'Grossing up' the plaintiffs damages in employment cases, is it right?

From a legal standpoint maybe not, to some economists the answer is yes.

For some economists, whether or not a state allows consideration of income tax adjustments to arrive at earnings losses, the gross-up for excess taxes in employment lawsuits is a separate and necesary calculation. Recent IRS and court rulings cause a prevailing plaintiff not to be made whole if they win.

That is because the lump-sum award will be taxed at a relatively higher rate than would have been paid on the earnings year-by-year. Think: Of winning the taxes on winning the lottery

Several articles address the issue and present a simple (and mathematically correct) procedure & formula for calculing the gross-up.

Tyler J. Bowles, and W. Cris Lewis, “Taxation of Damage Awards: Current Law and Implications,” Litigation Economic Digest, Fall 1996, Volume 2, Number 1, pp. 73-77

Ben-Zion, Barry, "Neutralizing the Adverse Tax Consequences of a Lump-Sum Award in Employment Cases," Journal of Forensic Economics 13(3), 2000, pp. 233-244;