Title VII Damage Caps: Calculating Your Maximum Exposure

Title VII (which prohibits discrimination on the basis of race, sex, national origin, etc.) limits damage awards based on the number of employees the employer had during the "current or preceding calendar year." The maximum total amount of compensatory and punitive damages that may be awarded to the plaintiff are dependent upon the number of employees as shown below.

It may seem like a simple task to decide the meaning of the term "current or preceding calendar year." But, what does that term mean to you? This was one of the specific issues in the recent Fifth Circuit decision of Vance v. Union Planters Corp. The Fifth Circuit clearly explained that the term "current year" refers to "the year in which the discriminatory acts took place." The court also explained that any "other interpretation allows parties to engage in gamesmanship by structuring companies, or timing the progress of lawsuits, to maximize or to minimize loss."

Further, the court presumed that part of the reason for the damages cap for a smaller company is that such an entity cannot afford to hire a human resource personnel to deal with issues of modern employment law while larger companies may be better equipped to hire the relative expertise and are held to a higher standard.

In counting employees, the court explained that the first step is to determine whether "nominally independent entities" are a single employer for purposes of Title VII liability. If so, the total employment should be aggregated. In other words, if there is more than one employer, all employees for each employer may be counted to determine the total number of employees of the damage cap. For example, in Vance, the court explained that the fact that two companies were merging at the time of the alleged harassment may have necessitated counting the employees in both companies to determine the limit of damages.

Employers now have a bright line test for determining their maximum exposure in discrimination cases pursuant to Title VII. Simply count the number of employees that were employed during the current or preceding calendar year when the alleged discrimination took place.