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Growth Strategies

Under Pressure

If an employee feels forced to quit, it could be trouble. Here's how to avoid a "constructive discharge" lawsuit.
Magazine Contributor
3 min read

This story appears in the August 2004 issue of Entrepreneur. Subscribe »

When is a resignation not a resignation? When a court declares it a "constructive discharge."

Suppose you have an employee you want to get rid of for a variety of reasons, but you're worried that firing her might look like race or age or gender discrimination. So you try to force her out. You reassign her to a windowless office half the size of what she had. You assign her the least desirable work. You tell other employees to shun her. And after a few weeks, she quits. Then-surprise! You get slapped with the lawsuit you feared, claiming she was effectively terminated. What's up with that?

The employee's action relies on the legal concept "constructive discharge." It means that conditions at work had become so intolerable that any reasonable person would have quit. It doesn't matter whether you fired her or she threw in the towel; if a court rules the circumstances a constructive discharge, you're just as liable.

Not that it's normally illegal to fire someone who's not working out for your company. In most states, employees are presumed to work on an "at will" basis. This means you can terminate the employee at any time for any reason (or no reason at all). But it's illegal in the United States to fire an employee because of age, race, gender, religion, national origin or, in some states, sexual orientation. You can't terminate an employee because of a handicap if, with accommodations, the employee can do the work. And you can't terminate someone if doing so violates public policy-such as firing the guy who told the press about your illegal dumping of toxic waste.

Accordingly, claims of constructive discharge come in tandem with claims of some illegal activity, such as discrimination. And in those cases, the fact that the employee resigned may not be an adequate defense.

Courts have ruled that it doesn't count as a constructive discharge merely to demote someone or reduce their pay or change their duties or fail to promote them. To count as a constructive discharge, there has to be a whole pattern of behavior aimed at making conditions intolerable. Therefore, employees don't win these cases very often.

That doesn't mean it's an uncommon claim. The word is out among disgruntled employees and their lawyers that you can quit and still sue. The hard part is proving that the employer was trying to force the employee out-and for an illegal reason.

The best way to avoid a constructive discharge lawsuit is to be evenhanded in your treatment of employees, keep the lines of communication open, and follow up on complaints of poor conditions. A few additional precautions in case you get sued anyway:

If you hear that an employee finds working conditions intolerable, look for solutions.

When an employee says there's a safety or environmental violation, investigate and correct the problem. Don't take action against the employee.

Keep good employment records, so you can document why you decided to promote this person instead of that one, reassign duties or territories, and so on.

If an employee quits, then says he was mistreated, send him a letter saying he was welcome to stay and wasn't discharged. It might help you build a case later.

Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.

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