THE LAW: Caps on damages: Could they save an employer millions?

Very few lawsuits actually go to trial. They typically settle beforehand so that both parties avoid the risk of an adverse ruling.

However, when a jury trial is held, and you mix major damages, a large corporation, and an angry jury, the results can often lead to a “runaway” jury.

Several years ago, two large medical malpractice cases in Iowa caught everyone’s attention: a $97.4 million award to a family whose newborn suffered brain injury due to health care providers using improper procedures during delivery and a $27 million award to a man whose case of bacterial meningitis was misdiagnosed as the flu.

As a result, the Iowa Legislature this year “capped” non-economic pain and suffering and emotional distress damages in medical malpractice cases at $2 million for hospitals and $1 million for doctors. The new law does not cap economic — that is, medical bills or the cost of future medical care — or punitive damages.

Opponents to the law said lawmakers should trust juries to do their jobs and decide each case on the evidence. Proponents said such verdicts were increasing the cost of medical care for everyone and running doctors out of the state.

Employment cases

In the employment area, several highly publicized jury verdicts in Iowa have gone against employers in favor of ex-employees: $1.4 million against the University of Iowa, $2.2 million against the Iowa Republican Senate caucus, and $4.5 million against Grinnell Regional Medical Center.

Most of the damages awarded by the jury were for emotional distress. These amounts do not include the money paid the lawyers for those plaintiffs, typically in the hundreds of thousands of dollars.

Like medical malpractice, the Iowa Legislature could have enacted one significant legislative solution if they were truly alarmed about these excessive employment verdicts.

First, like the federal Title VII anti-discrimination statute, the state of Iowa could “cap” the combined value of compensatory and punitive damages recoverable under Iowa law based on the size of the employer.

Under federal law, the four caps are $50,000, $100,000, $200,000, and $300,000, depending upon the employer’s size. In one recent case in Alabama, for example, a federal jury awarded a former employee $8 million in punitive damages and $2.5 million in emotional pain and mental anguish for an alleged refusal to accommodate his disability and return to work. The federal judge vacated the jury’s award and entered punitive and compensatory damages of $300,000 — a far cry from the $10.5 million awarded by the jury.

Another alternative to jury trials (aside from arbitration agreements) is for an employer to have its employees sign a jury trial waiver.

This means that any dispute will be resolved in court by a judge, and not a jury or in arbitration. Several Iowa federal court judges have approved such jury trial waivers, provided certain conditions are met, mostly related to evidence that the parties have voluntarily and knowingly waived the rights to a jury trial.

One reported Texas case took it one step further, holding that an employer could legally fire an at will an employee for refusing to sign a jury trial waiver agreement.

This is easily satisfied. In order for an employer’s jury waiver to be enforced, the language should be straightforward and clear, indicating that employees are waiving their right to a jury trial, and that all disputes related to their employment will be decided by a judge.

The waiver should be included in a separate document with its own heading and in close proximity to the employee’s signature, so that the employee’s attorney cannot claim it was buried inconspicuously in the middle of the document.

Make sure that the jury waiver is broadly worded to include all employment claims, including statutory employment discrimination claims. Your company attorney can assist you in drafting all the other important language needed for the waiver to be enforced.

Wilford H. Stone is a lawyer with Lynch Dallas in Cedar Rapids. Comments: (319) 365-9101; wstone@lynchdallas.com