Constructive discharge: when quitting constitutes illegal termination.

Employers looking to eliminate "problem employees" may take actions that put their company at risk. An employee who quits may still claim that his/her employer made working conditions intolerable. This article explores how employers can avoid the danger of "constructive discharge" litigation by practicing good human resource management.

Introduction

Supervisors often assume that when an employee resigns, the company is "off the hook" -- i.e., there will be no employee lawsuits to recover post-resignation economic damages. An employer may heave a sigh of relief when a troublesome employee turns in his or her resignation. There is a feeling of security. After all, the employee quit voluntarily, so there should be no basis for wrongful discharge litigation.

Not always true. In fact, employees who tender their own resignation can -- and do -- sue their employers after the fact when they believe that they were forced to leave by that employer's actions. The argument is legally known as "constructive discharge" and it's causing headaches for many companies that thought they were off the hook.

Constructive discharge can cover a variety of employee complaints stemming from alleged unfair labor practices, discrimination under Equal Employment Opportunity laws or violations of the Americans with Disabilities Act (27). If constructive discharge is proven, the penalties can be severe, including back pay and damages to compensate for the employee's loss of future earnings from the job (based on remaining work years and how long it will take to find a similar job). Penalties can also include attorney's fees, and even compensatory damages for pain and suffering or mental distress. In addition to compensatory damage, courts may award "punitive damages" -- intended to punish an employer for wrongful behavior. Punitive damages can run into millions of dollars, so they're not something to be taken lightly (Wilson v. Monarch Paper Co., 1991).

This paper reviews literature, legislation and current court rulings on constructive discharge. It is designed to inform employers and their agents about events that may lead to post-employment litigation and how to avoid this situation. A good rule of thumb is to practice fair and just treatment of all employees, continuously upgrade working conditions, document performance, use good communication, provide grievance procedures and educate managers -- i.e., practice good human resource management.

While constructive discharge is not a new phenomenon, current laws and court logic make employee claims more likely and easier to win than ever before. In short, this is a subject few companies can afford to ignore (14).

Constructive Discharge -- By Definition

Constructive discharge involves forcing an employee out of a job with an ultimatum to either resign or face one of several unpleasant consequences -- for example, demotion, reassignment or intolerable working conditions (33). Constructive discharge is a "tort" or civil wrong that generally occurs when there is a legal basis preventing the employee from being discharged openly (i.e., a contract or collective bargaining agreement) (23).

To prevail on claims of constructive discharge, employees must demonstrate that their employers deliberately made working conditions intolerable, forcing them to quit (14). Specifically, the former employee must charge and prove two elements to be entitled to future compensatory damages: 1) the "deliberateness" of the employer's actions; and 2) the "intolerability" of the working conditions.

There is a large measure of judgment involved in court decisions regarding constructive discharge, and each of the elements is highly subjective. Courts, however, have established - and are continuing to establish - guidelines around the areas of deliberateness and intolerability, which will be explored now.

Deliberateness

The Federal Circuit Courts of Appeal are divided about what an employee must show to prove the deliberateness of an employer's actions. A minority of these courts (specifically, the Fourth and Eighth Circuit Courts of Appeal) requires that in addition to intolerable working conditions, the employee must show that his/her employer's activities were deliberately intended to force the employee to quit This introduces a large element of subjectivity - increasing the burden of proof for employees and providing a substantial advantage for employers.

The element of deliberateness varies by case and state. In some states, the burden of proof is tougher than others. That is, the employee has to prove that working conditions were so intolerable that he/she was forced to quit Also that the employer knew the effect of the unbearable actions and conditions, and could have remedied them but chose not to (27). In some cases, the employee even has to show that the employer created or knowingly permitted the intolerable working conditions. Largely due to its subjective characteristics, the concept of deliberateness has been under attack for many years (3,11).

The following is a look at a few court rulings and landmark decisions that have shaped the course of constructive discharge over the past decade...

Turner v. Anheuser-Busch, Inc., 1994. James Turner worked for Anheuser-Busch, Inc. (ABI), where he had received "good" performance evaluations except for a single December 1984 review. Turner asserted that he was subjected to a "campaign of harassment," including being reassigned to a different department, after he informed his superior that other employees had violated state liquor laws, internal company policies and provisions of the collective bargaining agreement.

Four years later, Turner received a "needs improvement"' on his evaluation, which he challenged. A few days after that, Turner resigned and filed an action against ABI, claiming discrimination, constructive wrongful discharge in violation of public policy, breach of contract, and intentional and negligent infliction of emotional distress.

The Court of Appeals allowed only the public policy claim to proceed, ruling that the long list of ABI's alleged wrongful actions represented a triable case of constructive discharge. The California Supreme Court recognized that in an attempt to avoid wrongful discharge liability, an employer may refrain from actually firing an employee, "preferring instead to engage in conduct causing him or her to quit."

The court ruled that such a constructive discharge is legally regarded as a "firing," rather than a "resignation," when: "1) the employee is forced to resign due to actions and conditions so intolerable or aggravated at the time of the employee's resignation that a reasonable employer would have realized that a reasonable person in the employee's position would have been compelled to resign; and 2) the employer or its effective representatives, such as officers, directors, managing agents or supervisory employees, had actual knowledge of the intolerable actions and conditions and their impact on the employee, and could have remedied the situation but did not."

This ruling is a departure from earlier decisions of the California Courts of Appeal, which held that mere constructive knowledge of the intolerable working conditions could justify an employee's resignation as a constructive discharge. Based on the new rules, the court found that Turner failed to show a constructive wrongful discharge. That's because there was no evidence that Turner's job was made so intolerable that a reasonable person in his position would have felt compelled to resign. The court, accordingly, upheld summary judgment in favor of dismissing Turner's claims.

Martin v. Cavalier Hotel Corp., 1995. The plaintiff in Martin alleged that her immediate supervisor (the general manager and vice president of Cavalier Hotel Corp. and a member of its board of directors) engaged in outrageous and repeated acts of sexual misconduct Martin testified that she submitted to Daniel Batchelor's demands because "when he tells you to do something, you do it or else." After five years of employment, she ultimately decided that she "couldn't handle what he was doing" and resigned.

Martin then filed a multiple count complaint against both Cavalier and Batchelor, seeking to recover economic emotional distress damages. Martin also alleged that she was constructively discharged as a result of sexual harassment in violation of Title VII of the Civil Rights Act of 1964. The jury found in favor of Martin (against Batchelor) on her state common law claim of assault and battery, and also in favor of Martin (against Cavalier this time) on her claim of constructive discharge.

Cavalier appealed - trying to reverse the trial court's decision based on the Fourth Circuit's adherence to the minority view. Cavalier asserted that Martin had proven that working conditions were "intolerable," but not that Cavalier "intended" she resign. Cavalier argued, rather, that the evidence demonstrated that Batchelor "desired Martin to remain employed at the hotel so that he could continue to assault her ..."

Once again, the court ruled in favor of Martin.