Court Rejects Enhancement to Damage Award to Offset Adverse Tax Consequences

Besler v. Bd. of Educ. of West-Windsor-Plainsboro Regional Sch. Dist., 2008 WL 3890499 (App. Div., August 25, 2008) – Adding to the divide among New Jersey courts, the Appellate Division held that a trial court should not have increased a $100,000 award for emotional distress damages by approximately $70,000 to offset the adverse tax consequences the plaintiff would incur as a result of the lump sum award in a denial of free speech case.  Other courts within and outside New Jersey have held that, consistent with the “make whole” goal of discrimination laws,  economic and noneconomic damage awards should be increased to account for the fact that such awards will be subject to taxation after being paid to the prevailing plaintiff.  Departing from those cases, the Court here held that absent direction from the Supreme Court, it would not affirm the enhancement awarded by the trial court.  Although not an employment discrimination case, the holding here is applicable to employment cases.

Note: This article appeared in the September 2008 issue of the New Jersey eAuthority.