Third Circuit Grants Additional Award to Offset Tax Burden in Agere Discrimination Suit

Holding:

Creating a new precedent in the federal circuit, the U.S. Court of Appeals for the Third Circuit has ruled that courts may grant a winning plaintiff in an employment discrimination case an additional award to compensate him for the increased tax burden of receiving a backpay award in one lump sum. In this appeal, the Third Circuit upheld a jury award of $200,000 against Agere Systems, Inc. in this discrimination case filed by Joan Eshelman under the Americans with Disabilities Act (“ADA”). In her suit, Eshelman claimed that she was terminated because Agere perceived her to be disabled due to a chemotherapy-related memory impairment. The U.S. District Court for the Eastern District of Pennsylvania denied Agere’s motion to overturn the jury verdict. Aside from affirming the jury award, the Third Circuit granted an additional $6,893 to the plaintiff to compensate her for the negative tax consequences a backpay award may create. In so doing, the Third District broke away from the District of Columbia Circuit’s ruling under Dashnaw v. Pena, 12 F.3d 1112 (D.C. Cir. 1994) that winning plaintiffs are not entitled to supplemental awards to make up for increased taxes. On the contrary, the Third Circuit wrote, trial judges have broad equitable powers under discrimination laws to fashion a remedy that truly makes the plaintiff whole. This type of an award, as with prejudgment interest, represents a recognition that the harm to a prevailing employee's pecuniary interest may be broader in scope than just a loss of back pay.

Detailed Summary:

Plaintiff-appellee Eshelman instituted a lawsuit against her former employer, defendant-appellant Agere claiming, inter alia, that Agere discriminated against her in violation of the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101-12213. At trial, Eshelman argued alternatively that Agere unlawfully discharged her because of her record of cancer-related disability, or because it regarded her as disabled. The jury found in Eshelman’s favor, and awarded her back pay and compensatory damages totaling $200,000.00.

In this appeal, Agere argued that there was insufficient evidence to sustain the jury verdict with respect to either theory of liability. Further, Agere argued that the U.S. District…

More Updates