Damage caps, the predetermined limits on how much a plaintiff can recover in employment discrimination lawsuits, have long been debated in civil rights and employment law. These caps, instituted under Title VII of the Civil Rights Act of 1964, vary depending on the employer’s size, with a maximum cap of $300,000 for the largest companies. While these caps were initially intended to protect businesses from exorbitant payouts, they have come under scrutiny for undermining the deterrent effect of discrimination lawsuits and preventing victims from receiving total compensation for their harm. This article delves deeply into the implications of damage caps, examining their historical context, how they affect both victims and employers, and the pressing need for legislative reform.

Historical Context and Legal Foundation

Title VII of the Civil Rights Act was landmark legislation to end employment discrimination based on race, color, religion, sex, or national origin. However, when it was enacted, Title VII did not provide monetary damages for victims of discrimination—only equitable relief, such as reinstatement or back pay, was available. This changed with the passage of the Civil Rights Act of 1991, which introduced the possibility of recovering compensatory and punitive damages in cases of intentional discrimination. However, to balance the interests of employers, the law also imposed caps on these damages based on the employer’s size.

These caps were set at the following levels:

• $50,000 for employers with 15-100 employees
• $100,000 for employers with 101-200 employees
• $200,000 for employers with 201-500 employees
• $300,000 for employers with more than 500 employees

While these caps were intended to protect businesses, particularly small ones, from potentially crippling financial liabilities, they have not been adjusted for inflation since their establishment over 30 years ago. As a result, the real value of these caps has diminished significantly, making them increasingly inadequate in addressing the severity of harm in many cases of workplace discrimination.

Case Studies: The Impact on Victims

The cases of Danya Davis and Bernessa Wilson illustrate the profound impact that damage caps can have on victims of discrimination. Davis, a vice president, and Wilson, an administrative assistant, were both subjected to severe sexual harassment during their tenure at an Illinois engineering firm. Despite their efforts to report the harassment, the firm’s leadership failed to take any corrective action, leading to their eventual termination.

When they sued under Title VII, a jury recognized the severity of the harassment and awarded each woman over $3 million in damages. However, due to the statutory damage caps, the court reduced their awards to just $50,000 each. This drastic reduction minimized the financial impact on their employer and sent a disheartening message to the victims and others who might consider bringing similar claims: that the legal system may not fully value the harm they have endured.

Impact on Mental and Emotional Well-Being: Research has shown that the psychological toll of workplace discrimination can be severe, leading to anxiety, depression, and other long-term mental health issues. When damage awards are significantly reduced, it affects victims’ financial compensation and undermines their emotional recovery. The perception that the law does not fully recognize their suffering can exacerbate feelings of injustice and further erode trust in the legal system.

Economic Consequences: In addition to emotional distress, victims of discrimination often face significant financial losses, including lost wages, diminished career opportunities, and the costs associated with seeking new employment. Damage caps can prevent victims from recovering the full extent of these losses, leaving them financially disadvantaged. For example, a victim who loses a high-paying job due to discrimination may struggle to find comparable employment, leading to a prolonged period of reduced income. In such cases, a capped damage award may fall far short of compensating for the actual financial harm suffered.

The Detrimental Effects on Accountability and Deterrence

One of the primary purposes of awarding damages in discrimination cases is to deter employers from engaging in discriminatory practices. By imposing financial penalties, the legal system aims to discriminate against an unprofitable and risky endeavor for businesses. However, damage caps significantly weaken this deterrent effect.

Reduced Incentive to Comply with Anti-Discrimination Laws: Large corporations, in particular, may view capped damages as a manageable cost of doing business. A $300,000 cap on damages may be considered a minor expense for a company with billions in revenue, insufficient to prompt meaningful changes in behavior or policy. This lack of financial incentive can lead to a culture of complacency, where discriminatory practices persist because the cost of addressing them is perceived as higher than the cost of litigation.

Disproportionate Impact on Marginalized Groups: Damage caps disproportionately affect marginalized groups who are more likely to experience severe and systemic discrimination. For example, women and people of color often face multiple forms of discrimination simultaneously, such as gender and racial bias. In such cases, the harm inflicted can be profound, yet the compensation available under the capped system may not reflect the full extent of the damage. This exacerbates existing inequalities and undermines the goal of achieving workplace equity.

Undermining Public Confidence in the Legal System: Public polling indicates that most Americans believe that compensation for discrimination should be based on the severity of the harm inflicted, not on arbitrary caps. When juries award significant damages based on the evidence presented, only to have those awards reduced by the court due to statutory limits, it can erode public confidence in the fairness and efficacy of the legal system. This disconnect between public sentiment and legal outcomes underscores the need for reform.

Legislative Reform: The Case for Removing Damage Caps

The Equal Remedies Act, introduced by Senator Ted Kennedy in 2007, sought to address these issues by eliminating damage caps in employment discrimination cases. Although the bill did not advance then, the Equal Remedies Act was reintroduced. The Equal Remedies Act of 2024 is sponsored by several members of Congress committed to enhancing the protections available under civil rights laws. The lead sponsors include Representative Suzanne Bonamici and other members of the House who have a strong track record of advocating for workers’ rights, gender equality, and social justice. These sponsors recognize the limitations of the current damage caps and are pushing for legislative change to ensure victims of discrimination receive total compensation, thus promoting greater accountability for employers.

Aligning Compensation with Harm: Eliminating damage caps would allow juries to award damages that more accurately reflect the severity of the harm suffered by victims. This approach respects the jury’s role in the justice system and ensures victims receive fair and just compensation.

Enhancing Deterrence: Removing caps would increase the financial risk for employers who engage in discriminatory practices, thereby strengthening the deterrent effect of discrimination lawsuits. Knowing that there is no upper limit on potential damages, employers would have a stronger incentive to comply with anti-discrimination laws and implement effective prevention and remediation measures.

Promoting Workplace Equity: By ensuring that victims of discrimination can recover total compensation, regardless of the size of their employer, the legal system can help level the playing field for marginalized groups. This would contribute to broader efforts to achieve workplace equity and eliminate systemic discrimination.

Responding to Economic Realities: The damage caps established in 1991 have not been adjusted for inflation, meaning their real value has decreased significantly over the past three decades. In today’s economic context, the caps are increasingly out of step with the actual costs of discrimination, both for victims and society. Removing or adjusting these caps to reflect contemporary economic conditions would be necessary to ensure that the legal system keeps pace with the realities of the modern workplace.

Conclusion: The Urgent Need for Change

Damage caps in employment discrimination cases undermine the principles of justice, accountability, and equity that Title VII of the Civil Rights Act was designed to uphold. By limiting the compensation available to victims and reducing the financial consequences for employers, these caps make it “too cheap” for employers to discriminate. Legislative action to eliminate or reform damage caps is urgently needed to restore the deterrent effect of discrimination lawsuits, ensure fair compensation for victims, and promote a more equitable workplace.

As society grapples with workplace discrimination, the legal system must evolve to meet these challenges. Removing damage caps is a critical step in that evolution, one that will help ensure that discrimination is not only illegal but also too costly for any employer to ignore.

If you or someone you know is experiencing discrimination or harassment in the workplace, it is crucial to understand your rights and take action. The law protects such practices, and legal avenues are available for redress. For more insights on employment law, follow me on LinkedIn, Facebook or visit The Sanders Firm, P.C. Stay informed by subscribing to our newsletter and following our YouTube channel for the latest updates on legal issues that matter to you.