DOLLAR GENERAL PARTNERS v. ARNEY UPCHURCH
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RENDERED:
NOVEMBER 3, 2006; 2:00 P.M.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-001703-MR
DOLLAR GENERAL PARTNERS
APPELLANT
APPEAL FROM CLINTON CIRCUIT COURT
HONORABLE EDDIE C. LOVELACE, JUDGE
ACTION NO. 03-CI-00017
v.
ARNEY UPCHURCH
APPELLEE
OPINION
AFFIRMING IN PART
AND
REVERSING IN PART AND REMANDING
** ** ** ** **
BEFORE:
JUDGE.
COMBS, CHIEF JUDGE; HENRY, JUDGE; PAISLEY,1 SENIOR
PAISLEY, SENIOR JUDGE:
Arney Upchurch filed an action against
Dollar General Partners alleging that he was discharged in
retaliation for filing a workers’ compensation claim in
violation of KRS 342.197.
The jury returned a verdict awarding
$25,000 in back pay and $250,000 in front pay.
Dollar General raises five issues:
On appeal,
(1) that the trial court
committed reversible error in denying its motion for a directed
1
Senior Judge Lewis G. Paisley sitting as Special Judge by assignment of the
Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and
KRS 21.580.
verdict; (2) that the trial court erred when it allowed
Upchurch’s back pay and front pay claims to go to the jury; (3)
that the instructions were erroneous; (4) that the award for
back pay and front pay were speculative and against the weight
of the evidence; and (5) that the trial court erred when it
permitted the jury to consider punitive damages.
EVENTS LEADING TO UPCHURCH’S TERMINATION
In December 1999, Upchurch was hired as the store
manager for Dollar General’s store in Albany, Kentucky.
He
earned approximately $420 per week plus yearly bonuses.
In
2001, his bonus was $6,500 but Upchurch testified that he
anticipated a $10,000 bonus in 2002.
His duties included
opening and closing the store, preparing work schedules,
unloading and stocking merchandise, and supervising employees.
Prior to August 2002, there were no complaints made to Dollar
General concerning Upchurch’s job performance, his yearly job
performance reviews were above average, and in January 2002,
store sales tripled.
In May 2002, Upchurch sustained a work-related injury
to his back.
He reported the injury to David Neale, the
district manager responsible for the Albany store, and was told
to report the injury to Dollar General’s Risk Management
Department.
Shortly thereafter, Upchurch told Neale that he was
seeking workers’ compensation benefits.
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Upchurch continued to
work until August 2002, when he took a leave of absence to have
back surgery.
Because of Upchurch’s absence, Neale spent increased
time in the Albany store.
During this time, he allegedly
learned from various employees that Upchurch did not participate
in unloading trucks and did not work the required hours to
manage the store.
He also learned that Upchurch had given a
store key to an unauthorized person, Joyce Graham, and that
Upchurch had given paid vacation to Rubenia Jarvis, an
ineligible part-time employee.2
Neale contacted Dollar General’s Field Employee
Relations Coach, Grace Pena, who instructed him to gather
documentation to substantiate the allegations.
Neale obtained
statements from Brenda Parrigin, the assistant manager, and the
“third key”, Stephanie Craig, regarding the key given to Graham.
Both women stated that Graham was given a key to open and close
the store in May 2001.
He also received employee statements
confirming that Upchurch had given vacation time to Jarvis.
Based on that information and after receiving approval from
Dollar General’s legal counsel, Pena instructed Neale to notify
2
Pursuant to company policy, store managers are expected to work forty to
forty-five hours per week. Personnel records for the year prior to his
termination show that Upchurch worked considerably less than that amount,
sometimes twenty to twenty-five hours per week. Each Dollar General store
has three store keys. Under the company policy, the authorized key holders
are the store manager, assistant manager, and the “third” key holder. The
Dollar General handbook provides that vacation time is given only to fulltime regular employees.
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Upchurch that he was terminated.
On October 24, 2002, Neale
told Upchurch that he was terminated.
UPCHURCH’S POST-TERMINATION WORK HISTORY
In November 2003, Upchurch began working part-time as
a sales representative for the Phillip Morris Company where he
earned $8.00 per hour plus mileage.
He also worked for his
parents’ Armco station in exchange for the payment of personal
expenses, including his mortgage, utilities, cable bill, and
gasoline.
He sometimes worked for his cousin’s company for
which he received merchandise.
In August 2004, Upchurch left his employment with
Phillip Morris and attended college full-time to pursue a degree
in radiology.
Although he continues to occasionally help his
parents and cousin at their businesses, he receives no wages or
salary.
DOLLAR GENERAL’S MOTION FOR A
DIRECTED VERDICT
At the close of Upchurch’s case, Dollar General moved
for a directed verdict arguing that Upchurch failed to prove a
causal connection between his workers’ compensation claim and
his termination and that he failed to demonstrate that the
reasons for his termination were pretextual.3
3
Its subsequent
Dollar General’s motion was sustained as it related to Upchurch’s claim for
damages for emotional distress.
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motion for a judgment notwithstanding the verdict or, in the
alternative, remittitur, was denied.
The standard of review applicable to a denial of a
motion for directed verdict and a judgment notwithstanding the
verdict is the same.
The appellate court is required to
consider the evidence in the strongest light possible in favor
of the opposing party.
(Ky.App. 1985).
Taylor v. Kennedy, 700 S.W.2d 415, 416
Either motion is properly granted only if there
is a “complete absence of proof on a material issue in the
action, or if no disputed issue of fact exists upon which
reasonable men could differ.”
Id.
KRS 342.197(1) states:
No employee shall be harassed, coerced,
discharged, or discriminated against in any
manner whatsoever for filing and pursuing a
lawful claim under this chapter.
A claim under KRS 342.197(1) is subject to the rule that to
avoid a directed verdict in a claim for employment retaliation,
the plaintiff must first establish a prima facie case.
The
plaintiff can meet this initial burden by proof that: (1) he
engaged in a protected activity; (2) the defendant knew that the
plaintiff had done so; (3) adverse employment action was taken;
and (4) that there was a causal connection between the protected
activity and the adverse employment action.
Brooks v.
Lexington-Fayette Urban County Housing Authority, 132 S.W.3d 790
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(Ky. 2004).
Upchurch filed a workers’ compensation claim, an
activity expressly protected under KRS 342.197.
Dollar General
was aware of the claim and Upchurch was discharged; the first
three elements of the cause of action were satisfied.
Dollar
General argues that Upchurch failed to prove a causal connection
between the protected activity and the adverse employment
action.
The plaintiff is not required to demonstrate that the
sole or even the primary reason for the termination was related
to the protected activity but only that its pursuit was a
“substantial and motivating factor” in the decision to
terminate.
First Property Management v. Zarebidaki, 867 S.W.2d
185 (Ky. 1993).
Because there is often a lack of direct
evidence, proof of a causal connection can be difficult and
requires reliance on inference.
In most cases, this requires proof that
(1) the decision maker responsible for
making the adverse decision was aware of the
protected activity at the time that the
adverse decision was made, and (2) there is
a close temporal relationship between the
protected activity and the adverse action.
Brooks, supra. at 804 (citation omitted).
Dollar General contends that, as a matter of law, the five-month
lapse of time between the reporting of the work injury to Dollar
General and the termination does not constitute a “close
temporal relationship”.
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“The sooner adverse action is taken after the
protected activity, the stronger the implication that the
protected activity caused the adverse action, particularly if no
legitimate reason for the adverse action is evident.”
Kentucky
Department of Corrections v. McCullough, 123 S.W.3d 130, 135
(Ky. 2003), citing Justin P. O’Brien, Weighing Temporal
Proximity in Title VII Retaliation Claims, 43 B.C. L.Rev. 741,
749 (May, 2002).
Although Dollar General cites a string of
cases, both state and federal, none purports to establish a time
limitation between the protected activity and the termination.
See Bromley v. Parisian, Inc., 55 Fed. Appx. 232, 239 (6th Cir.
2002); Richmond v. ONEOK Inc., 120 F.3d 205, 209 (10th Cir.
1997); Hughes v. Derwinski, 967 F.2d 1168, 1174 (7th Cir. 1992);
Shaffner v. Westinghouse Elec. Corp., 101 N.C.App. 213, 398
S.E.2d 657 (N.C.App. 1990).
They merely hold that under the
facts, the delay was so long that a reasonable inference could
not be drawn that the employee’s protected activity was a
substantial and motivating factor in the decision to terminate.
“Close temporal proximity” does not mean that the employee must
be terminated within days or even weeks of the filing of a
workers’ compensation claim.
Such a requirement would shield
the employer from liability by merely waiting months or even
years to terminate the employee.
The logical approach is for
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the court to view the time between the two events in the context
of the entire circumstances.
Upchurch was injured in May 2002, but continued to
work until August, when he took leave to have surgery.
Only
five months passed after the filing of the claim and his
termination occurred three months after Upchurch took medical
leave.
It was during this time that Neale made his allegations,
told Pena, and the decision was made to terminate Upchurch.
Construing the evidence most favorable to Upchurch, Dollar
General gathered its evidence to support it pretextual basis for
Upchurch’s termination.
Under the facts, there was a
sufficiently close temporal proximity to establish an inference
that there was causal connection between the protected activity
and the termination.
Once a prima facie case is established, the burden
shifts to the defendant to show a non-retaliatory reason for the
adverse employment decision.
McCullough, at 134.
At this point, the case then proceeds
with the plaintiff having to meet her
initial burden of persuading the trier of
fact by a preponderance of the evidence that
the defendant unlawfully retaliated against
her.
To meet her burden of persuasion, the
plaintiff “must be afforded the opportunity
to prove by a preponderance of the evidence
that the legitimate reasons offered by the
defendant were not its true reasons but were
a pretext for [retaliation].” Proof that
the defendant’s non-retaliatory reasons are
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“unworthy of credence is simply one form of
circumstantial evidence that is probative of
intentional discrimination, and it may be
quite persuasive”....In other words, a
plaintiff’s prima facie case plus proof of a
pretext may constitute sufficient evidence
to survive a motion for a directed verdict.
Id. (citations omitted).
Dollar General offered proof of its legally legitimate reasons
for the termination, including Upchurch’s failure to work
sufficient hours, keep the store in good condition, unload the
trucks, and that he permitted an unauthorized lay away program,
gave a key to an unauthorized employee and vacation time to a
part-time employee.
If these are the true reasons for
Upchurch’s termination, his retaliation claim fails.
While far from conclusive, there was sufficient
evidence to support the jury’s conclusion that Dollar General’s
reasons were a mere pretext.
Pena testified that prior to
receiving Neale’s information, she had not received any
complaints about Upchurch’s performance as a manager, the
condition of the store, or employee morale at the Albany store.
Although reference was made to a “zero tolerance policy”, which
would cover the alleged violations committed by Upchurch, the
employee handbook in effect at the time of Upchurch's
termination makes no mention of such a policy.
Written
notations kept by Pena indicate that she became aware of the
allegations against Upchurch in September 2002, only after she
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instructed Neale to “gather proof and mail it to me before we
call and terminate Arney.”
As a salaried employee Upchurch was not required to
complete time sheets.
Upchurch explained his actions concerning
the vacation time to Jarvis and the key given to Graham.
Jarvis, he testified, was hired as a full-time employee but no
longer worked a full forty hours per week, so he took an average
of the hours works and, since she averaged twenty-five hours,
gave her twenty-five hours of vacation.
He also pointed out
that the key was given to Graham in May 2001, prior to David
Neale becoming district manager and, consistent with policy, he
obtained permission from the prior district manager.
Based on the evidence, a reasonable jury could have
found that Upchurch’s termination was based on the filing of his
workers’ compensation claim and that the gathering of “evidence”
by Neale was motivated by the need to find a legally permissible
reason to terminate.
The jury could have, and did infer, that
the reasons given by Dollar General were pretextual.
THE AWARD OF BACK PAY
Dollar General contends that Upchurch’s medical
restrictions preclude him from recovering back pay.
Following
his surgery, and at the time of his termination, Upchurch was
under medical restrictions, including lifting restrictions of a
maximum of seven pounds from the floor, thirty pounds from the
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waist to the shoulder, and twenty pounds from the shoulder to
over-head.
He was further restricted from carrying thirty
pounds and no more than occasional bending, squatting, or
sitting.
A plaintiff in a wrongful termination case is entitled
to lost wages only for the periods in which he was ready,
willing, and able to work and in which he was physically capable
of performing the essential functions of the job he claims was
wrongfully denied.
2000).
Dunn v. Comcast Corp., 781 So.2d 940 (Ala.
The most physical aspect of Upchurch’s duties was
unloading trucks; it was not, however, his primary duty.
Pena
testified that if the manager was physically unable to assist in
the unloading, the job duties were fulfilled if the manager
supervised.
None of the restrictions placed on Upchurch would
prevent him from supervising and even assisting with light
items.
He was physically capable of performing his essential
job functions.
Although we find no error in the submission of the
back pay issue to the jury, we find that the jury instructions
and the calculation of the maximum amount to be awarded in back
pay were erroneous.
“Jury Instruction No. 3” provided that if
the jury found that Upchurch was wrongfully terminated, back pay
could be awarded and provided that:
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[T]he gross amount of wages he would have
earned from DOLLAR GENERAL CORPORATION
during the period between his discharge on
October 18, 2002, and November 2003,
including “fringe benefits” less any
compensation he received from other
employment or benefits he could have earned
through the exercise of reasonable diligence
to secure other employment during that
period of time, not exceeding a total award
of $26,029.66 for back pay.
Calculating the maximum amount of the award, the trial court
multiplied Upchurch’s weekly salary by 4.33 for a monthly salary
of $1,818.60 and multiplied the number of months from October
2002, until November 2003, when Upchurch became employed at
Phillip Morris, for a total of $20,004.60 and then reduced that
figure by $3,974.74 representing three months unemployment
benefits.
$10,000 was added as a bonus Upchurch projected he
would have received in 2002.
No reduction was taken for the
$3,540 paid in workers’ compensation benefits.
The jury awarded
$25,000.
The initial flaw in the trial court’s calculation and
consequently, in the instruction, is the use of the November
2003 date.
Both parties tendered instructions stating that the
back pay award should include the period from the date of
termination until the date of trial; the court, however,
erroneously used the date when Upchurch became employed by
Phillip Morris.
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The date when back pay ends and front pay begins has
significance in regard to the roles of the jury and the court.
Back pay includes all damages incurred as a result of the
wrongful termination until the date of trial and is
distinctively different from front pay.
The former compensates
the terminated employee for compensation lost until trial, while
front pay is awarded for lost compensation during the period
between judgment and reinstatement or in lieu of reinstatement.
Brooks, supra at 806.
Considered an equitable remedy, whether
front pay should be awarded and if so, the amount, are issues
for the trial court and not the jury.
Id.
Although Upchurch became employed by Phillip Morris in
November 2003, it was a part-time job and he made substantially
less than he did while in Dollar General’s employ.
Thus, while
amounts earned during his employment with Phillip Morris must be
deducted, amounts awarded from the date of his termination until
the date of trial, May 11, 2005, are properly considered back
pay.
Dollar General contends that Upchurch is not entitled
to compensation during any period in which he failed to actively
seek employment, including that period after August 2004, when
he attended school.
Thus, if Dollar General’s assertion is
legally correct, Upchurch is precluded from recovering benefits
after the date he left his employment with Phillip Morris.
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Following his termination, Upchurch was required to
mitigate his damage by exercising reasonable diligence to secure
other comparable work.
Lewis v. Bledsoe Surface Mining Company,
798 S.W.2d 459 (Ky. 1990).
To recover damages during any period
following his termination, he must have been ready, willing and
available for employment substantially equivalent to the
position he lost.
See Miller v. Marsh, 766 F.2d 490, 492 (11th
Cir. 1985).
Attending school after being wrongfully terminated is
often an effort to enhance employment opportunities.
The
question that arises in the context of wrongful termination
cases, however, is whether that effort satisfies the plaintiff’s
responsibility to mitigate damages.
Although there is no
Kentucky case with similar facts, the federal courts have
addressed this issue.
In Miller, the court held that the
plaintiff was properly denied back pay after she enrolled in law
school and voluntarily removed herself from the employment
market.
The plaintiff, the court emphasized, did not actively
seek employment and to permit her to reap the benefit of earning
her law degree and back pay for that same period would be a
double recovery.
[W]hen an employee opts to attend school,
curtailing present earning capacity in order
to reap greater future earnings, a back pay
award for the period while attending school
also would be like receiving a double
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benefit. Id. at 492, quoting Taylor v.
Safeway Stores, Inc., 524 F.2d 263 (10th Cir.
1975).
We agree that the pursuit of an education is not sufficient to
meet the duty to mitigate damages; it does not, however,
necessarily preclude an award.
The issue is not whether the
plaintiff returned to school but whether during the time he was
enrolled in school, he continued to be ready, willing, and
available to accept employment.
In Hanna v. American Motors Corp., 724 F.2d 1300 (7th
Cir. 1984), the court held that the plaintiff’s return to work
was not to “reap greater future earnings” but because, after an
unsuccessful job search, it was a means of receiving veterans
benefits and, at all times, he used reasonable diligence to
obtain comparable employment.
He sought employment for four
months before enrolling in school and, while enrolled, continued
to apply for various jobs.
After his first semester, he left
school and continued his employment search for another nine
months before again returning to school.
The return to school,
the court found, was a better alternative than unemployment.
The facts in this case are strikingly different than
those in Hanna.
After Upchurch left his employment with Phillip
Morris, he chose to withdraw himself from the workforce to
pursue an education program which would increase his future
earning capacity.
The duty to mitigate damages will not permit
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recovery for the wages lost during the period when he made a
voluntary choice to be unemployed.
Thus, upon remand, Upchurch
is entitled to back pay up to and including the date he no
longer actively sought employment.
We also find error in the additions and deductions the
trial court made from Upchurch’s base salary.
It added $10,000
to Upchurch’s back pay as an anticipated bonus in 2002.
In
Maggard v. Commonwealth, Cabinet for Families and Children, 991
S.W.2d 659 (Ky.App. 1998), the court denied the recovery of back
pay for an amount above the employee’s base salary.
The amount
of overtime was dependent on the availability of work and the
employee’s willingness to work. Because the employee was not
vested with any legally enforceable right to earn overtime pay,
any such award was impermissibly based, in part, on speculation
and conjecture.
Id. at 661.
Likewise, there was no guarantee
that Upchurch would receive a certain amount or that he would
receive yearly bonuses at all; the $10,000, therefore, should
have been excluded from the damage award.
The court deducted $3,974.74 for unemployment benefits
received representing three months of benefits paid.
Dollar
General contends that the amount should be that received for
nine months.
Upchurch did not file a cross-appeal challenging
the trial court’s deduction for unemployment benefits; this
court, however, has previously approved the deduction of such
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benefits.
Under KRS 341.415(1), the unemployment commission is
entitled to seek recoupment of any benefits paid in weeks for
which a person later receives a back pay award.
Thus, whether
the reduction is taken from the award or benefits are recouped
by the state, the terminated employee is not entitled to a
double recovery.
Simpson County Steeplechase Association, Inc.
v. Roberts, 898 S.W.2d 523, 528 (Ky.App. 1995).
Although the entire amount of benefits received should
have been deducted, we find that there was evidence to support
the trial court’s deduction.
Upchurch testified on direct that
he received benefits for three months but on cross-examination
ambiguously stated that he received benefits for six to nine
months.
Despite this inconsistency, Dollar General did not
produce any records which would conclusively establish the
amount received; the trial court, therefore, did not abuse its
discretion in deducting only $3,974.74.
We likewise find no error in the trial court’s failure
to deduct the workers’ compensation benefits paid.
Whether the
employer is entitled to credit for the workers’ compensation
benefits paid was decided in Hardaway Management Company v.
Southerland, 977 S.W.2d 910 (Ky. 1998).
Holding that the
employer is entitled to credit, the court stated:
[W]orkers’ compensation benefits in Kentucky
are not intended as damages for injuries,
but as compensation for wages lost or
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anticipated to be lost in the future. . . .
Hardaway was entitled to credit against
Southerland’s judgment for the temporary
total disability benefits paid to her while
she was unable to work. Those benefits
represented compensation for wages lost
during an identical period for which the
jury awarded her damages for “back pay and
income lost.” Id. at 918-919 (citations
omitted).
The $3,540 paid to Upchurch, however, was paid for the ten weeks
prior to his termination when he was on medical leave from work.
Under the circumstances, it was proper not to deduct the
workers’ compensation benefits.4
THE AWARD OF FRONT PAY
The trial court submitted the front pay award to the
jury and Upchurch was awarded $250,000.5
As we have previously
stated, the issue of front pay should not have been submitted to
the jury.
Brooks, supra.
Because an award of front pay is
often inherently speculative, the preferred remedy is
reinstatement and, if requested, the logical remedy.6
Upchurch,
4
In Hardaway, the court distinguished a lump sum settlement for permanent
partial disability. “A worker can be entitled to permanent partial
disability benefits even if he or she has sustained no immediate loss of
earnings, but has sustained an impairment of future earning capacity.” Id. at
919 (citation omitted). In that case there was not an award for future lost
earnings.
5
$250,000 is twelve and one-half years of Upchurch’s $20,000 yearly salary.
6
Reinstatement is not a desirable remedy in all instances such as where
there is hostility between the employer and terminated employee, the employee
has found other work, or where reinstatement would require displacement of a
non-culpable employee. See Roush v. KFC National Management Company, 10 F.3d
392, 398 (6th Cir. 1993).
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however, does not request that the court order reinstatement;
we, therefore, give that remedy no further consideration.
Although the jury found that Upchurch was wrongfully
terminated, he is not automatically entitled to front pay.
The
purpose of front pay is limited to compensating the employee for
wages lost as a result of the wrongful termination.
KFC National Management, 10 F.3d 392 (6th Cir. 1993).
Roush v.
Thus, for
the same reason Upchurch is not entitled to back pay after he
stopped actively seeking employment, he is also precluded from
receiving front pay; his admission that he was not actively
ready, willing, and available for employment, as a matter of
law, defeats any claim for front pay.
Hanna, supra; Miller,
supra; Lewis, supra.
THE PUNITIVE DAMAGE INSTRUCTION
The trial court submitted the issue of punitive
damages to the jury.
Although no award was made, Dollar General
contends that it was nevertheless prejudiced and that the
instruction influenced the jury to award an excessive amount for
front pay.
KRS 342.197(3) provides that an individual claiming to
have suffered retaliation for asserting a workers’ compensation
claim can recover “actual damages.”
Construing similar language
contained in KRS 344.450, in McCullough, the court held that
punitive damages are not recoverable under KRS 344.450 which,
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like KRS 342.197, provides that only “actual damages” may be
recovered.
“Actual damages”, the court held, does not include
punitive damages.
Id. at 139.
While it was error to submit the punitive damage
instruction to the jury, because no front pay is to be awarded,
any prejudice is remedied.
CONCLUSION
We find no error in the jury’s finding that Upchurch
was wrongfully terminated from his employment with Dollar
General.
We find error, however, in the calculation of the back
pay and the award of front pay.
On remand, the court is
instructed to determine, consistent with this opinion, that
amount which will compensate Upchurch as a direct result of his
wrongful termination up until he no longer actively sought
employment.
The award of front pay is reversed and, on remand,
there shall be no front pay award.
ALL CONCUR.
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BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF FOR APPELLEE:
Elizabeth S. Washko
OLGETREE, DEAKINS, NASH,
SMOAK & STEWART, P.S.C.
Nashville, Tennessee
Michael A. Rains
CARROLL & TURNER, P.S.C.
Monticello, Kentucky
ORAL ARGUMENT for APPELLEE:
Lance W. Turner
CARROLL & TURNER, P.S.C.
Monticello, Kentucky
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