Collecting data in discrimination cases

Regardless of who the attorney is representing, it is important to provide the statistical expert with employment information that completely describes the employment processes that are being studied. Generally this will involve providing the statistical expert not only the hardcopy or electronic employment data that describes the statistical disparity, but in addition, the background information on the employer and the employer’s practices.

Typically, the background information will include information from sources such as electronic databases provided by the defendant, employer handbooks, written descriptions of the relevant selection processes, and depositions of human resource personnel and other key decision makers. If at all possible, engaging the statistical expert early in the discovery process typically will allow the expert to more adequately prepare a listing of the specific information needed in the employment analysis.

In most employment analyses the statistical expert will at a minimum require the following information about the defendant’s employment processes.

A. Employee level information. The employee level information required by the statistical expert includes not only the demographic and employment information, such as date of hire, salary grade, etc., for the plaintiff but also for all the employees in the organization being analyzed. This information will allow the statistical expert to construct comparison pools of ‘similarly situated’ employees.

B. Employer practices information. This type of information includes information about the factors that are incorporated into the employer’s selection or compensation processes. For instance, in cases involving discrimination in employee terminations, it is important to determine the specific formula or individual factors that were considered by the employer in the relevant reduction in force action.

C. Company specific information. This information generally includes company specific factors that describe the organizational differences between different divisions within the relevant analysis unit. For example, in some companies that closely tie financial performance to employee salaries, it is not uncommon to observe higher average pay levels in division that generate higher levels of revenue for the company. For larger organizations, the pay or salary grade structure for the company is also important information for the statistical expert.

S.A.T. scores matter

Economic damage calculations involving minors are tough. One of the major debates concerning calculating losses for minors involves the S.A.T. Simply put some economic experts think the S.A.T. is a strong predictor of future earnings. For examples, some studies, such as http://nces.ed.gov/pubs2000/2000043.pdf, suggest that better performance on the S.A.T. suggest higher earnings in the future.

Some studies have suggested that a 100 point increase in S.A.T. is correlated with a 6 to 10% increase in post-college wages. Other studies, such as the study performed by Daniel Hammermesh et al. in 2002 (They examined the post graduation wages of economics majors) showed either a weakly positive or a statistical unimportant relationship between S.A.T. score and post-graduation earnings. In practical terms, this suggest that the attorney should if the data is available collect information on the S.A.T scores of an injured or deceased minor.

Valuing Stock Options and Stock Purchase Plans

Injury, death, and employment cases frequently involve a plaintiff who has lost out on the value of company stocks that could have been purchased. Generally, the calculation of the number and the amount of company stocks is fairly straightforward. However the value of the lost shares is not as straightforward.

The calculation of the value of the lost shares typically involves the use of sophisticated mathematical models such as the Black-Scholes model. Here are the typical types of plans that the injured or deceased plaintiff could have had:

Employee Stock Option Plans: Stock options plans give the employee the ability to purchase a specific number of shares of a company's stock at a future date at a pre-set price. Options are typically granted for a certain period of time. If individuals do not exercise the options before the end of the period, they expire and are forfeited. Also they must exercise them usually within 3 months of leaving the company. Note that until the individual exercises the option, they are not the owner of the stock.

Employee Stock Purchase Programs: Stock purchase programs give the employee the ability to purchase a quantity of shares of a company’s stock within a certain time period at a discounted price of 10-15%. Employees typically use payroll deduction to purchase stock in a stock purchase program. These purchases must happen within the the allotted time and the individual becomes the owner of the stock at purchase.

Our work in law school

Professor Bales, a law professor at Northen Kentucky University, will use our paper Back Pay and Front Pay Calculations in Employment Termination Cases: Accounting for Re-Employment and Mitigation Efforts in his classes. See his blog review of our work at his , Workplace Prof Blog.

Pensions and Divorce

When valuing a retirement pensions in a divorce case, the idea is to determine the economic value of the pension at the time of divorce. In theory this is done so that the individuals post-divorce work efforts are not incorrectly awarded to the marital period. There appear to be several ways to handle the valuation of a pension in an divorce case.

The ease at which it can be done really depend on if it is a defined benefit or defined contribution plan.

Overall here are the approachs:

1. One approach is to value the defined benefit plan at the date of divorce. In otherwords, just look at what is in the pension at the time of the divorce.

2. Another is to value it at the projected retirement and then to do a time rule analysis, apportioning the pension by the fraction of marital years to total years.

3. A third approach is called here a a QUILDRO qualified Illinois domestic relations order. This approach assigns the pension in proportions in the future. The proportions are based on when the retirement would be paid out.

4. A fourth approach simply values the contributions and their interest as they have been paid in - more appropriate for defined contribution plans. This is somewhat problematic for defined benefit programs.

Stats Saturday: Wage and hour terms to know

Stratified Sampling, n. a method of statistical
sampling that draws sub-samples from
different sections, or strata, of the overall data
population.

Discussion:

Stratified sampling routines are used in
employment settings when there are important
differences between different groups of
employees that are being surveyed.. For
example, in a survey of off-the-clock work,
workers at different locations and different
supervisors may have different work culture
that make it less likely

How long do people work?

The heart of analyzing lost earnings and wages is estimating by how much injury or death decreased a person’s lifetime earning capacity.

This requires estimating how many years the injured or deceased party have otherwise continued working. In many cases, the economist will have to choose some assumption for remaining work life. The simplest assumption is that retirement would come at the age of eligibility for full Social Security benefits. An alternative is to use government data on the median number of years to retirement for workers at any given age and assume that the person would have continued employment for that length of time.

These types of assumptions can be problematic in some settings because they ignore the reality that many people do not conform to these retirement patterns. These analyses ignore the fact that workers at any age have some statistical probability of not being able to continue earning income due to death, physical incapacity, or unemployment. To overcome these difficulties, economists most often use published data that allows them to calculate the average number of remaining years of employment people have at any age.

The Plaintiff Worked for themselves...

Calculating the earnings capacity of individuals who are self employed is involved but very do-able.

The research question in injury and death cases involving the self employed is the same with wage earners: 'How much damage, if any, has been done to the plaintiff's ability to earn a living?'

The biggest difference for the self employed is that there are a number of different ways a self employed person will report the earnings. For instance, some self employed individuals will receive income as an independent contractors while others will receive payments thru a closely held corporation. Other self employed people are sole proprietors; estimating the earnings capacity is different for each of these worker types.

The key piece of information that is used in these analyses is the personal income tax return, usually a form 1040, AND all the supporting schedules. The supporting schedules are used by the analyst to look closer at the plaintiffs' earned wages, business expenses, and to separate accounting adjustments and expenses (such as real estate depreciation) from real business expenses. Attorneys trying to calculate damages in these types of cases should make sure to obtain the supporting tax form schedule for every item on the main 1040 personal tax form . In general, the most accurate estimate of the plaintiffs earnings capacity involves adding reported wages, business income and accounting depreciation.

The Economic Cost of a Life Care Plans

Calculating the economic cost of a life care plan typically involves two steps by economists. First, after figuring out (from the life care plan) what products and services have been prescribed for the injured person, the economist will project the future cost of providing those goods and services at the perscribed times.

For example, what will Prozac cost in 2014? Making this calculation usually means projecting future medical cost using historical medical inflation cost indexes for the services and products in the injured person's life care plan. Second, in some instances the life care plan may call for the economist to make seperate cost projections on the cost of individual items. For instance, there may a service that is not neccessarily medical that the life care planner may ask the economist to value.

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