NLRB Upends Traditional Backpay Formula Providing Potential Windfall to Employees

In calculating backpay owed to former employees the National Labor Relations Board (NLRB) has concluded were wrongfully terminated, the Board has historically deducted any interim earnings. In calculating interim earnings, the Board has treated expenses incurred in seeking or maintaining interim employment as deductible from interim earnings. In King Soopers, Inc., 364 NLRB No. 93 (August 24, 2016), the Board, once again, turned long-standing precedent on its head by increasing the amounts payable by employers. Specifically, the Board Majority ruled former employees are entitled to search-for-work and interim employment expenses as separate expenses—not as offsets to wages earned from interim employment and no longer limited by the actual interim earnings the former employee has earned.

In so ruling, the majority reasoned that its traditional approach to search-for-work expenses resulted in less than make-whole relief. By way of example, the majority pointed to situations in which discriminatees either do not find interim employment or find work that pays less than the expenses incurred in finding/or maintaining that work. In those situations, the majority argues, “[t]he practical result of the Board’s traditional approach has been less than make-whole relief.” since those discriminatees who have been discharged from employment are in effect not compensated for out of pocket expenses that exceed their interim earnings.

Member Miscimarra filed a separate opinion partially concurring and partially dissenting from the majority opinion. Although he acknowledges the “one circumstance in which the Board’s traditional approach does not compensate a claimant’s employment/search expenses in full” (i.e. where there are insufficient interim earnings to be offset by those expenses), he nonetheless dissents from the majority’s new approach to search-for-work expenses. Miscimarra first argues the new approach would produce a windfall when a wrongfully terminated employee’s interim earnings exceed his or her back pay and employment/search expenses by placing them in a “more favorable financial position than would have resulted from uninterrupted employment with the respondent employer,” which exceeds the Board’s remedial authority

Miscimarra also criticized the majority’s departure from long-standing precedent on the bases that it will (1) create a substantial risk of protracted litigation, thus further delaying the resolution of cases, and (2) depart from the ways in which other statutes calculate the expenses as a component of back pay.

Employers will need to take the Board’s change in the treatment of search-for-work/ employment expenses into consideration when determining the potential costs associated with defending against unfair labor practice charges that may result in a backpay award.