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Can you explain what mitigation of damages means in a wrongful termination case?

Best Employment Attorney Answer: Our wrongful termination lawyers recently addressed that an unlawfully fired employee’s right to back pay and front pay may be reduced or wholly eliminated if he or she failed to mitigate his or her damages. (Best Law Read: Wrongful Termination Claim: Why Looking For A New Job Is So Important). As our employment discrimination attorneys discussed, employers can reduce a prevailing employee’s entitlement to backpay by proving the employee failed to attempt to mitigate. The Employer’s burden to do so is met by presenting sufficient evidence that: (1) suitable work existed, and (2) the employee did not make reasonable efforts to obtain it. Rasimas v. Mich. Dep’t of Mental Health, 714 F.2d 614, 624 (6th Cir. 1983); Clarke v. Frank, 960 F.2d 1146, 1152 (2d Cir.1992). The ultimate question “is whether the plaintiff acted reasonably in attempting to gain other employment or in rejecting proffered employment.” Pierce v. F.R. Tripler & Co., 955 F.2d 820, 830 (2d Cir.1992). So, essentially, if an unlawfully fired employee acted reasonably to replace lost income, back pay and front pay will not be reduced. (Best Law Read: How Is Back Pay Calculated In Wrongful Termination Cases?; Can I Get Front Pay After Being Wrongfully Fired?).

Will self-employment be considered mitigation of damages?

Top Wrongful Termination Lawyer Answer: “Self-employment can constitute employment for purposes of mitigating damages, as long as the self-employment was a reasonable alternative to finding other comparable employment.” Smith v. Great American Restaurants, Inc., 969 F.2d 430, 438 (7th Cir.1992) (affirming that jury could properly find that prevailing employee’s opening of her own restaurant was a reasonable venture to satisfy mitigation requirement). To that end “a self-employed person is ‘employed’ for the purposes of mitigating damages if establishing a business of his own was a reasonable alternative to finding other comparable employment.” Carden v. Westinghouse Electric Corp., 850 F.2d 996, 1005 (3d Cir.1988).

However, an wrongfully fired employee cannot satisfy the duty to mitigate by simply proclaiming some effort to start entrepreneurial business as the new business effort must be undertaken seriously with a reasonable chance of succeeding. See Brown v. Smith, 827 F.3d 609, 616 (7th Cir. 2016)(“there is little reason to doubt that Brown’s business was a legitimate and reasonable attempt to make money.”); Hawkins v. 1115 Legal Serv. Care, 163 F.3d 684, 696 (2d Cir. 1998)(holding self-employment as lawyer was a reasonable effort to mitigate); Brooks v. Woodline Motor Freight, Inc., 852 F.2d 1061, 1065 (8th Cir. 1988) (holding unlawfully fired employee opening own trucking business acted reasonably even though business failed); Nord v. U.S. Steel Corp., 758 F.2d 1462, 1471 (11th Cir. 1985) (holding assisting husband in opening psychology practice constitutes reasonable self-employment).

Who has the burden of showing that self-employment was reasonable or unreasonable?

Best Employment Discrimination Lawyer Answer: Consistent with the burden to prove failure to mitigate as an affirmative defense, the burden to prove that starting a business was unreasonable falls on the employer. Taylor v. Invacare Corp., 64 F. App’x 516, 523 (6th Cir. 2003); Carden v. Westinghouse Elec. Corp., 850 F.2d 996, 1005 (3d Cir. 1988).

Who decides whether self-employment was reasonable or unreasonable?

Top Trial Lawyer Answer: Just like all other issues of mitigation in wrongful termination cases, the issues surrounding the reasonableness are decided by the jury. Gunter v. Bemis Co., Inc., 906 F.3d 484, 490 (6th Cir. 2018); Hawkins at 696; Dailey v. Societe Generale, 108 F.3d 451, 456–57 (2d Cir. 1997); Wehr v. Burroughs Corp., 619 F.2d 276, 278 (3d Cir. 1980).

What is an example of mitigating a wrongful termination by self-employment?

Best Unlawful Firing Attorneys Answer: Let’s look at Smith v. Great Am. Restaurants, Inc., 969 F.2d 430, 438–39 (7th Cir. 1992), in which the United States Court of Appeals for the Seventh Circuit thoroughly addressed this issue. In this case, Lucille Smith, a former restaurant manager, sued her former employer, Great American Restaurants (“GAR”), for age discrimination and wrongful termination under the Age Discrimination in Employment Act of 1967 (“ADEA”). Jury returned found in her favor and awarded her $55,998 in lost wages and benefits and, in doing so, rejected the employer’s failure to mitigate affirmative defense. Disagreeing with the jury, the United States District Court for the Southern District of Indiana granted judgment notwithstanding the verdict on the issue of mitigation and reduced the award to $18,113.

First, the United States Court of Appeals for the Seventh Circuit held as a basic premise that self-employment is an allowable form of mitigation and that starting a new entrepreneurial business does not automatically cutoff lost wages or constitute a failure to mitigate:

We must reject GAR’s contention that Smith’s duty of mitigation limits her damages to a single month of back pay. The cases indicate that self-employment, if reasonable, counts as permissible mitigation, and the jury could certainly conclude that Smith’s efforts were reasonable. In fact, GAR’s own witness conceded that Smith’s opening of a restaurant was a reasonable venture. GAR’s reliance on Hansard v. Pepsi–Cola Metropolitan Bottling Co., 865 F.2d 1461 (5th Cir.), cert. denied, 493 U.S. 842, 110 S.Ct. 129, 107 L.Ed.2d 89 (1989), is misplaced. In Hansard, the court explicitly recognized the general principle that self-employment can satisfy the burden of diligence in mitigation, but found the plaintiff’s burden not satisfied by his flea market enterprise. In rejecting the plaintiff’s efforts as insufficient, the court relied on the facts that he “did not approach the flea market as a business,” that his “flea market business was never more than a part-time enterprise” and that he was “fully capable of continuing his job search during the week.” Id. at 1468. Here, in contrast, it is uncontested that Smith’s efforts in opening and operating Lucy’s Family Dining were serious and in fact much greater than required by an ordinary full-time job. A jury could rationally determine that Smith’s self-employment was a reasonable, good faith exercise of diligence. The notion that starting one’s own business cannot constitute comparable employment for mitigation purposes not only lacks support in the cases, but has a distinctly un-American ring.

That being said, the United States Court of Appeals for the Seventh Circuit held that there was a point were continuing in failing business may no longer be reasonable:

We have greater sympathy for the district court’s 11–month measure of damages. Given that Smith’s decision to open her own restaurant was a reasonable effort at alternative employment, we must ask whether such self-employment remained reasonable for the entire period covered by the jury’s award. The ADEA must not be used as a tool for insuring a plaintiff’s fledgling business while it continues to sustain losses. Damages should ordinarily extend only to the date upon which “the sting of any discriminatory conduct [has] ended.” Syvock, 665 F.2d at 160 n. 14. The district court determined that by December 1988 Smith must have known that her business was not making a profit. At that point, the court held, GAR was no longer responsible for her lack of an income. The district court’s 11–month measure makes sense.

With the Seventh Circuit finding that both opinions of the jury and judge were reasonable – although directly conflicting – the expectation might be that the Court of Appeals would either weigh whose opinion is more reasonable or give deference to the federal district court judge. Not so.  Remember, the law provides that the jury is to decide this issue. The United States Court of Appeals for the Seventh Circuit explained:

But we are not deciding whether the district court’s decision was rational; it is the jury’s verdict that we must review. And it is worth reiterating that the jury’s verdict must stand if it is rational, and that the plaintiff is entitled to every permissible inference from the evidence. Despite the permissibility of the district court’s view, we cannot say that the jury’s 34–month measure of damages was impermissible. First, we emphasize that the issue of reasonable mitigation is ultimately a question of fact for the jury. Second, while it is true that Smith’s restaurant business did not show a net profit until its third year, its gross revenues were increasing, and the jury could determine that continuing with the enterprise was reasonable under the circumstances. Finally, one factor raised at trial and urged on appeal by Smith stands unaddressed by GAR and by the district court. Mills testified that he would tell prospective employers who contacted him that Smith simply walked off the job without notice, and that such a report would make it difficult for her to find employment. The jury thus could have rationally concluded that any efforts to find comparable employment would have been fruitless. On this permissible view of the evidence, the “sting” of discrimination did not end at the 11–month point after all; rather, GAR’s “official” version of events continued to preclude Smith’s employment by another employer. We note also that these issues were presented and argued before the jury. The defendant had (and used) its opportunity to argue that Smith’s self-employment was not reasonable mitigation. The jury rejected that argument.

How do I maximize my damages in a wrongful termination case?

Best Employment Law Firm Answer: Get help from a top employment law firm that has the experience and resources to help you with the specifics of your case. Every employment discrimination and wrongfully firing case is going to be different. If you have been wrongfully fired or terminated; harassed or discriminated based on your race, national origin, gender, age, religion or disability; or even think that you might need an employment lawyer, then call the right attorney to schedule a free and confidential consultation. (Read: What is the Spitz No Fee Guarantee?) Call our lawyers in Cleveland, Columbus, Detroit, Toledo and Cincinnati to get help now. Spitz, The Employee’s Law Firm and its experienced attorneys are dedicated to protecting employees’ rights and solving employment disputes.

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