Two new laws were recently signed by Governor Tomblin that greatly alter the damages landscape in West Virginia employment cases – SB 344 (available here) and SB 421 (available here).

SB 344 amends the West Virginia Code to add a new article, including Sections 55-7E-1, 55-7E-2 and 55-7E-3.  These new sections limit the scope of “compensatory damages available to an employee in statutory and common law wrongful or retaliatory discharge causes of action or other employment law claims.”  SB 421 attempts to reign in excessive punitive damage awards.  Specifically, the WV Legislature added a section to the West Virginia Code, §55-7-27, which alters the punitive damages scheme in the state by placing caps on the amount of punitive damages and altering the procedure for awarding such damages at trial.  Let’s take a look at these new laws in more detail.

SB 344: The End of the Malice Exception and Court-Determined Front Pay

Plaintiffs in most states have a duty to mitigate damages in employment suits.  If a plaintiff has found new employment at a “substantially equivalent” position is unavailable for work or left the job market, or refuses an unconditional offer of equivalent employment, back and front pay awards may be cut off.  Additionally, and perhaps most importantly, plaintiffs in most statutory schemes have an affirmative duty to mitigate damages.  In order to meet this duty, plaintiffs must show that they have pursued equivalent employment and have been unable to find such employment.

Those concepts were generally true in West Virginia, too; however, the West Virginia Supreme Court established an exception to this duty to mitigate a number of years ago if a plaintiff could show that the employer acted with “malice.”  The definition of “malice” resembled the standard applied to determine whether punitive damages were warranted, but was still nebulous, and resulted in a scheme where plaintiffs were sometimes able to avoid the duty to mitigate their damages in many employment cases by relying on the exception.

SB 344’s main reform is that it closes the “malice exception” loophole, now making it an “affirmative duty” for plaintiffs to mitigate past and future lost wages.  All awards of back or front pay, whether given by a jury or by an administrative body, are to be reduced by the amount of earnings that a plaintiff earned in substantially equivalent employment.  The legislation keeps the burden of proving a plaintiff’s lack of diligence in mitigating damages on the employer.

Additionally, SB 344 takes the issue of front pay from the jury and places it in the hands of the judge.  Essentially, if front pay and/or reinstatement are sought by a plaintiff, the judge will rule on the appropriateness of front pay versus reinstatement.  If the judge determines that front pay is an appropriate remedy, the amount of front pay to be awarded is decided by the judge rather than the jury.  This was done to counteract the problem of front pay awards from juries who do not generally understand that unique category of damages.

SB 344 formally becomes law on June 8, 2015.

SB 421: Caps on Punitive Damages in Civil Actions and Bifurcated Trials

With SB 421, the West Virginia Legislature attempted to provide greater barriers to runaway jury awards of punitive damages.  First, and most importantly, the legislature capped the amount of punitive damages in civil actions at four times the amount of compensatory damages or $500,000, whichever is greater.  If a jury awards any sum which is greater than that, the court must reduce the award to comply with the cap.

The bill also includes some procedural reforms, including a specific recitation that defendants may request a bifurcated trial on punitive damages.  This means that if a defendant is found liable to plaintiff for compensatory damages, the court or judge will then determine whether there is sufficient evidence to have the jury consider the issue of punitive damages.  The jury then will consider the issue of punitive damages separately during a different stage of the bifurcated trial.  This reform allows courts to serve as “gatekeepers” of the issue of punitive damages, to deter juries from improperly considering the issue without sufficient evidence to warrant such an award.

SB 421 also takes effect on June 8, 2015.

The Fallout for Employers

While the letters of these laws are definitively positive steps and marked improvements over the previous state of affairs in West Virginia, there are still some question marks as to how effective the reforms will be.  Both laws take power away from juries and place responsibility in the hands of judges, which could lead to inconsistent application.  Additionally, the punitive damages cap is not as restrictive as many would like.  In cases where compensatory damages are large, there is a chance that juries may see the maximum “four times” multiplier as a suggested amount for punitive damages, rather than realizing that they can award less than that amount in punitive damages.

Like with any new laws, employers will have to wait and see how these reforms are implemented in practice, and it’s likely to be a little while before there is any concrete evidence as to how they have been applied.