High Court Limits Awards in Certain Dismissal Suits

The Supreme Court shielded employers Monday from facing large damage suits from workers who contend that they were discharged to save on pension costs.

In a unanimous decision, the court said such workers must take their claims to a federal judge, not to a state court jury.

Though the decision turned on a technical conflict between federal and state law, the ruling is an important victory for corporations that are forced to cut back on staffing.

“Business feels a lot more comfortable fighting in federal court,” said Stephen A. Bokat, who directs the litigation center for the U.S. Chamber of Commerce.

And no wonder. In federal court, the discharged worker must plead his case before a judge, with the hope of winning only reinstatement to his job and back pay.

In a state court, the same worker could also ask a jury for hundreds of thousands of dollars in compensatory and punitive damages from an employer. In California, claimants who persuaded a jury that they were wrongfully discharged were awarded an average of $486,812 in damages, according to a 1988 study cited in the Chamber’s brief to the high court.

“In these state court cases, it always seems to be a case of the local citizen versus the big, bad national corporation,” said Bokat.

Not surprisingly, corporate attorneys have been seeking to keep wrongful discharge suits out of state courts, and they won a key ruling toward that goal Monday.

The “exclusive remedy” for anyone who maintains that he was discharged because an employer wanted to save on pension costs or other benefits is in federal court, said Justice Sandra Day O’Connor.

The ruling was based on the Employee Retirement Income Security Act of 1974. In this law, Congress set up a uniform system of federal rules for pensions and other “employee benefit plans.” Workers won the assurance that they could move from state to state without losing pension benefits. But in turn, they lost the right to sue in state courts to seek damages, the high court said.