What to Expect in Employment Discrimination Settlements

Employment Discrimination Settlements: What Employees Can Expect

Employment discrimination cases rarely result in trial. That’s what the American Bar Association found out in study exploring employment discrimination cases. According to the study, of all cases, only 6% reach trial court proceedings. Forty percent are dismissed or end in summary judgment. The remainder of employment discrimination cases end up in settlement.

It’s important to know what to expect in a settlement case. Settlements can reduce the costs of litigation and lower risks to employees. Knowing the particular nuances and benefits of settling an employment discrimination case may help an employee resolve issues sooner and with greater effectiveness. It’s in an employee’s best interest to know what to expect in the settlement process.

Desired Outcomes

Before the settlement process begins, it’s important for employees to examine desired outcomes. An attorney can help with determining whether an employee desires reinstatement, compensation, or a different, professionally negotiated resolution and can help explain which remedies are available based on the claims.

At times, there may be options available other than settlement for resolving an employee’s issues. For instance, a severance package could be negotiated based on a company’s willingness to come to terms with an employee’s allegations. Once an attorney has helped determined an employee’s desired outcomes and all other options have been explored, the settlement process can begin.

The Demand Letter

One of the first forms of communication in the settlement process is an early demand letter. The demand letter outlines the grounds for complaint and gives the defendant a chance to consider an employee’s specific settlement terms.

An employee should expect a demand letter to explicitly state facts alleged and make specific requests. It’s important to discuss these issues thoroughly with an attorney beforehand. A good demand letter will inform an employer of the employee’s stance on the prevalent issues as well as the necessary steps to take in order to avoid costly litigation.

A demand letter will usually become a catalyst for informal settlement discussions. Subsequent communication between the parties will help each come to a resolution on which they can finally agree. Discussion will also help determine whether the employer is willing to enter into more formal talks prior to litigation.

Considering Settlement Requests

Once pre-litigation settlement talks begin, the main issue is finding remedies for the offended party. The general concept behind remedies is that they should be equal to the  amount or value that would make an offended party whole. In other words, what would it take to ensure that the defendant walks away with everything he has lost as a direct result of the plaintiff’s alleged behavior?

Determining the value of an employment discrimination case is crucial for reaching a successful settlement agreement. Here are several types of valuations available in the settlement process, each with its own particulars:

  1. Compensation for Lost Wages and Back Pay – Typically, employees can ask for the replacement of lost wages that come directly as a result of the employer’s alleged behavior. This includes may include money lost due to court proceedings and unemployment that came as a result of wrongful discharge.
  2. Compensation for Future Losses – Employees may also ask for future losses to be remedied, including bonuses and promotions that would have been given if the discrimination had never occurred.
  3. Emotional Pain and Suffering – Employment discrimination cases and the settlement process can be emotionally taxing. Damage to reputation or professional standing may also occur. This is why many employees request compensation for the psychological trauma experienced as a result of discriminatory incidents at the workplace.
  4. Other “Pecuniary” Damages – Pecuniary damages may include relocation expenses, medical expenses or physical therapy. These are out-of-pocket expenses that come as a direct consequence of discriminatory conduct.
  5. Punitive Damages – Most courts will allow punitive damages in addition to compensatory damages. This is a likely request in situations where an employee alleges “malice or reckless indifference” on the part of the employer. The amount of punitive damages is at the discretion of the judge presiding over a settlement agreement.
  6. Attorney’s Fees – Because both the settlement process and court time can be lengthy events, attorney’s fees can increase exponentially. Attorney’s fees are a form of relief requested both in court proceedings and in settlement agreements based on statutory requirements.
  7. Verbal and Other Reconciliation – Sometimes, all the employee needs is an acknowledgment of the discrimination and an apology. Other times, an employee may be willing to withdraw a complaint based on an employer’s willingness to establish new rules and policies against the particular kinds of discrimination alleged.


It’s normal for an employee to condition some of the terms of a settlement agreement with a release of employer obligation. This is often an effective tactic that facilitates progress in the settlement process. For instance, an employee might agree, as noted above, to withdraw the discrimination case once any or all of the conditions of the settlement are met.

Duty to Mitigate

Even if a company agrees to settle an employment discrimination case, an employee still has a duty to mitigate damages during the process. This includes diligently seeking other employment or income during the progress of the case. This is because an employee may not recover damages, even in settlement, for harm that she could have avoided or minimized with reasonable effort.

Negotiating Everything

It’s important to understand how to negotiate every element of a settlement offer, and to consider matters beyond valuation, such as statutory rights, benefits, insurance, and confidentiality. Settlement agreements come with their own unique aspects depending on the details of each claim. Knowing what to expect ahead of time can make a big difference.

Manuela Varela

Relations Manager

Manuela Varela has been with Shegerian & Associates since August 2022. She is responsible for outreach and marketing on behalf of the firm and manages relationships between firms and referring attorneys. She is also responsible for developing business opportunities and affiliations. Manuela graduated from Loyola Marymount University with a degree in Economics and Political Science.