Thursday, June 26, 2008

Exxon, Punitive Damages, and Employment Cases

Exxon Yesterday, the Supreme Court in Exxon Shipping Co. v. Baker cut the punitive damage award for the Exxon Valdez spill from  $2.5B to $500M.  Over at SCOTUSblog, Lyle Denniston points out that

It is necessary . . . to acknowledge that this is not a constitutional ruling, that it is only about the Court’s common-law powers, and that it arises only in the context of law governing maritime commerce.  But to look at it only in those narrow terms is to miss the signal that the Court is giving – that is, it has grown highly skeptical that it can spell out, in words rather than numbers, workable guidelines that could bring some sense – some consistency – to punitive damages awards.

And in numerical terms, as Denniston points out, the Court has fixed that ratio at 1:1.

Such a ratio, if applied to employment cases, would have a devastating impact.  Compensatory damages in employment cases are seldom sufficient to pay for the cost of litigation.  The largest component of compensatory damages is lost wages, and these damages aren't huge for low-income employees or employees who have managed to find subsequent employment.  What makes employment cases viable -- and what keeps employers honest -- is the possible award of punitive damages.

Yes, punitive damages are a crapshoot.  But with low- and moderate-income employees all but priced out of the market for legal services, the fear of punitive damages is the only legal incentive employers have to protect low-income employees from employment discrimination.


Employment Discrimination | Permalink

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