Economic damages are the heart of many of today’s legal disputes. This is why it’s crucial to understand which aspects of your case would benefit from the guidance of an economic expert. From discrimination in the workplace cases to wage and hour claims, there are many instances in which litigators could immensely benefit from retaining an economic expert; this article will examine several of those.

What is an economic expert?

Economic experts are doctorate-level economists skilled at analyzing employment and labor data and providing recommendations based on their findings. Often, these economists may appear as expert witnesses in the trial. Other times, they may evaluate the merits of claims or class certification. An economic expert can isolate appropriate employment and hiring data, including factors such as employees’ seniority, level of experience and training, and career mobility.

These experts can provide analyses concerning legislation, such as Title VII, the Federal Equal Pay Act, the Fair Labor Standards Act, or individual state labor laws. They may also work to accurately and fairly compute economic damages or recommend alternate strategies for mitigation if applicable.

When would a company need an economic expert?

Consider a hypothetical situation in which a company must enact a reduction in its workforce due to the effects of the COVID-19 pandemic. Terminated employees may come forward with various allegations, such as:

  • The layoffs impacted certain protected classes more than others
  • The layoffs were conducted improperly, or in violation of fair labor standards
  • The criteria for determining which employees would retain their jobs were discriminatory against members of a protected class

As a result, the employer may become the defendant in a class action or single-plaintiff lawsuit, potentially costing millions of dollars in economic damages. Before reaching this point, counsel for the defense would be wise to retain an economic expert.

What types of cases would be best served by retaining an economic expert?

An economic expert analysis can vastly improve the outcome of litigation for the defendant in both single-plaintiff cases or class action lawsuits. Essentially, an economic expert can assist in any situation in which the defendant may potentially be found to owe economic damages.

Single-Plaintiff Cases

Generally, single-plaintiff cases involve allegations of employment discrimination under statutes such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA) of 1967, or the Americans with Disabilities Act of 1990. Such employment discrimination cases may pertain to wrongful termination claims, lack of advancement, pay inequity, or unfair stipulations at employee severance.

In a single-plaintiff case, the role of the economic expert is to use hiring and employment data to determine the validity of the plaintiff’s allegation and, if necessary, serve as an expert witness for the defense (or potentially, help to reach a settlement that avoids litigation).

The economists at Welch Consulting have extensive experience in serving single-plaintiff cases. For example, a minority firefighter brought charges against the City of Los Angeles after having been the target of racially-motivated practical jokes. Our economists evaluated the damages report prepared by the plaintiff’s expert, factored the city’s pension and medical benefit alternatives into damages, and presented evidence of alternative employment opportunities outside of active firefighting.

Class Action Cases

Class action cases involve a group of employees making the same claim of discrimination, wrongful termination, or pay inequity based on a shared characteristic. In particular, wage and hour claims are common: These cases involve allegations of incorrect payments or allocation of benefits to non-exempt (generally non-salaried) employees. They include missed rest and meal breaks, time clock rounding, incorrectly compensated off-the-clock or overtime pay, or employees’ misclassification.

In a class action case, an economic expert may challenge class certification–that is, prove that the plaintiffs’ allegations of wrongdoing are not valid within the entire class or only a sub-group. The expert would also determine whether the matter being alleged (low pay, missed meal breaks, termination, etc.) can be shown to have occurred outside of that class (thus constituting a broader employment practice, with effects not limited to the putative class.)

Assuming class certification is not defeated, the economic expert’s analysis would examine whether the wrongdoing alleged by the putative class was a result of incorrect or discriminatory practices, or whether the outcome was justified by bona fide reasons or legitimate business practice.

Economists at Welch Consulting were retained in a class action suit involving a large food processing company. The company was sued for economic damages relating to the amount of time employees spent “donning and doffing” (putting on and taking off protective equipment and non-equipment gear.) Employees claimed all such time should be compensable. Our economists combined payroll data with details on where employees were stationed in the processing line to calculate to what extent donning and doffing time was under-compensated. Damage estimates were lowered substantially.

Economic damages analysisIf damages are owed, how can an economic expert help?

If the plaintiff’s allegations are found to have merit, then compensatory economic damages, or economic losses, must be paid by the defendant. The amount of these damages is calculated as earnings forgone due to the adverse incident (such as a reduction of workforce, in the previous example) minus any alternate earnings or mitigatory efforts.

Economists look at past damages–that is, damages from the event in question (such as wrongful termination) until trial–and future damages, meaning wages or benefits that could have been reasonably expected to be accrued in the future had the event not taken place. Our analyses also examine contract terms, employee mobility, and labor market factors such as industry uptick or downturn. These calculations can significantly reduce the amount paid by the defendant.

How can a company limit its risk of litigation and avoid costly economic damages?

Welch Consulting recommends that companies work proactively to minimize their exposure in employment and labor disputes. This can include conducting annual employment practice audits or pay equity audits. Our economists can work with human resources to help identify any questionable practices before troubling allegations arise. In the event of a vulnerability, we can also provide adverse impact analysis. Organizations may also choose to seek EEOC or OFCCP audit support, in order to prepare for such investigations or potential litigation.

Contact an Economic Expert Witness Today

Get in touch with Welch Consulting to find out how our economists can support your business with rigorous analysis, expert testimony, and innovative consulting that yields practical solutions.