October 2000

WIN AT WORK MONTHLY

A Community Service of DON D. SESSIONS, A PROFESSIONAL LAW CORP., Employee Rights Attorneys
	Win At Work OUTPLACEMENT OPTIONS Outplacement services have become increasingly popular . . . but they’re not the only option. Employers often pay for outplacement services because they have learned that fired employees who find a new job quickly will be less likely to sue for wrongful termination. They might include classes, counseling, offices, telephones, answering services, typing, database—all to help you find a job. Yet, you may be just fine on your own. There are books, software programs and many resume preparation services. Some states, such as California, sponsor free job search and counseling organizations that do much the same. Employment agencies or executive search firms may be more aggressive in finding you a job, and their fee may be paid by your new employer. So before you blindly accept your former employer’s offer of unemployment services, consider asking for the money instead. It may be better used in meeting your mortgage payments or even a trip to Hawaii.		Employee Rights Update TAX FAIRNESS ACT NEEDS YOUR HELP The pending Civil Rights Tax Fairness Act, which makes most employment dispute recoveries non-taxable, needs your help. Please e-mail Senator Feinstein at senator@feinstein.senate.gov and Senator Boxer at senator@boxer.senate.gov or call them directly at (202) 224-3121. A sample letter is attached for you to send or revise to your liking. Without the Act, employment disputes are more difficult to resolve. With taxes factored in, employees demand more, employers have to pay more, and the settlements decrease in frequency. If the Act passes, employees will net more money from whatever is paid by employers. It will make litigation of these disputes viable. Currently, litigation does not make a lot of sense, after considering attorney’s fees and taxes on possibly the entire recovery. There really isn’t much left for the employee. Please act now as this year’s congressional session is in its waning days. Thanks!
		Update on our attorneys - Don Sessions taught the basics of wrongful termination to approximately forty attorneys at the Westin South Coast Plaza Hotel for their California State Continuing Education credit. Our Win at Work syndicated column is now in publications in northern California and Utah.
Look for our answers to employees’ questions in the "Shop Talk" column of the Times’ Sunday Business Section or the Register’s "Business Monday" Section. Click here to add (or here to delete) your E-mail address to or from our monthly mailing list. For more employee rights information, click here for our website, job-law.com; here to order our book, Employee Rights in California; or contact our office directly at 23456 Madero, Suite 170, Mission Viejo, CA 92691, (949) 380-0900, (800) 774-7494, mailto:attorneys@job-law.com. The Win at Work portion of Win at Work Monthly is from our ongoing syndicated column appearing in Times/Mirror Publications (including Los Angeles Jobs and Orange County Jobs) and elsewhere. Win at Work Monthly is intended for general information and should not be construed as legal advice or opinion. Readers in need of legal advice should promptly retain the services of an attorney. ©2000 by Don D. Sessions.

The Honorable Diane Feinstein and Barbara Boxer

U.S. Senate

Washington, DC 20510

Re: S. 2887, the Civil Rights Tax Fairness Act:

Dear Senators Feinstein and Boxer:

I write to urge your cosponsorship and support of S.2887 by Senators Charles Grassley, Charles Robb, Susan Collins, and Tom Daschle, which would eliminate the unfair tax penalty paid by those who have successfully fought back against discrimination and civil rights violations. The bill will also assist business by removing what has become a major obstacle to settling these cases, since the tax penalty has made the cost of settlement much higher for employers. This is why a number of organizations have endorsed the bill including the United States Chamber of Commerce, the American Bar Association’s Labor and Employment Section, the American Small Business Alliance, insurance companies, national, state and local bar associations, and AARP.

Current tax law is unfair to those who demonstrate they have been subjected to illegal discrimination, because they are subject to a “triple whammy” of additional taxation on each portion of their monetary recovery. First, while damages received because of a barroom brawl or slip-and-fall, often caused simply by negligence, are tax free, damages to compensate for the very same types of psychological harm caused by intentional discrimination are not. Second, people who receive back wages in a lump sum are required to pay more taxes on those wages than they would have if they had received the wages on their regular pay schedule, because the lump sum payment pushes them into a higher tax bracket. Finally, those who have been the targets of discrimination must pay taxes on the part of their award that goes directly to their attorney, even though the attorney will be paying taxes on that money as well.

All of these tax provisions not only significantly deter individuals from challenging discrimination, but also make it more difficult to settle discrimination cases. As has been pointed out by the Chamber of Commerce and the American Small Business Alliance, these unfair tax policies are forcing businesses to pay much more to settle cases. In order to assure that full back pay and other compensation is received by the injured party, the employer must inflate the settlement amount to take into account the taxes. This amounts to a pass-through tax to business. To illustrate: under current law, it costs a defendant $107,000 to settle a case that would net the discrimination plaintiff the same amount as a $50,000 settlement under the Civil Rights Tax Fairness Act. In another example, it costs the defendant $910,000 to compensate a plaintiff the same amount under current law as a $450,000 settlement would if this law were reformed. As a result, we are wasting judicial resources and clogging our courts with unnecessary trials.

S 2887 remedies this unfair taxation by:

• Eliminating the tax on emotional distress damages

• Eliminating the DOUBLE tax on attorney’s fees

• Permitting income averaging of back-pay awards

The Civil Rights Tax Fairness Act will help make the tax code more fair for those who have successfully fought back against intentional discrimination. It is supported by both civil rights and business groups, and it deserves your support as well.

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