'Make Whole': The Need for Gross-Ups in Employment Discrimination Cases

Abstract

A primary purpose of federal anti-discrimination remedies is to place the victim in the same economic position she would have occupied had no discrimination occurred. However, a lump sum award for lost pay will be taxed in the year it is received, exposing the plaintiff to increased marginal tax rates. In order neutralize the often harsh tax consequences of lump-sum wage awards, many courts have begun “grossing-up” the plaintiff’s award, relying on the “make whole” remedial purpose of anti-discrimination statutes. However, some courts still force plaintiffs to bear this additional tax burden, even though it was caused by the defendant’s discriminatory conduct. This Article provides an overview of federal discrimination statutes and the available relief; explains the adverse tax consequences of a lump-sum award in employment cases; and reviews case law and statutes supporting gross-ups, outlining the differing jurisdictional treatments and arguing for wider adoption based on the “make whole” doctrine.