The United States Court of Appeals for the Third Circuit recently held that in order to prove economic damages, a plaintiff in an employment discrimination matter must present the testimony of an expert witness where the estimate of damages is not based upon his or her own personal knowledge.

In the recent case of Donlin v. Philips Lighting North America Corporation, Colleen Donlin, a temporary employee, sued Philips Lighting for employment discrimination after it failed to hire her as a full-time employee.  After a jury trial, the jury ruled in favor of Ms. Donlin and recommended $63,050 in back pay and $395,795 in front pay, for a total of $458,845. The jury's advisory verdict on front pay was based upon the premise that Ms. Donlin would have worked for 25 more years until retirement.  The trial court followed the advice of the jury on the back-pay issue, but modified its front-pay award by reducing the award to account for only 10 years of damages, finding that calculating damages for a 25-year period was too speculative.

Philips Lighting nevertheless appealed the award contending that the damages analysis was flawed because it allowed Ms. Donlin, a lay person, to provide specialized or technical testimony regarding her compensatory damages.  As to back pay, the trial court allowed Ms. Donlin to testify not only about her actual earnings, but also about her estimated lost earnings and pension benefits. With regard to front pay, Ms. Donlin's testimony detailed the number of years she intended to work and the annual salary differential between Philips Lighting and the other companies where she was employed.  In addition, Ms. Donlin estimated her future pension value, performed a probability of death calculation, and reduced her front pay award to its present value.

In finding in favor of Philips Lighting, the Third Circuit cited Rule 701 of the Federal Rules of Evidence which had been amended in 2000 to allow a layperson to testify only as to opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge. 

The Third Circuit noted that, if a lay witness has particularized knowledge by virtue of her experience, she may testify -- even if the subject matter is specialized or technical -- because the testimony is based upon the layperson's personal knowledge rather than on specialized knowledge.  At the same time, lay testimony requiring future projections of a business or operation must come from someone who has intimate and thorough knowledge of the business gathered from either a lengthy tenure or a position of authority.  The Third Circuit extended this “personal knowledge” exception to plaintiffs testifying in employment discrimination suits. 

The Third Circuit held that the trial court should have barred portions of Ms. Donlin's testimony requiring technical or specialized knowledge as she was only a temporary employee of Philips Lighting for a term of less than 1 year and did not develop in-depth knowledge of the company's salary structure, advancement opportunities, pay raises, or employment patterns. Ms. Donlin admitted that she was "not a professional," nor a finance major or forensic economist, and much of her testimony went beyond those easily verifiable facts within her personal knowledge and instead required forward-looking speculation for which she lacked the necessary training.

Specifically, the Third Circuit found that Ms. Donlin's testimony regarding the pension component of her back pay damages was improper, as well as her testimony with regard to her estimate of the annual pay raises at Philips Lighting, her estimated pension value, and the discounts she made for the probability of death and to find the present value of the award.