Constructive discharge

By Small Business Encyclopedia  [August 30th, 2011]

The term "constructive discharge" describes a situation in which an employee is forced to quit a job because the employer has made working conditions intolerable. Working conditions may be considered intolerable if, for example, the employee is discriminated against or harassed, or if he or she suffers a negative change in pay, benefits, or workload for reasons that are not performance-related. In most cases, an employee who voluntarily leaves a company—as opposed to one whose employment is terminated by the company against his or her will—is not entitled to unemployment benefits and loses the right to sue the company for wrongful termination.

But the law recognizes constructive discharge as an exception to this rule. "In an increasing number of cases, employees are quitting their jobs, filing wrongful discharge suits against their former employers, and—here's the kicker—coming out a winner," J.D. Thorne wrote in an article for Small Business Reports. "The courts have reasoned in these cases that the employers made the workers' jobs so unbearable that they would rather quit than suffer more abuse. Being compelled to quit was much the same as being unfairly discharged. This claim, commonly known as constructive discharge, essentially excuses the employee from being the one to sever the employment relationship."

Legal Standards and Applicable Penalties

In order to sue successfully on the basis of constructive discharge, an employee must prove in court that the working conditions he or she experienced were intolerable. In addition, the employee must prove that the intolerable conditions were directly attributable to the employer. In other words, the employer either created the intolerable conditions intentionally or allowed them to exist. Some courts differ about the degree of employer intent required for constructive discharge, but as the San Diego Business Journal observed, most agree that the following must occur: 1) The employer's conduct effectively forced the employee to resign; 2) A continuous pattern of employer misconduct existed; 3) Conditions were so egregious and intolerable that any reasonable person would have quit.

The most common problems cited by employees in constructive discharge complaints include a loss of pay or benefits, an abnormal increase or decrease in workload, or discrimination under the Americans with Disabilities Act, equal employment opportunity laws, or unfair labor practice statutes. Constructive discharge suits may also be triggered when an employer is abusive toward an employee, particularly when that employee is a member of a protected class by virtue of gender, race, or age. Improper disciplinary actions can also be cause for a constructive discharge complaint, although employers can criticize employees' job performance and deny benefits for reasons that are business related.

In recent years, as the number of legal actions related to constructive discharge have increased, some states have strengthened the burden of proof for employees. Rather than simply proving that working conditions were intolerable, some employees now must also show that the employer knew about the poor conditions and could have remedied the situation. "Unless an employee can prove that you deliberately made working conditions so intolerable that the worker was forced to quit, then a court probably won't find the company guilty of constructive discharge," Thorne explained.

Some states also require employees to notify their employer of the problem and give them a fair chance to fix it. The idea behind such measures is to make it unnecessary for employees to quit in order to see their problems resolved, as well as to prevent employers from being blind sided by employees who quit and then sue for wrongful discharge. In Arizona, for example, employees must provide 15 days' written notice of their intention to quit for cause. The employer then has that time to make necessary changes in working conditions. If the employee is not satisfied with the employer's response and still decides to quit, then he or she is entitled to file suit for constructive discharge. The Arizona law does provide an exception, however, for employees who encounter working conditions so serious that they must leave the company immediately.

On the other hand, some courts have expanded the definition of constructive discharge to enable employees on leave to suit their employers. "An employee may still be successful in a constructive discharge lawsuit even though the employee never quits the job, if the company deliberately allowed such an intolerable workplace situation to exist that the employee ends up on permanent unpaid medical leave," explained Mary-Kathryn Zachary in Supervision. "[The court] held there was no real difference between the situation of an employee who quit because of intolerable working conditions or one who became disabled and placed on leave as a result of such conditions…. Thus, an employee may successfully bring a constructive discharge case without actually terminating employment."

The penalties a company can face if a former employee sues successfully for constructive discharge can be severe. As Thorne noted, the usual penalties include both back pay (the amount of wages the employee would have been paid had they continued working for the company up until the time of the lawsuit) and front pay (an amount based on the employee's remaining work years and the expected length of time it will take him or her to find a similar job), as well as reimbursement of attorney fees. There also may be monetary damages, compensatory damages for pain and suffering or mental distress, and punitive damages of up to $300,000 in some discrimination cases. Employees who win constructive discharge cases are usually not reinstated, however, because it would be counterproductive to return them to an intolerable working environment.

How to Avoid Constructive Discharge Lawsuits

Small business owners can take a number of steps to strengthen their defenses against charges of constructive discharge. One option is to implement a formal complaint system and encourage employees to make use of it. These systems, when effectively implemented, give the company a chance to rectify problems before they lead to lawsuits. Another recommendation is to establish and follow company guidelines for informing employees of performance problems and taking disciplinary action. "Don't unnecessarily put the employee in a 'sink or swim' situation," counseled the San Diego Business Journal. "Conduct regular training sessions. Ensure employees receive performance feedback regularly and understand company expectations." In addition, small businesses should ensure that any necessary downsizing measures are undertaken using objective rather than subjective criteria.

Another important suggestion for small business owners is never to change the conditions of employment in order to get employees to resign rather than having to fire them. "Attempts to force an employee to resign by making working conditions intolerable or changing job duties, is not a good idea," wrote Kristen Gerencher in InfoWorld. In fact, such attempts can have a deleterious impact on the morale of supervisors or other employees charged with implementing such a strategy. Instead, companies should always follow their standard procedures for discipline and termination. These procedures should include probation periods for employees with performance problems. It may also be helpful to request a letter of resignation from employees who quit voluntarily and keep it on file as evidence of their reasons for leaving the company. Finally, exit interviews should be made mandatory for all employees who leave the company. The exit interview gives management an opportunity to iron out differences with employees who quit with hard feelings toward the company.

But the best policies a small business can follow to avoid being sued for constructive discharge, however, are to promote fair management practices and stamp out any negative environmental conditions that begin percolating the workplace. After all, a healthy working environment not only helps keep constructive discharge lawsuits away, but also promotes over-all business success. "The best advice, as always, is to play it straight with employees," Thorne wrote. "There's no substitute for allowing them to air grievances, correcting problems with working conditions, and disciplining them fairly for unsatisfactory work."

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