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The Relevance of Tax Returns in Employment Disputes

February 12, 2019 By Larry Schaefer

The Relevance of Tax Returns in Employment Disputes | Schaefer Halleen

We are about to enter into a national debate about the relevance of President Donald Trump’s past tax returns.  These are sought in large part to determine the extent to which the President may have been financially entangled, in the past and through the current time, with foreign interests which could compromise his ability to lead our country objectively.  These financial ties, if established through these returns, may have been used to coerce collusion with Russia in its’ proven past, and likely future, efforts to undermine our electoral process.

While these returns therefore have unquestionable relevance to current investigations, the issue is very different when complete tax returns are sought by defendants in employment litigation.  This blog describes the very limited basis for seeking evidence of earnings post-termination in an employment dispute, and explains why complete tax returns are rarely appropriately requested, much less produced, in this kind of litigation.

The Obligation to Mitigate Damages

Defendants generally predicate requests for production of tax returns on a plaintiff’s obligation to “mitigate” damages following an allegedly illegal termination.  In addition to this duty, any earnings post-termination can often serve to reduce, dollar-for-dollar, the economic loss a plaintiff has suffered and can recover in this litigation.  

The economic loss a successful plaintiff can recover in an employment claim generally includes projecting through trial (called “back pay” loss), and beyond (called “front pay” loss, which can generally extend for 2-6 year beyond trial) the amount he or she could have expected to earn (salary/hourly pay plus bonus plus the value of all benefits) from the employer if the illegal termination had not occurred.  This can and should even include promotions into positions of greater responsibility, when the evidence supports this kind of projection. Expert forensic economist testimony is often very helpful in establishing the full value of this loss, and effectively reducing future loss to “present value.” The difference between this total amount over time and the actual amount received by plaintiff in other earnings (with the limited exception described below), represents the recoverable “economic loss” from an illegal termination.      

The duty to mitigate damages generally applies in any “wrongful termination” case, whether premised on discrimination, harassment, retaliation, or other common law or contractual obligation(s).  This duty is limited, however, to making good faith efforts to seek “comparable” employment, and to disclose, with limited exception, earnings through work since termination, whether paid to the plaintiff as an employee or independent contractor, by check or cash.  If a plaintiff cannot establish in litigation that he or she has satisfied this obligation, this can actually serve as a basis for a court to to deny and back-pay or front-pay loss.

Tax Returns Contain Irrelevant Information

Complete tax returns, however, contain far more information that simply wages earned in any given year.  The sometimes very detailed process of determining gross and taxable income, and final tax amount owing, includes many steps which reveal charitable contributions, number of dependents, earnings outside of the employment or work context, and a potential myriad of claimed itemized deductions which the former employer has no right to discover in litigation.  Therefore, resist any attempt to produce complete tax returns, and instead tailor any production to solely w-2 income earned (and the accompanying tax forms which issues when this income is paid), 1099 income earned (and accompanying forms), or, in rare instances, cash payments made for services rendered.

Not all Post-Termination Earnings are Relevant

Even in this circumstance, there are many occasions where post-termination earning cannot serve to reduce plaintiff’s economic loss from an illegal termination.  When this is the case, counsel should resist any effort to produce evidence of these earnings in litigation.  For instance, when a plaintiff earns money from “moonlighting” in a less than full-time role, or from a part-time position he or she may have been able to serve in even if the challenged termination had not occurred, these earnings should have no impact on an appropriate calculation of back- or front-pay loss.  Resist any efforts to “discover” these earnings in litigation.

Maximizing Economic Loss is Crucial in Employment Litigation

Experienced legal counsel understand how to maximize economic loss when prevailing on employment claims.  They also know how to ensure a plaintiff fully documents mitigation efforts to ensure that the record on this obligation is beyond reproach in litigation.  Schaefer Halleen lawyers have this experience, and are well versed in every aspect of maximizing the recovery of economic loss, including retaining and working forensic economics experts when necessary.

Employment discrimination lawyer Minneapolis is available for a free consultation to assist you in determining whether you have been a claim where economic loss can be recovered, and will develop an effective strategy for maximizing this recovery.  

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Filed Under: All Blog Posts, Lawrence P. Schaefer, Severance/Employment Contracts, Wrongful Termination

About Larry Schaefer

Lawrence P. Schaefer has earned the respect of judges and other lawyers for his thorough and aggressive client advocacy in negotiation and litigation. He focuses exclusively on representing people who have been subject to employment discrimination at work. Larry serves as the firm’s President and head of litigation. Read more >

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412 S 4th St Suite 1050Minneapolis,MN55415
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Schaefer Halleen, LLC

Schaefer Halleen, LLC is located at:
412 S 4th St, Suite 1050, Minneapolis, MN 55415
Phone: 612-294-2600
Fax: 612-294-2640
Email: info@schaeferhalleen.com
www.schaeferhalleen.com

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4.6
Leon Griggs
Leon Griggs
15:49 12 Sep 23
I had no idea if or what legal rights I had involving employment law. After receiving consultation from Schaefer Halleen, a surprising and fair resolution was found to the expressed appreciation of all parties involved.Schaefer Halleen, Thank you for your help on this very important matter.
Don Mink
Don Mink
16:15 22 Aug 23
Lawrence was extremely professional and thorough in his research and communication with me and other parties. I highly recommend him and this firm and would personally utilize their services in the future.
Rembrandt Brown
Rembrandt Brown
19:16 10 Jul 23
Fantastic firm!
Al Krysan
Al Krysan
13:47 16 May 23
I engaged Peter Christian at Schaefer Halleen and his advice, guidance, and speed to resolution was just what I needed to move on in a better spot. I highly recommend this team!
Randy Reyes
Randy Reyes
16:13 28 Apr 23
Lauren D'Cruz did a wonderful job representing me on a complicated case. Her expertise, intelligence, and understanding of the circumstances and my personal story led to a very successful outcome and efficient process. I am extremely grateful for her expert work.
James Hannan
James Hannan
20:04 21 Apr 23
Excellent knowledge and easy to work with!
Mary Kallock
Mary Kallock
04:22 19 Apr 23
I highly recommend working with Schaefer Halleen. Each team member that I interacted with - Larry, Darren, and Jenelle - were extremely professional, respectful of my time and concerns, and were quick to address my needs. I worked closely with Darren Sharp for my case. Darren lives up to his surname - he is thorough, efficient, and no nonsense when it came to representing my needs. All the same, he is compassionate, engaged, and a pleasure to work with. Again, I highly recommend this firm and thank them for their support in my case!
Leann Barrick
Leann Barrick
05:00 25 Jan 23
I highly recommend this law firm. Peter took his time to explain how the legal practice would work so I knew what to expect and Jenelle showed compassion when listening to my needs. Peter resolved the settlement fast and I think you find out you'll be happy with this firm as well.
Smook Music
Smook Music
16:34 27 Dec 22
Jeff Hilligoss
Jeff Hilligoss
15:03 05 Dec 22
Larry Schaefer and the professionals at Schaefer Halleen are the team you want in your court for employment law matters. Consummate professionals, their expert, clear-eyed advice and counsel has been invaluable to me over the course of my career. And they are a delight to work with!
Tom Emison
Tom Emison
14:53 22 Nov 22
Tim Christensen is simply amazing; evenings, weekends, whatever it took to serve me. thank you Tim!
Mark Copeland
Mark Copeland
22:46 17 Nov 22
Tim was fantastic and really paid attention to detail. I recommend him and the firm to anyone who has employment legal issues.Mark Copeland
C Verdick
C Verdick
13:47 15 Nov 22
Peter and Makenzie were great to work with. Highly recommend.
Keely Hooper
Keely Hooper
17:48 02 May 22
Caroline Allen
Caroline Allen
10:56 03 Feb 22
I worked with Larry on a severance negotiation and was incredibly pleased with the work he did. He gave great advice and helped me end the negotiation in a very favorable spot.
Kit White
Kit White
18:22 07 Jun 21
I would highly recommend working with this firm if you're dealing with a legal case. They are so responsive, kind and compassionate. Darren made me feel heard and fought for me throughout the entirety of my case. It was not an easy experience, as legal cases tend to bring up a lot of emotions and trauma, but this firm will fight for you and make you feel heard. Highly, highly recommend.
Marcia
Marcia
14:18 02 Jun 21
I highly recommend Peter Christian and Shaefer Halleen. Clear communication and planning were key to our success. The team I worked with was empathetic and sensitive to my situation, and always helped me understand the overall legal process and what to expect during our case.
Amy A Houchins-Post
Amy A Houchins-Post
14:00 10 Mar 21
Lia
Lia
22:13 26 Feb 21
Peter and Lauren are patient and understanding. They considered my case from every angle possible. They also took the time to educate me a bit on how the law works. Very impressed!
Julie Koritz
Julie Koritz
01:27 25 Feb 21
Peter and Jacob did a great job getting me a settlement. I am very fortunate to have worked with them.
DeAijha Oliver
DeAijha Oliver
05:22 30 Dec 20
Henry V
Henry V
15:56 25 Sep 20
I worked with Larry Schaefer and Lauren D'Cruz. They enthusiastically took up my case. They showed creativity, good judgment and deep knowledge of the law in formulating the theory of the case. They also struck a fine balance between zealous advocacy and risk management. They were very responsive and provided timely status updates throughout our engagement. They took genuine interest in me as a person. I would recommend Schaefer Halleen to my family and friends without reservation.
Constance Lewis
Constance Lewis
15:46 10 Aug 20
I had the opportunity to work with Peter Christian. He was amazing to work with. He believed in my case from the moment we spoke and was diligent in working for me. He kept me in the loop on every aspect of my case, he allowed me to have input before decisions were made and fought for me from the very beginning to the end. He was prompt and followed through on everything he said he would. Peter was very professional, and timely. I truly appreciate the time and dedication to my case. Thank you Peter for taking the chance with my case and fighting for me. With Peter's expertise, my case was settled with a positive and favorable outcome. You were a pleasure to work with and I would highly recommend your services. Thank you again!
B Bowlby
B Bowlby
15:46 24 Apr 20
I cannot recommend Schaefer Halleen highly enough. I had a particularly hard employment issue and I found the people at S.H. to be excellent to work with. They are all very professional, very intelligent, handled me and my situation with care and always kept me up to date on where my case was at. In the rare instance when I contacted them by either phone or email I received a near immediate response.I was always made to feel that I was important and I always felt I was being given advice I could trust. At the end of the day my case was settled in a very timely manor and I am very pleased with how it turned out.Finally, the lawyers and staff at S.H. are some of the most experienced people in their industry and I was very impressed with their past accomplishments. I knew I could trust S.H. to handle my case after the very first meeting. If you need employment law help, Schaefer Halleen, LLC is the one and only firm I would recommend.
Roland Awasome
Roland Awasome
13:32 02 Apr 20
I am a professional and worked with many attorneys in the past. Peter is hands down the best out there. I can’t recommend him enough .
Laura H
Laura H
14:10 21 Feb 20
I am so thankful I found the Schaefer Hallen team to help me through one of the most difficult times in my life. Lauren always took the time to listen and was respectful and professional. Her attention to detail is impeccable, and she helped organize all my random thoughts and emails to help strengthen my case. Larry and Lauren kept me informed throughout the whole process and always made me feel like I was in control. With their expertise, my case was settled efficiently and with a positive outcome.
Mevhibe Atay
Mevhibe Atay
20:03 19 Feb 20
I had a great experience with the firm. My attorney Darren Sharp was very efficient, knowledgeable and kept me informed at every step. Very trustworthy and professional.
Ioannis Karampelas
Ioannis Karampelas
15:45 12 Sep 19
Extremely professional and humane treatment towards me as a person in severe trouble, perplexed by conditions generated totally out of my control. This law firm is outstanding.
Katy Eagle
Katy Eagle
16:54 16 May 19
Overall, the firm is great! Lauren D'Cruz is organized, thoughtful, and very pleasant to work with. I have enjoyed my interactions with everyone at Schaefer Halleen over the years. I highly recommend the firm and Ms. D'Cruz.
M. Malik
M. Malik
20:11 05 Apr 19
It is with great pleasure that I write this for Mr Schaefer and his capable people comprised of talent and empathy. I had a fear of Attorneys (due to my own weakness, no disrespect to the legal profession), but I felt pleasantly surprised after my visit to his firm located in the heart of Minneapolis - my home city that I am passionate about. Larry's office emblomized everything that I look for. The attorneys, the administrative staff, the decor, it all felt "happy" and "inter-connected". I had thought my case was too too hard to understand by others, however due to Larry's brilliance and savvy, it became evident to me that he understood it very well. He had a clear line of action and a resolve to seek justice with ethics. That was all that I desired. I hope Larry's office continues to serve the disability community, that it prospers, grows, and makes Minneapolis the best city in the world.
Sameh Said
Sameh Said
16:21 04 Apr 19
I am very thankful to Larry for helping me through a very difficult time of my life. My former employer discriminated against me and treated me very badly and I was forced to resign to end my struggle with this employer. I did not know what to do or who I can find to help me getting through this and restore my reputation and my employment. I met with several layers prior to my meeting with Larry and I can tell the difference immediately when I engaged with him. Larry told me what will happen in the first meeting and despite my process took several months, he was able to predict the successful outcome just through listening to me in that very first meeting. He has complete understanding of all employment related issues, he is focused and dedicated to help his clients getting back on track. His strategic thinking and the steps he made were the key to success. He also has a wonderful team that are just the right team to help. Quick response and timely feedback about what is going on with the case so you are always in the loop with the next step. Now I moved on to a new and a better employer and I feel I am beginning a new and a good chapter in my life, and I feel I can't thank Larry or his wonderful team enough for what they did to me and how they supported me to get through probably the worst chapter in my life.Thank you Larry
Rebecca Thavis
Rebecca Thavis
17:14 02 Apr 19
Larry truly went above and beyond. In each step of the case, he made sure I was aware of what was happening and the next steps. He called frequently, and followed my choices, making sure that I felt in control. I never felt like a victim, or less- he helped inspire me to fight for what I needed and deserved. If I had to go through it again, no questions asked, I would want Larry by my side every step of the way. His team is well organized, efficient, kind and discrete. I am forever grateful that Schaefer Halleen represented me, and I highly suggest them for any and all people who need empowering representation.
Joanne Simons
Joanne Simons
21:30 26 Mar 19
Excellent experience, outstanding staff, expedient, caring, respectful.
Jessie Lecy
Jessie Lecy
00:22 18 Mar 19
The humanness and genuine care for their clients separates this firm from others and makes it best in class.
John Styliaras
John Styliaras
23:55 17 Mar 19
Larry and his team at Schaefer Halleen helped bring to resolution issues at the workplace in an amicable manner. When I first approached Larry, I was not even sure what steps to take, what to do, did not even know if I needed a lawyer, or why I needed a lawyer. All I knew was that friends and colleagues told me to reach out to a lawyer. And when I asked around, his name and his firm's name kept on being mentioned by many. And the reputation was well deserved.Larry patiently and deliberately listened to my story, and then explained to me exactly why I needed a lawyer, and how he could help me. Immediately he laid out the plan about how to proceed. Instantly I was put at ease. Throughout a very long process, he provided me advice and guidance and was always willing to talk to me on the phone, whenever there were either updates, or I had questions and concerns.I am absolutely certain that I would had not been able to reach the resolution without Larry's and his team's steadfast guidance, advice, and impressive work. I recommend Larry and his firm unconditionally - the very best in the field.John C. Styliaras MD,MS
Ricardo Vidal Gonzalez
Ricardo Vidal Gonzalez
18:49 12 Dec 18
I highly recommend the Schaefer Halleen law firm. Larry Schaefer was always available to answer any questions and his team was very professional. They work hard to get results and take the time to listen to the client’s goals.
annette miller
annette miller
00:40 07 Nov 18
I found the team to be professional, respectful and very well versed in employment law. I would recommend them to anyone looking for advice or expertise in this area.
Lynn Hassan Jones
Lynn Hassan Jones
14:18 31 Oct 18
I am a physician who recently hired Schaefer and Halleen to represent me in an employment discrimination case, my Atty was Jean Boler ESQ.They provided top-tier legal services to me for my case 2017 through my settlement in 1st qtr of 2018.This was excellent legal representation, specifically - very responsive, very prompt, extremely detailed and never off-putting.Absolutely would recommend without reservation!
Doc MoSho
Doc MoSho
19:40 02 Jul 18
They were attentive and responsive and dod a great job of diffusing the tension in a situation that could have been quite adversarial. They also did an excellent job of level setting before the process proceeded to far in an unrealistic direction. Great work.
the Dodger
the Dodger
14:28 04 Jun 18
Joyce Jenkins
Joyce Jenkins
19:03 02 Jun 18
Larry has been a great resource for several years. His response time, quality of response and follow up are excellent. He has been flexible enough to answer an impromptu calI and get a response back within an hour. I recall talking to Larry early one morning when there was 8" of snow and most businesses were closed. He was the only one in the office to keep my appointment.I have recommended Larry to more than a dozen of my friends and colleagues and I feel very comfortable recommending him to anyone.Derek Jenkins
John
John
23:57 01 Jun 18
An honest lawyer? YES! Larry was fantastic and I can’t thank him enough for his unbiased advice and support.
Ravi B
Ravi B
21:00 01 Jun 18
Larry is amazing. Very professional, takes the time to listen, is very knowledgeable and respected and if he says he can get you justice - you can count on it.
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