Mitigation in employment damages: actual earnings, imputed earnings, and the middle ground

The duty to mitigate damages is one of the oldest principles in common-law remedy. In employment litigation, it translates into a requirement that a plaintiff seek and accept substantially equivalent employment during the loss period, and that actual earnings from such employment offset the damages claim. The economic expert operates in a space defined by that legal duty, by the evidentiary record of what the plaintiff actually did, and by labor-market data about what the plaintiff could reasonably have done.

Actual mitigation

The clearest case is actual mitigation. The plaintiff secured substitute employment during part or all of the loss period. Earnings from that employment are documented through W-2s, 1099s, pay stubs, and tax returns. The model subtracts actual earnings from projected earnings in each year of the loss period.

Actual earnings are subtracted dollar for dollar in most frameworks. The comparable-benefits offset, subtracting substitute-employer benefits from the projected benefits calculation, follows the same approach.

Where actual mitigation is the full story, the damages model is procedurally simple. The defensibility of the number turns on the projection of counterfactual earnings, not on mitigation analysis.

Imputed mitigation

Imputed mitigation enters where the plaintiff did not secure substitute employment, or secured substitute employment at a lower level than the plaintiff could reasonably have obtained. The question is what a similarly situated person in the plaintiff’s labor market would have earned.

This is where mitigation analysis gets contested. Defense experts typically argue for higher imputed earnings (reducing damages). Plaintiff experts typically argue for lower imputed earnings (preserving damages). The difference between the two is rarely a disagreement about method. It is usually a disagreement about which data source fits the plaintiff’s specific profile.

The evidentiary record

The defensible imputed-mitigation analysis begins with the plaintiff’s actual search effort. Applications submitted, interviews attended, offers received, offers declined, reasons for decline. This record, pulled in discovery, sets the baseline. Where the search effort is diligent and the documented labor market supports the plaintiff’s explanation for ongoing unemployment or under-employment, imputed earnings typically track actual earnings closely.

Where the search effort is thin, or where the plaintiff declined substantially equivalent offers, imputed earnings must be constructed from labor-market data appropriate to the plaintiff’s occupation, geography, and profile. The Bureau of Labor Statistics Occupational Employment and Wage Statistics (OEWS), supplemented by industry-specific sources and, where relevant, firm-size adjustments, provide the foundation.

Where the line sits

The economist does not determine whether the plaintiff satisfied the duty to mitigate. That is a question for the trier of fact. The economist provides the numerical analysis under alternative scenarios: actual earnings as reported, imputed earnings at the plaintiff’s pre-loss level, imputed earnings at a conservative OEWS median, and sensitivity ranges around each.

Presenting the work as a scenario table, rather than a single fixed reduction, gives the trier of fact the structure to apply its factual findings to the numerical framework. The opposing expert is then constrained to attack specific inputs rather than the composite conclusion.

What the mitigation section of the report should show

The defensible section shows the plaintiff’s actual post-loss earnings year by year, the search effort summary as stipulated or reported, the imputed earnings calculation if any, and a sensitivity table around the imputed assumption. Each imputed number ties to a labor-market source cited by vintage, geography, and occupation code. The report that names its sources and its assumptions survives; the report that produces a single mitigation number without showing its work does not.