Friday, October 4, 2013

Reframing the Value of Settlement

    Psychologists have learned that people are generally more averse to loss than to risk of not getting a gain.  In other words, if I offer you $100,000, but you only have a 50% chance of winning it (value now $50,000), you are more likely to accept it than if I say, for example, if you lose the case you'll have to pay me $50,000.00 (making the settlement value potentially a net loss).  For this reason, a valuable offer which has no risk of cost should be carefully re-framed to shake out it's true value.
     I have found the most troubling cases lately are those of older workers who have been discharged from their jobs with little prospect for being re-hired before their retirement or pensions kick in.  After two or three years of diligently searching for work, they often have relatively high lost earnings and can justifiably claim many more years at a fairly high salary that they can anticipate being out of work.  Where an employee loses their job in their 20's or 30's, they can usually show a year or two of lost wages.  After that, the world expects them to find alternative employment.  An employee in their mid-50's can often demonstrate a loss of at least two years past lost wages and an additional 5-10 years of future lost wages, causing the "actual damages" to creep up to millions of dollars quickly.
     In these cases, it's a great opportunity for the mediator to reframe the value of the offer in conceptual ways that extend beyond money.  For example, an offer of the equivalent of a full year's salary can be described as a fair offer if it had been made at the time the termination occurred in a way that was intended to give the worker a full year paid leave of absence to re-train or find a more suitable work environment for himself, even if it is only a fraction of the actual out-of-pocket losses incurred by the time of the mediation hearing.  The same hypothetical $100,000 can also be couched as a college fund for both of the Plaintiff's children:  which is really what they were working to save in the past ten years--but now in a lump sum.  (Having put three children through college, I am keenly aware of today's costs of college--ranging from elite private to State schools).  Too, the $100,000 can be conceptualized as enough to pay their mortgage for six months and pay off their credit card debt.  In other words, we mediators cannot un-ring bells and turn back the hands of time...but a healthy offer can put an end to the lawsuit and make for a better future if a neutral can present the offer in light of it's true value, even if it is far less than the amount the Plaintiff's lawyer predicted in the uncertain outcome at trial.