Wrongful Termination Expert Witness Testimony
Issues Considered by the CPA Expert Witness When Calculating Wrongful Termination Damages
The basic questions to answer in determining damages in wrongful termination, personal injury and wrongful death cases are the same: how much would plaintiff have earned in active work and retirement through his or her death, absent the critical event, and how much can plaintiff reasonably be expected to earn today (if anything)? These are questions forensic accountants can answer. (Personal injury cases may call for an additional expert, a vocational rehabilitation expert; wrongful death cases require consideration of the deceased’s personal consumption, which is within the purview of the CPA expert witness.)
The bases of the calculation of damages in wrongful termination cases are the facts learned and assumptions made by the CPA damages expert. The most important of these facts and assumptions are summarized below.
Key Facts and Assumptions in Wrongful Termination Damages Calculations
Plaintiff details, including age, sex and education
Dates, including hire, termination or reemployment dates
Wage information, like pre-termination wages and post-termination or mitigating wages
Benefits, like retirement plans or mitigating retirement plans
Prejudgment interest rate
Dates, including reemployment or retirement date and the date of death
Wage information, like but-for wage growth or future mitigating wage growth
Benefits, including but-for benefits and future mitigating benefits
An often-cited source for information on worklife expectancy is the article “The Markov Process Model of Labor Force Activity: Extended Tables of Central Tendency, Shape, Percentile Points, and Bootstrap Standard Errors,” Gary R. Skoog, James E. Ciecka and Kurt V. Krueger, Journal of Forensic Economics 22(2), 2011, pp.165-229. The article includes tables showing worklife expectancies for initially active and initially inactive men and women by level of education. For example, the graph below shows worklife expectancies by age for initially active men with a bachelor’s degree (but not higher).
Authoritative information on life expectancy are available from several sources, including National Vital Statistics Reports prepared by the U.S. Department of Health and Human Services, and Actuarial Life Tables prepared by the Social Security Administration. The graph below shows the life expectancy by age for white women.
A key challenge in determining damages in wrongful termination damages is to project by what amount plaintiff’s total earnings would have increased (or decreased), both but for and currently expected, given the termination (which is assumed to be wrongful) has occurred. There are many resources that provide information on historical and currently projected earnings in the United States. These include the Census Bureau, Bureau of Labor Statistics, Social Security Administration and the Organization for Economic Cooperation and Development.
The graph below shows historical and projected future earnings for an individual who earned $60,000 in 2017, based on alternative projections made by the Social Security Administration.
Above and beyond wages and salary, fringe benefits can be a significant portion of an employee’s compensation. News releases by the Bureau of Labor Statistics regarding employer costs for employee compensation are an important source for information on the value of these benefits. The table below shows that, for example, average benefits for civilian workers can increase the cost of an employee’s total compensation by 46.6% over the cost of the employee’s wages and/or salary.
|Cost of Benefits As a Percent of Wages and Salaries||Civilian Workers||Private Industry||State and Local Govern-ment|
|Wages and salaries||100.0%||100.0%||100.0%|
|Insurance – Other||0.7%||0.7%||0.5%|
|Insurance – Health||12.2%||10.8%||18.5%|
|Retirement – Defined benefit||4.8%||2.2%||17.1%|
|Retirement – Defined contribution||2.9%||3.3%||1.3%|
|Subtotal – Benefits||46.6%||43.9%||59.7%|
Projected future earnings in wrongful termination cases can continue many years, particularly with regards to retirement earnings, which often are assumed to continue from plaintiff’s worklife expectancy (i.e., age at retirement) to plaintiff’s life expectancy (age at death). The choice of which discount rate is applied to these projected future earnings can have a material impact on the calculated present value of these earnings. The table below shows the impact of choosing different rates to discount to present value projected future earnings of $50,000 per year beginning five years from today and continuing for an additional 20 years while growing 3% annually.
Present Value of Future Cash Flows
|20-Year T Bond (2.98%)||Moody’s Baa Bond (4.82%)||20-Year T Bond + 5% Risk Adjustment (7.98%)|
Contact a CPA Expert Witness Experienced with Wrongful Termination Cases
When you are working on a wrongful termination case and need the help of a CPA expert witness to calculate the damages caused by wrongful termination, call the experienced experts at Thomas Neches & Company, LLC.
Trial Testimony: Wrongful Termination
- Lynda Burton v. First Interstate Bank
- Howard Karlitz v. Viewpoint School, et al.
- Debbie Dennis-Johnson, M.D. v. Magan Medical Clinic, Inc.
- Anthony Kelly v. United Parcel Service, Inc., et al.
- Jeffrey Kovach v. First Alliance Mortgage Company
- Sunny Chow v. Applied Micro Circuits Corporation, et al.
- Shelby Feldmeier v. City of Los Angeles
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