What Happens When You Sue Your Employer: EEOC, Discovery, and Damages

When you sue your employer, you enter a structured legal process that usually takes one to three years and almost always ends in a negotiated settlement rather than a trial. Before filing, you may need to clear a mandatory agency step with the EEOC, and if you signed an arbitration agreement, you may not be allowed to go to court at all. Once a case is filed, most of the time and expense goes into discovery and pretrial motions, and the money you can recover depends heavily on the type of claim and the size of your employer.

Check for an Arbitration Agreement First

Before anything else, look at what you signed when you were hired and anything you signed later. Arbitration clauses appear routinely in offer letters, employee handbooks, and onboarding paperwork. If you agreed to one, you likely gave up your right to sue in court and agreed to resolve disputes privately. The Supreme Court has repeatedly held that the Federal Arbitration Act requires courts to enforce these agreements as written, including provisions that waive the right to join a class or collective action.¹

There is one major exception. A 2022 federal law lets you bypass any pre-dispute arbitration agreement for claims involving sexual assault or sexual harassment. You can choose court regardless of what your contract says.²

Even with an arbitration clause in place, you can still file a charge with the EEOC. The agreement does not stop the agency from investigating or pursuing relief on your behalf.¹

The EEOC Step That Often Comes Before a Lawsuit

If your claim involves discrimination, harassment, or retaliation based on a protected characteristic such as race, sex, age, religion, or disability, federal law generally requires you to file a formal charge with the U.S. Equal Employment Opportunity Commission before you can sue. You cannot skip this step for most discrimination claims.³

The deadline is 180 days from the discriminatory act, extended to 300 days if a state or local agency also enforces a law covering the same type of discrimination.³ Many states and cities operate their own fair employment agencies that process charges jointly with the EEOC.⁴

After the charge is filed, the EEOC notifies your employer and may offer mediation. Mediation is voluntary, confidential, and run by a neutral mediator who cannot impose a result. When both sides participate, it can resolve a charge in months rather than years.⁵ If mediation fails or either side declines, the EEOC investigates. That investigation can take several months on its own. If the agency doesn’t resolve the matter, it issues a Notice of Right to Sue, which clears you to file in federal court. You then have 90 days from receiving the notice to file, and courts enforce that deadline strictly.⁶

Not every claim requires an EEOC charge. Wage and hour disputes under the Fair Labor Standards Act, breach of contract claims, Equal Pay Act claims, and certain whistleblower claims can be filed directly in court.³ Each of those claim types has its own statute of limitations, so don’t assume EEOC deadlines control every employment dispute.

Inside the Lawsuit

Filing the Complaint

A lawsuit begins when your attorney files a complaint laying out the facts, the laws your employer allegedly violated, and the compensation you are seeking.⁷ The complaint is then formally served on the employer, which typically has 21 days to answer each allegation. Expect pushback immediately. A common opening move is a motion to dismiss, which argues that even if every fact in the complaint is true, no legal claim exists. If the court denies that motion, the case moves into evidence gathering.

Discovery

Discovery is where most of the work happens and where cases are won or lost. Both sides exchange documents, answer written questions, and take depositions, which are sworn out-of-court interviews of witnesses including you, your former managers, and coworkers.⁸ Your employer must produce internal emails, personnel files, and policy documents. You must produce evidence supporting your claims.

This phase is also where cases get expensive. A straightforward wrongful termination case might take six months in discovery. A complex discrimination case with years of documented incidents can take well over a year, and court backlogs add time on top of that.

Summary Judgment

After discovery closes, your employer will almost certainly file a motion for summary judgment, asking the court to throw out the case without a trial. The argument is that even viewing all evidence in your favor, no reasonable jury could find for you. The court grants the motion only if there are no genuine disputes about the key facts.⁹ Many employment cases end here. Surviving summary judgment gives your case real settlement leverage because the employer now faces the cost and unpredictability of a trial.

Protection Against Retaliation While the Case Is Pending

Filing a lawsuit or an EEOC charge is a legally protected activity. Federal law makes it illegal for an employer to punish you for asserting your rights, whether by firing you, cutting your pay, demoting you, or transferring you to worse assignments.¹⁰ The Americans with Disabilities Act contains a similar prohibition covering anyone who files a complaint or participates in an investigation.¹¹

Retaliation doesn’t have to be as dramatic as termination. Courts recognize subtler forms: increased scrutiny of your work, exclusion from meetings, schedule changes designed to create hardship, or spreading negative information about you to colleagues. The legal standard is whether the employer’s action would discourage a reasonable person from making a complaint.¹²

If retaliation occurs, it becomes a separate legal claim on top of your original lawsuit. Proving it means connecting the employer’s negative action to your protected activity, and timing is often the strongest evidence. When an employer fires someone two weeks after being served, the sequence speaks for itself.

What You Can Recover

Back Pay

The most straightforward remedy in a discrimination case is back pay, which covers the wages and benefits you lost between the wrongful action and the resolution of your case. Courts can also order reinstatement, though that is uncommon because the working relationship is usually too damaged. Back pay in a Title VII case can only reach back two years before you filed your EEOC charge.⁶

The law also expects you to look for new work while your case is pending. Any earnings from a new job, or earnings you could have made with reasonable effort, reduce the back pay you’re owed.⁶ This is the duty to mitigate. Apply for comparable positions as soon as possible and document every application. Sitting idle can shrink your damages to almost nothing even if you win.

Compensatory and Punitive Damages, With Caps

In intentional discrimination cases under Title VII or the ADA, you can also recover compensatory damages for emotional harm and punitive damages for especially reckless conduct. Federal law caps the combined total based on the size of the employer:

15 to 100 employees: $50,000
101 to 200 employees: $100,000
201 to 500 employees: $200,000
More than 500 employees: $300,000

These caps apply per complaining party and do not include back pay, which is uncapped.¹³ State laws may provide different damages with higher caps or no caps at all, which is why many plaintiffs file under both federal and state law.

Wage and Hour Claims

If your case involves unpaid wages or overtime under the FLSA rather than discrimination, the damage rules are different. An employer who violates federal wage laws owes the unpaid amount plus an equal amount in liquidated damages, essentially doubling the recovery.¹⁴ The employer can avoid the doubled damages only by convincing the court the violation was made in good faith with a reasonable belief it was legal.¹⁵

Attorney’s Fees

If you win a discrimination case, the court can order your employer to pay your attorney’s fees and expert witness costs.⁶ This fee-shifting provision is part of why employment attorneys take cases on contingency, and it means the employer’s total exposure is larger than the damages owed to you.

Settlement Versus Trial

Most employment lawsuits end in settlement. A settlement is a negotiated agreement where the employer pays a sum and the employee drops the case. Settlements can happen at any point: during the EEOC process, after the complaint is filed, during discovery, or on the eve of trial. Both sides have reasons to agree. You avoid the risk of losing and the wait for payment. The employer avoids the uncertainty of a jury verdict and continuing legal costs. Settlement agreements almost always include confidentiality and non-disparagement clauses, so read any proposal carefully before signing.

If settlement fails, the case goes to trial. Both sides present evidence to a judge or jury, which issues a binding verdict. A trial can produce a larger award than the last offer, but it can also leave you with nothing after years of litigation. That unpredictability is exactly why most cases settle.

Taxes on What You Recover

Most money from an employment lawsuit is taxable. Back pay, front pay, and compensatory damages for emotional distress that isn’t tied to a physical injury all count as gross income. Punitive damages are taxable regardless of the underlying claim.¹⁶

The only significant exclusion is for damages received for personal physical injuries or physical sickness. If your employer’s conduct caused a genuine physical injury and your settlement compensates you for it, those damages are excluded from income. Emotional distress on its own does not count as a physical injury, though you can exclude the portion of emotional distress damages that reimburses out-of-pocket medical expenses.¹⁷

This catches many plaintiffs off guard. A $200,000 settlement for race or gender discrimination is fully taxable income, and without planning you could owe tens of thousands to the IRS the following April. Work with a tax professional before finalizing any settlement, and consider negotiating how the agreement allocates money across different categories of damages.

1
U.S. Equal Employment Opportunity Commission. Rescission of Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment
2
Office of the Law Revision Counsel. 9 US Code 402 – No Validity or Enforceability
3
U.S. Equal Employment Opportunity Commission. Time Limits For Filing A Charge
4
U.S. Equal Employment Opportunity Commission. Fair Employment Practices Agencies (FEPAs) and Dual Filing
5
U.S. Equal Employment Opportunity Commission. Questions And Answers About Mediation
6
Office of the Law Revision Counsel. 42 US Code 2000e-5 – Enforcement Provisions
7
Legal Information Institute. Federal Rules of Civil Procedure Rule 3 – Commencing an Action
8
Legal Information Institute. Federal Rules of Civil Procedure Rule 26 – Duty to Disclose; General Provisions Governing Discovery
9
Legal Information Institute. Federal Rules of Civil Procedure Rule 56 – Summary Judgment
10
Office of the Law Revision Counsel. 42 US Code 2000e-3 – Other Unlawful Employment Practices
11
Office of the Law Revision Counsel. 42 US Code 12203 – Prohibition Against Retaliation and Coercion
12
U.S. Equal Employment Opportunity Commission. EEOC Enforcement Guidance on Retaliation and Related Issues
13
Office of the Law Revision Counsel. 42 US Code 1981a
14
Office of the Law Revision Counsel. 29 US Code 216 – Penalties
15
Office of the Law Revision Counsel. 29 US Code 260 – Liquidated Damages
16
Internal Revenue Service. Tax Implications of Settlements and Judgments
17
Office of the Law Revision Counsel. 26 US Code 104 – Compensation for Injuries or Sickness