When employers are faced with employment discrimination and harassment lawsuits, they are often scarred stiff at the prospect of having to pay hefty punitive damages awards to former employees. That, of course, is the point of punitive damages. The state legislature created the threat of punitives so employers have a reason to stop or prevent workplace harassment and discrimination. Sometimes, the economic damages an employee can prove are not substantial enough to deter an unmotivated employer. Adding punitive damages to plaintiffs’ arsenals turns almost every employment lawsuit into a potential financial bloodbath for an employer, making it a strong deterrent.

Because punitive damages are meant to punish employers and deter them from violating the law, courts typically tailor such awards to be appropriate in amount both with respect to the severity of the misconduct committed and the employer’s ability to pay. If an employee proves an employer violated an anti-discrimination statute in an especially egregious and shocking way, a higher punitive award is justified. Likewise, if a plaintiff proves misconduct that warrants punitive damages, but the employer is a small “mom and pop” business with low cashflow and few economic resources, a court will probably award a relatively low award. This supports the traditional view that an employer’s misconduct should result in deterrence and punishment — not wholesale destruction of the business. See Herman v. Sunshine Chem. Specialties, Inc., 133 N.J. 329, 338-339 (1993) (punitive damages awards must be “fair and reasonable”).

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