Estimating Settlement Value of Employment Law Cases

Last week, I discussed how to calculate the potential value of a wrongful termination case at a trial. However, most employment law cases settle rather than going to a trial. Accordingly, it also is important to be able to assess the potential settlement value of your case.

Risk of Loss

Trial CourtroomSince proving discrimination or retaliation requires you to show what is in someone else’s mind, most of these cases are inherently risky. As a result, when trying to determine what might be an acceptable settlement you should factor in the risk that you could lose your case.

For example, if you estimate your damages are approximately $1 million and you have a 50% chance of winning your case, then mathematically your case might be viewed as having a $500,000 settlement value. In contrast, if you have a 70% chance of winning the same case, then it would have a mathematical value of $700,000.

Of course, nobody can predict the actual odds that you will win or lose your case. However, with the advice of an experienced employment lawyer you can make reasonable predictions about whether your case involves a relatively high or low risk of winning or losing at a trial.

Risk Adversity

Most people try to avoid taking unnecessary risks in life, especially when they the stakes are high. For example, although a 50% chance of receiving $1 million theoretically has a mathematical value of $500,000, most people would be willing to accept a guaranteed $450,000 instead of taking this risk. This concept is known as risk adversity.

Someone who is especially risk adverse might be willing to accept $300,000 rather than taking this risk. In contrast, someone who is a gambler might not be willing to accept less than $500,000. Your current personal financial circumstance often impacts how much risk you are willing or able to take.

Costs of Litigation

Another factor you should consider in estimating an appropriate settlement value for your case is what it will cost you to get to (and through) a trial. Depending on your agreement with your lawyer, this may include actual dollar costs such as out-of-pocket costs or legal fees. While most employment discrimination and retaliation cases allow you to can recover these legal fees and costs from your former employer if you win, you will not be able to recover these costs if go to trial and lose your case.

Aside from dollar costs, every employment law case requires a significant commitment of time and energy. As a result, when deciding your settlement position you should consider the dollar and energy you would save.

Emotional Considerations

Aside from dollars, there are emotional factors to consider with respect to settling your case. Most employment law cases are deeply personal. You have to determine whether you will feel better if you are able to resolve your case and move on with your life, or will regret your decision to settle and always wonder if you made a mistake. In litigation, individuals often change how these emotional considerations impact their decisions as time passes.

Practical Considerations

Yet another factor you should be aware of when assessing the settlement value of your case is what your former employer is likely to be willing and able to afford to pay. For example, you should understand that a relatively small and unprofitable company that does not have insurance coverage is unlikely to be able to make the same type settlement that a Fortune 500 company, or a smaller company with insurance coverage, might be able to afford. While that does not necessarily mean you should accept a lower settlement as a result, it is something you should at least understand.

Bottom Line

There is no one right or wrong answer to determine your settlement position. Rather, you should speak to your employment lawyer about these and any other relevant factors to help you assess your position.

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