Businesses Object to New Wisconsin Law Allowing Punitive Damages

June 10, 2009

Wisconsin Gov. Jim Doyle, has signed into law Senate Bill 20, which enhances discrimination protections for workers in the state. The bill requires employers with more than 15 employees who are convicted of engaging in discriminatory employment practices to pay compensatory and punitive damages, the governor’s office said.

An analysis of SB 20 provided by the Wisconsin Legislature states in part that:

“This bill permits a person who has been discriminated against or DWD to bring an action in circuit court to recover damages caused by the act of discrimination.

“Under the bill, if the circuit court finds that a defendant has committed an act of discrimination, the circuit court must order the defendant to pay to the person discriminated against compensatory and punitive damages in an amount that the circuit court finds appropriate and to pay to the circuit court a surcharge equal to 10 percent of the amount of compensatory and punitive damages ordered.”

Business leaders in the state are opposed to the bill. The state’s largest business lobbying group, Wisconsin Manufacturers and Commerce, issued a statement saying the law will allow convicted felons and other members of protected classes to file lawsuits to win workplace punitive damage awards up to $300,000. The new law allows punitive damage awards of up to $300,000 for workplace discrimination lawsuits, along with actual damage awards. Felons are a protected class under Wisconsin law, the WMC said.

“The new state law allows workplace discrimination claims – including felons rejected for jobs – to be ruled on by the state Department of Workforce Development (DWD), and then again in a second jury trial before a Wisconsin Circuit Court,” the WMC said in a statement released by the organization. “The new approach replaces a system that currently allows sole review and rulings by the Department of Workforce Development. Nearly two-thirds of claims are currently rejected by DWD for lack of merit. Workers currently can receive back pay and reinstatement for legitimate claims. ”

Jeff Bykowski, an account executive with M3 Insurance Solutions for Business in Madison, Wis., says there are insurance-related issues in the bill about which he has alerted clients.

In an e-mail to Insurance Journal, Bykowski noted that:

  • Even though not all businesses have one, those that do should be aware that some employment practice liability policies exclude punitive damages. He cited one insurance carrier’s policy which covers “punitive damages as awarded by a judge, but not by an arbitration proceeding.”
  • Many of the states surrounding Wisconsin, including Iowa, Illinois and Michigan do not allow for punitive damages. Minnesota allows for punitive damages but has a $25,000 cap.
  • He expects that insurance companies will ultimately revise current language within employment practice liability policies in reaction to the bill.

The WMC believes the SB 20 is “part of a cascade of anti-growth policies under consideration in Madison.” It recently organized a petition drive in which it gathered more than 2,100 signatures from Wisconsin business leaders who object the law, as well as to tax increases and other proposals in the state budget they believe to be anti-business.

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