Calculation Error
Mr. Snow has worked for the Jones Auto Parts Store for 12 years. He started as a salesclerk
and worked his way up to assistant store manager. He was the assistant store manager for six
years before he was fired by the owner after a heated argument. Mr. Snow started working at
the store for $16,000 per year. Right before he was promoted to assistant manager, he was
earning $21,400. His first-year salary as assistant store manager was $25,000, and he was
earning $33,500 when he was fired. Mr. Snow was 45 years old at the time he was fired.
In his damages claim, Mr. Snow is seeking $2,250,737 in lost compensation. In the expert
report filed on Mr. Snow’s behalf, the expert explained his calculation of damages as follows.
Mr. Snow’s salary grew at an average annual rate of 9.11 percent. This rate was calculated by
dividing his final year salary of $33,500 by his first-year salary of $16,000. The result showed
an increase of 109.375 percent ($33,500 ÷ $16,000) = 2.09375. He then divided by 12 years to
get an average annual increase of 9.11 percent (109.375 ÷ 12) = 9.11 percent. Next, the expert
projected a 9.11 percent salary increase compounded annually for Mr. Snow for the remaining
20 years that he expected to be employed by the Jones Auto Parts Store. He then summed the
expected annual salaries to arrive at the alleged damages amount. You have been hired as an
expert witness by Jones Auto Parts Store to provide rebuttal testimony to the expert hired by
Mr. Snow. Without regard to the issue of liability in this case, critique the damages estimate of
Mr. Snow’s expert providing as much reasoning and support for your position as possible.
First, the expert report filed on Mr. Snow’s behalf has assumed that the increase salary rate is
9.11 % per annum. The idea here is inaccurate because businesses can stop increasing salary at
any time if they are not growing as expected. Anything can happen that might decrease the
growth rate. The assumption of a constant salary increase is incorrect. Also, when calculating
the total claim amount using the explanation that the expert provided, there is a difference.
This difference could a calculation error.
Total claim = $2,250,737 Total re-calculation=$1,893,240 Difference= $357,496
Calculation of expected salary following instructions of expert report filed on Mr.
Snow’s behalf.
The second incorrect assumption is the growth rate of 9.11 percent. Mr. Snow’s first salary was
$16,000, and right before getting promoted, he was earning $21,400. Then he was promoted to
Assistant Store Manager, and his salary increased to $25,000. The unusual rise from 21,400 to
25,000 due to the promotion should not be considered as part of determining his average
annual salary increment. Then by the time he was fired, he was making $33,500 yearly. Then to
calculate the growth rate the periods need to be separate in two as follow:
Average Growth Rate: 5.65%
Consequently, it is wrong to assume an increase of 9.11% as it is evident by the above
calculation that the average growth rate is only 5.65% per annum.
The claim should be roughly calculated as below table 1.2:
Total Claim based on Growth Rate 5.65%