”
The differences between front pay and reinstatement are that front pay awards for past and future losses while reinstatement simply restores what the employee was previously entitled to as far as job and compensation.
The amount of front pay can vary, depending on if a charge is resolved through an EEOC conciliation process with a settlement agreement, or if a lawsuit is pursued in court. However, the front pay limits that are listed above still apply.
The EEOC (U.S. Equal Employment Opportunity Commission) is the organization that investigates filed charges brought from an employee against an employer. After the investigation (which includes gathering information, making on-site visits, and interviewing witnesses), the EEOC will determine if the charges have merit.
If there is reason to believe the charges do have merit, the EEOC may invite all parties to engage in conciliation (mediation) that may result in a settlement. If the conciliation is not successful in resolving the charge, a lawsuit may be filed in federal court.
Front pay is fairly simple to calculate because it is usually based on the employee’s pay rate or salary before the events that led to their termination. Basic front pay compensation awards the employee the amount of money they would have earned if job conditions had been fair and they had remained employed. Employees may also seek and be awarded a dollar amount for lost benefits, such as health insurance costs or company 401(k) matches.
Limits to front pay actually apply to additional damages the plaintiff may seek on top of basic front pay. These types of compensation may include pain and suffering (a payment that compensates the employee for how they were affected emotionally by the termination) or punitive damages (a payment that punishes the employer for their actions).
The limits on compensatory and punitive damages in discrimination cases depend on the employer’s size:
15-100 employees = $50,000
101-200 employees = $100,000
201-500 employees = $200,000
500+ employees = $300,000
Some factors that determine the amount awarded include:
Work and life expectancies
Effort of mitigation taken by employer
Length of time employed and length of time employed in lost position
Likelihood of continued employment absent any discrimination
Length of time it took to secure comparable employment elsewhere