When a plaintiff receives an award, he will often have to pay taxes on it. When the award is increased to take into consideration those taxes, it is “grossed up.” Generally, it is extremely difficult to obtain a gross up of a court awarded judgment to account for additional taxes which must be paid by the plaintiff on such awards.
However, is some authority which allows the court to award additional “grossed up” damages. The plaintiff must demonstrate that receipt of a lump sum award results in a higher tax burden than having received that income over time, such as in instances where back pay is awarded. See O’Neill v. Sears Robucks & Co., 108 F. Supp 2d. 443. Considering the rationale, it makes some sense: Given the higher tax burden of a lump sum award, the award would not be sufficient to make the plaintiff whole. For example, in O’Neill v. Sears Roebucks & Co., the court reasoned that additional damages to account for the tax penalty of receiving wages as a lump-sum (as opposed to over a period of time) were appropriate under the Age Discrimination in Employment Act, because the intent of the Act was to make plaintiffs whole.
Importantly, awards in a federal jury trial case cannot be grossed up as “additur” as it is forbidden by the Seventh Amendment to the U.S. Constitution. Therefore, whether an award may be “grossed up” depends upon the nature of the cause of action and the facts and circumstances of your case.
