Possible Damage Elements in Wrongful Termination Litigation: Back Pay, Front Pay, and Lost Earning Capacity

The purpose of this note is to show the distinction made in wrongful termination law between back pay, front pay, and loss of earning capacity. These terms have very specific meaning in wrongful termination litigation that an economist working on such cases would be well-advised to understand. There are many different acts at both the federal level and the state level under which such litigation might be initiated, not all of which involve terminations of employment. Further, such actions may be initiated through hearings at human rights commissions as well as in ordinary courts of law. For simplicity however, the term ‘‘wrongful termination’’ will represent any type of litigation under federal or state employment law under which workers might be awarded front pay or back pay to compensate for pay that was not or will not be received because of a wrongful act of an employer. Many such suits will not involve loss of earning capacity, which is for a different purpose than front pay.