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Employer may be liable for employee’s loss in selling his house in a bad market

November 27th, 2013  |  Lorene Park

Lorene D. Park, J.D.

The “goal of Title VII and the ADA is to make the plaintiff whole, i.e., put the plaintiff in the same position he would have been absent discrimination.” In the view of a federal district court in Ohio, that means that if an employer’s discrimination forces an employee to find a new job, relocation expenses incurred to obtain comparable employment may reasonably be considered to have arisen from the discrimination — including “any loss that occurred because the employee was compelled to sell his home under unfavorable market conditions.” Thus, in response to the employer’s motion in limine on the issue, the court agreed that it would hear oral argument on whether to present the issue to a jury (Hounshel v Battelle Energy Alliance, November 18, 2013).

In this case, a nuclear engineer alleged that, after he questioned a supervisor’s unethical behavior, he was put on a performance improvement plan and ordered to seek counseling for anger management. Though he claimed he had no performance or anger issues, he was placed on administrative leave due to allegedly false claims by his supervisor. He was also required to undergo a psychological evaluation. When he returned to work he was sequestered from his coworkers, denied training, and treated with suspicion. He claimed that, as a result, he was constructively discharged and forced to take a job out of state. He filed suit against his former employer seeking, among other things, compensatory damages for having to sell his house in a bad economy. After a year on the market, his house sold for $119,000; he owed nearly $160,000 on his mortgage at the time. He claimed that, had he not been constructively discharged, he would have remained in the home and not suffered such a loss.

Issues regarding proof. The court noted that the employee faced a problem of proof because the loss on the sale of his house could have more to do with his personal financial choices than his forced relocation. However, it saw two possible approaches he might take. First, he could argue that because he never intended to move, the measure of damages would be the difference between the sale price and what the home would have been worth had he stayed. However, the problem with that approach was he did not identify an expert to testify about the home’s current value and, because he no longer owned the property, he could not offer an opinion.

Alternatively, the employee could argue that after waiting for nearly a year, he was forced to sell for less than fair market value (FMV). Thus, the measure of damages would be the difference in sale price from FMV. While generally the employee or his wife could testify on FMV, they had not indicated they would do so in discovery so the court was not yet willing to let them do so. It did, however, aver that it would hear oral argument on the issue. The court stated that, if it allowed either the employee or his wife to testify, it would instruct the jury that an actual sale between a willing buyer and a willing seller is strong evidence of FMV.

Problems with such damages. The statutory goals of placing an employee in the same position (at least financially) that he would have been absent discrimination are laudable to be sure. But I see a few problems with reimbursing a purported loss due to selling a house in a bad economy. First, as noted by the court, the loss sustained by the employee might be due to his personal financial choices, not the employer’s actions. Plus, the measure of damages seems speculative because there is the possibility that he might not have stayed in the house regardless of whether he stayed with the employer. Or, the market might actually continue to get worse, so an award based on present FMV could be a windfall for the employee because he would actually have come out worse selling later on. There is also the question of whether the tactics used by the employee in marketing his house had something to do with the lower than desired sales price. Employees must mitigate damages for the loss of future pay in discrimination cases by making diligent efforts to find a new job. One would think a similar duty would apply in marketing a house for sale. It will be interesting to see how the court ultimately rules on this damages issue.