By Bill Ruhling
When a former employee claims wrongful termination, a common way he can establish damages is to assert that his future earning capacity was impaired. To adequately assess such a claim, a jury needs to have sufficient evidence to calculate a nonspeculative amount that will provide fair compensation. What type of evidence is appropriate?
In Egan v. Butler, the Virginia Supreme Court recently held that a jury may consider the employee’s employment history as part of the calculus. The court further explained that when the jury is assessing whether to award punitive damages against the employer for a manager’s egregious conduct, the test is whether the manager had sufficient discretion and authority to be deemed a “responsible actor.”
David Butler worked as a diesel mechanic for Abilene Motor Express under Joseph Egan’s supervision. Approximately 3 months after Butler was hired, Egan terminated him for unsatisfactory job performance. As can happen in such a situation, tempers flared, and an altercation occurred. As a result, Egan swore out a misdemeanor assault and battery complaint against Butler.
Egan claimed that Butler pushed and either cut or stabbed him. Several months later, the criminal charge was dropped without any determination of the merits. Those circumstances formed the basis of a malicious prosecution and defamation lawsuit Butler filed against both Egan and Abilene in the circuit court for the city of Richmond.
Butler claimed that as a result of Egan and Abilene’s wrongful conduct, his future earning capacity was reduced. At trial, he testified that he now makes approximately $6,000 less per year than he earned at Abilene. He further testified that he intends to work until age 65. Based on those facts, he claimed lost wages of approximately $140,000.
Egan and Abilene sought to introduce evidence at trial about Butler’s former employers, previous rates of pay, and the reasons he left various jobs. The trial court judge excluded that evidence, however, finding it had no bearing on Butler’s future income.
The jury awarded Butler $900,000 in compensatory and punitive damages. The court reduced the punitive damages award, leaving him with a total judgment of approximately $800,000. Egan and Abilene appealed to the Virginia Supreme Court, arguing that the trial judge erred in preventing Butler’s work history from being presented to the jury. Abilene also argued that the punitive damages award against it was improper.
Supreme Court’s decision
The Virginia Supreme Court agreed with Egan and Abilene on both points. The court said that “a jury award for future lost income damages must be predicated upon evidence sufficiently establishing the plaintiff’s work history and continuing ability to work absent the wrongful actions of the defendants, so that such an award is not impermissibly speculative.”
The court emphasized that when a former employee seeks recovery for lost future income for a significant period of time, there must be a solid evidentiary basis to support the claim. The employee’s work history is relevant to that assessment. The case was sent back to the Richmond Circuit Court for a new trial on compensatory damages with Butler’s work history being presented to the jury.
Limiting liability for punitive damages. Turning to Butler’s punitive damages award, the Supreme Court addressed a matter previously unresolved in the Commonwealth: how to determine when the actions of a manager may be attributed to the employer for purposes of awarding punitive damages.
The court concluded that punitive damages may be awarded against an employer only when the manager who committed the wrongful acts is “in a sufficiently high position in the employer’s corporate structure.”
The court declined to establish a clear-cut rule for how high in the corporate ranks a manager must be for his actions to be attributed to the employer. Rather, the court explained that the question is fact-sensitive and “dependent upon the power, role and independence of the employee [who committed the wrongful act] relative to the nature and structure of the corporate employer.”
In this case, the Virginia Supreme Court found that Butler failed to produce sufficient evidence at trial to show that Egan was in a sufficiently high-level position at Abilene to render the company liable for punitive damages. Egan v. Butler, 778 S.E.2d 765 (Va. 2015).
How can you best defend future income and punitive damages claims brought by former employees? First, you should prepare to present the former employee’s work history to illustrate both how he performed at past jobs and the pattern of his past earnings. That provides a basis for the jury to judge credibility and evaluate the former employee’s prospects for future employment and earning capacity.
Second, be able to articulate and describe the level of independence you give to individuals on your management team. You are more likely to be held liable for punitive damages if a manager exercises significant discretion or has the authority to speak and act independently for the company.
Thus, you should develop and communicate to employees in management positions the appropriate ways to handle difficult situations with disgruntled employees. Through effective communication, you can avoid future liability for punitive damages based on the improper conduct of your managers.