Policy Guidance: Circumstances under which the award of prejudgment interest is appropriate

All of the courts that have addressed the issue have concluded that prejudgment interest should be awarded to ADEA plaintiffs who are not awarded liquidated damages. The primary rationale for this conclusion is that unlawful discrimination deprives an employee of his salary as well as the use of that salary during the interim period. Thus, awarding prejudgment interest is consistent with the purpose of the ADEA, i.e., making the plaintiff whole.

(Extensive citations omitted; emphasis in the original.)

The question to be decided in this Policy Guidance is whether prejudgment interest^[1] can be awarded when "liquidated damages" (i.e., double damages in cases of willful violations of the ADEA) are also awarded.^[2]

In Trans World Airlines, Inc. v. Thurston, 469 U.S. 111 (1985), the Supreme Court analyzed in depth the appropriate definition of "willful" for purposes of the ADEA's liquidated damages provision. In its analysis, at 125, the Court held that the enforcement provisions of the ADEA and the FLSA were intended by Congress to be different regarding the awarding of liquidated damages. The Court stated that "[t]he legislative history of the ADEA indicates that Congress intended for liquidated damages to be punitive in nature. The original bill proposed by the administration incorporated section 16(a) of the FLSA, which imposes criminal liability for a willful violation." The Court indicated that Congress had rejected the FLSA approach for the ADEA, deciding not to provide criminal penalties under the ADEA because "difficult problems of proof. . . would arise under a criminal provision. . ." With respect to the double damage liability offered as a substitute, "Senator Javits argued that his proposed amendment would furnish an effective deterrent to willful violations. . .and it was incorporated into the ADEA with only minor modification." The Court did not address the issue of whether or not a court could award both prejudgment interest and liquidated damages under the ADEA.

Prior to the Thurston decision, most circuits had determined that prejudgment interest and liquidated damages could not be available concurrently. The Tenth Circuit's holding in Blim v. Western Electric Co., Inc., 731 F.2d 1473, 1479 (10th Cir. 1984), is typical of the pre?Thurston holdings:

In Brooklyn Bank v. O'Neil, 324 U.S. 697, 715 (1945), the Supreme Court held that prejudgment interest was not available under the Fair Labor Standards Act because liquidated damages, which at that time were mandatory under the FLSA, compensated plaintiffs for any delay. The ADEA incorporates. . .the FLSA provision for liquidated damages. . . . Thus, we agree with the circuits that still regard Brooklyn Bank as pertinent and hold that prejudgment interest is not available under the ADEA if plaintiffs receive liquidated damages.

In light of Thurston, some of the circuits have reconsidered their previous holdings and have held that prejudgment interest and liquidated damages could be imposed concurrently. The Second Circuit's holding in Reichman v. Bonsignore, Brignati & Mazzotta P.C., 818 F.2d 278 (2d Cir. 1987) is an example:

In an ADEA case, prejudgment interest is designed to compensate the plaintiff for loss of the use of money wrongfully withheld through an unlawful discharge. However, other circuits have refused to allow prejudgment interest on compensatory damages that are coupled with liquidated damages on the theory that the liquidated damages compensate the plaintiff for "losses that cannot be calculated with certainty. . . .On this view, awarding both prejudgment interest and liquidated damages would provide a double recovery. The Supreme Court has recently held [in Thurston], however, that liquidated damages under the ADEA are punitive in nature. Rather than serving to compensate the victim, they are designed to deter willful violations.

On the other hand, several circuits, post-Thurston, have declined to alter their views. In Linn v. Andover Newton Theological School, Inc., 874 F.2d 1, 7 (1st Cir. 1989), the First Circuit, while not ruling on the issue (since the plaintiff had requested either liquidated damages or prejudgment interest, but not both), stated at n. 9:

We note, however, that it is far from clear to us that our [pre?Thurston] decision. . .must be abandoned. Thurston dealt only tangentially with the precise issue before us here. Moreover the relevant portion of that opinion was quite brief . . . . In short, we will not lightly presume that the Court intended to overrule, sub silentio, a view held by virtually every circuit to have considered the issue.

(c) Current Position of the Circuits ?

First Circuit: In Linn, the First Circuit, while not specifically deciding the issue, indicated that it was not favorably inclined toward permitting both forms of relief concurrently.

Second Circuit: In Reichman, the Second Circuit decided that both forms of relief could be granted.

Third Circuit: While in Blum v. Witco Chemical Corp., 829 F.2d 367, 382 (3d Cir. 1987), the court held that the calculation of liquidated damages could not serve to double the front pay award, the court has been silent on the issue of liquidated damages and prejudgment interest. In Gelof v. Papineau, 648 F.Supp. 912, 929 (D.Del. 1986), rev'd. on other grounds, 829 F.2d 452 (3d Cir. 1987), the trial court held in dictum that an award of liquidated damages precluded an award of prejudgment interest. Since at trial the court had determined that liquidated damages were not appropriate, the issue of permitting both forms of relief concurrently was not reached on appeal.

Fourth Circuit: In Hamilton v. 1st Source Bank, 51 FEP 1874, 1879 (4th Cir. 1990), the Fourth Circuit determined that an award of liquidated damages precluded an award of prejudgment interest.

Fifth Circuit: In Burns v. Texas City Refining, Inc., 51 FEP 1029, 1033?34 (5th Cir. 1989), the Fifth Circuit decided that the two forms of relief could not be awarded together.

Sixth Circuit: In Rose v. National Cash Register Corp., 703 F.2d 225, 230 (6th Cir. 1983), cert. den., 464 U.S. 939 (1984), the court followed Brooklyn Bank. However, Rose is also a pre-Thurston case.

Seventh Circuit: In EEOC v. O'Grady, 857 F.2d 383, 391 at n. 13 (7th Cir. 1988), a post-Thurston case, the court, citing Coston v. Plitt Theatres, Inc., 831 F.2d 1321, 1335?37 (7th Cir. 1987), vacated on other grounds, 108 S.Ct. 1990 (1988), stated that "A district court in this circuit may not award both prejudgment interest and liquidated damages in an ADEA action."

Eighth Circuit: In Gibson v. Mohawk Rubber Co., 695 F.2d 974, 979 (8th Cir. 1981), a pre-Thurston case, the court followed the Brooklyn Bank line of cases. In Neufeld v. Searle Laboratories, 884 F.2d 335, 341 at n. 2 (8th Cir. 1989), the court held that: "On remand, the Court should reconsider its award of prejudgment interest. The plaintiff may not be entitled to both prejudgment interest and liquidated damages." (Emphasis supplied.) It is not certain whether the words "may not" would indicate that the circuit is reconsidering its Gibson position in light of Thurston.

Ninth Circuit: The Ninth Circuit, even before Thurston, held that the two forms of relief could be provided in the same case. See Criswell v. Western Airlines, 709 F.2d 544, 556?7 (9th Cir. 1983).

Tenth Circuit: In Blim v. Western Electric Co., Inc., 731 F.2d 1473, 1479 (10th Cir. 1984), cert. den. 469 U.S. 874 (1984), a pre-Thurston case, the Tenth Circuit followed Brooklyn Bank. The court has not ruled on the issue since Thurston.

Eleventh Circuit: In Lindsey v. American Cast Iron Pipe Co., 810 F.2d 1094, 1102 (11th Cir. 1987), the Eleventh Circuit held that the two forms of relief could be provided in the same case.

The D.C. Circuit has not addressed the issue either before or after Thurston.

In summary, the Second, Ninth, and Eleventh Circuits have ruled that prejudgment interest and liquidated damages can be awarded in the same case. The Sixth, Eighth, and Tenth Circuits, which have followed Brooklyn Bank in the past, have not addressed the issue after Thurston. The Fourth, Fifth, and Seventh Circuits have stated, post-Thurston, that the two forms of relief are mutually exclusive; the First Circuit has indicated that it will also rule in this manner. The Third Circuit appears to have no position at this time.

(d) Commission Position: The Commission considers the positions taken by the Second, Ninth, and Eleventh Circuits to be the correct position. In light of the Supreme Court's holding in Thurston and the legislative history cited therein, the Commission believes that it is permissible for a court to award both liquidated damages and prejudgment interest in the same case. The purpose of each relief is different; liquidated damages are awarded to punish an employer for willful misconduct in its violation of the ADEA, while prejudgment interest is awarded to compensate the employee for the loss of the use of the money during the period of the discrimination.

A contrary rule, in the form adopted by the Fourth, Fifth, and Seventh Circuits, would dilute the deterrent effect of liquidated damages by exempting the employer who willfully violates the ADEA from the prejudgment interest for which it would otherwise have been liable. Depending upon the length of time between the violation and the entry of judgment, this could be a significant benefit to the employer, a benefit which could make the sting of liquidated damages much less painful.

(e) Case Resolution ?

In seeking relief in a case under the ADEA, the Commission will request, inter alia, backpay, prejudgment interest and, in cases involving willful violations, liquidated damages. However, in the Fourth, Fifth, and Seventh Circuits, which have rejected (post?Thurston) simultaneous awards of prejudgment interest and liquidated damages, the Commission must follow the law of the circuit and not seek prejudgment interest if liquidated damages are awarded.

DATE: August 29, 1990 APPROVED:__/s/_______________________

EVAN J. KEMP, JR.

Chairman