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Compensatory and Punitive Damages Once Again Precluded in State Court Employment Discrimination Actions

By Kathy L. Nusslock

The Wisconsin Fair Employment Act (WFEA) returned to its pre-2009 status on April 5, 2012, when Governor Walker signed a bill repealing a 2009 amendment that had allowed employees who prevailed on a discrimination claim to sue their employers for compensatory and punitive damages in state court.

The WFEA prohibits employment discrimination based on an individual’s “age, race, creed, color, disability, marital status, sex, national origin, ancestry, arrest record, conviction record, military service, use or nonuse of lawful products off the employer’s premises during nonworking hours, or declining to attend a meeting or to participate in any communication about religious matters or political matters.” Wis. Stat. § 111.321. An employee who is subjected to any of these types of discrimination in hiring, demotion, termination, or other employment conditions may file a complaint with the state Department of Workforce Development (DWD) to request job reinstatement as well as back pay, costs and attorneys’ fees-damages aimed at allowing the employee to recoup his or her pecuniary loss, but precluding recovery for non-pecuniary damages, such as pain and suffering or punitive damages.

Before the 2009 WFEA amendment, the damages recoverable under federal law were more expansive than those under state law. In addition to the “make whole” damages available at the state level, a claimant in federal court could recover additional compensatory and punitive damages. As a result, before the 2009 amendment, an employee’s decision to file with the federal agency (the Equal Employment Opportunity Commission) or the state agency (the DWD) determined the damages that were recoverable by a successful claimant.

The 2009 WFEA amendment eliminated the dichotomy of damages available between federal and state law. The amended statute allowed an employee or the DWD to demand compensatory and punitive damages from the employer in a circuit court action if the employee prevailed at the agency level. Wis. Stat. § 111.39(4)(d). If the DWD or the employee exercised this right to sue the employer in state court, the court was required to award compensatory and punitive damages “in an amount that the circuit court or jury finds appropriate,” capped at tiered limits based on the number of employees at the company. This amendment exposed employers to additional damages ranging from $50,000 to $300,000, which, before the amendment, had been available only under federal law. Wis. Stat. § 111.397(2)(a).

Starting this Friday, the repeal of the amendment will turn back the clock and, therefore, return employers and employees to the dichotomy that existed before 2009. Compensatory and punitive damages will no longer be available in any state employment discrimination case in which the DWD’s final decision is mailed to the employee on or after April 20, 2012, the effective date of the bill Governor Walker signed on April 5 (2011 Senate Bill 202). Thus, businesses will no longer face the risk (or threat) of a $300,000 punitive damage award in state court–a significant sum, especially when actual damages are nominal.

The risk to businesses, of course, is not eliminated. Although the repeal of the 2009 amendment reduces an employer’s exposure in state law actions, employees retain the ability to recover compensatory and punitive damages in federal court. This means that employers may start to see an increase in federal employment discrimination suits, back to numbers seen before the 2009 amendment. Whether an employee files a discrimination complaint under state or federal law, it is important to consider the available damages (i.e., the employer’s potential liability) before responding to any allegations.

The attorneys at Davis & Kuelthau, s.c., are prepared to assist you in negotiations and litigation with your employees under both state and federal law. If you have questions about this topic or if you wish to discuss the details of the new law, please contact your Davis & Kuelthau, s.c. attorney or Kathy L. Nusslock at (414) 225-1447,