NLRB’s Revised Backpay Formula Upheld by Federal Court

The National Labor Relations Board’s revised backpay formula, which requires compensation for search-for-work and interim employment expenses, was upheld by the U.S. Court of Appeals for the D.C. Circuit.

As we discussed in our August 2016 E-Update, under Board law, workers who are unlawfully discharged have the duty to mitigate their losses by seeking other, interim employment. In so doing, the workers may incur expenses such as transportation, room and board, relocation costs, and training costs for the interim job. Previously, those expenses were treated as an offset to the amount of interim earnings, if any, that would be deducted from the gross amount of backpay due. The Board determined, however, that this approach did not fully compensate the worker. Therefore, the Board held that search-for-work and interim employment expenses must be reimbursed separately from any backpay award. In addition, the Board stated that separating these expenses from taxable back pay will avoid possible tax complications.

The D.C. Circuit, in King Soopers, Inc. v. NLRB, found that the Board had the authority to adjust its remedial framework for a make-whole remedy in order to achieve the goals of the National Labor Relations Act. Thus, employers who are found to have illegally terminated a worker should be prepared to see an increase in the damages that they pay. Search-for-work and interim employment expenses can exceed interim earnings, if any, and the amount of these expenses was previously limited by the amount of the interim earnings through the offset. Now the full amount of such expenses will be awarded.