HUMAN RESOURCES: Resignation or Termination?

“You’re fired!”

“I quit!”

Two phrases that have been universally understood by employers and employees alike – until now, that is. If being fired is “black” and resigning is “white,” let’s call the latest form of separation that has re-emerged – constructive discharge – "gray.” 

Generally speaking, when an employee quits, it is considered a “voluntary” separation of employment. The employee willfully decides to depart from the business...to exercise his or her “employment at will” rights. But what happens when an employee feels “forced” to resign? Is this a termination or a resignation? In most cases, courts and government agencies take the position that being forced to resign is akin to being terminated. In the world of fancy legal jargon, we call this “constructive discharge.” And, based on a recent U.S. Supreme Court ruling, the stakes are even higher when it comes to constructive discharge cases.

As a result of the ruling in Pennsylvania State Police v. Suders, employees who can prove that they were “forced” to resign (constructively discharged) because of sexual harassment or a hostile work environment can now sue employers under Title VII of the Civil Rights Act. To prove that the resignation qualifies under the constructive discharge doctrine, the employee must be able to establish that (1) he or she suffered harassment or discrimination so intolerable that a reasonable person in the same position would have felt compelled to resign, and (2) the employee’s reaction to the workplace situation – that is, his or her decision to resign – was reasonable given the totality of the circumstances.

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The concept of constructive discharge is not a new one; it originated in the 1930s when the National Labor Relations Board developed the doctrine to address situations where employees were forced to resign after employers created intolerable working conditions in retaliation for union activity. The language has survived the past 70+ years and, more recently, employers have seen the terminology used by Unemployment Compensation Divisions as a basis for awarding unemployment to employees believed to have been forced to resign. Although the federal Equal Employment Opportunity Commission (EEOC) and Courts of Appeals across the country have also recognized constructive discharge claims in a variety of Title VII cases, this new ruling is unique because it is based specifically on hostile work environment (sexual harassment) claims. 

A constructive discharge is typically considered to be an “involuntary” resignation.  Courts commonly agree that an employee need not be told “You’re fired,” to prove that he or she was terminated. If the employee can prove that the working conditions were so intolerable that a reasonable person would be compelled to resign, then the employee is considered to have been constructively discharged. If the intolerable working conditions involve a protected class (race, sex, religion, age, sexual harassment, disability, etc.), even though the employee may deliver the “I resign” message, the separation will be treated by most courts, fair employment agencies, and unemployment divisions as a discharge. Likewise, threatening an employee with termination if he or she does not resign (e.g., “You can resign now or be terminated.”) is not considered a voluntary resignation. This is also considered constructive discharge.

When an employee is constructively discharged, the same legal remedies that are available to illegally terminated workers are available to the constructively discharged employee. Here are some examples of types of actions that can support a claim of constructive discharge:

• A humiliating demotion
• Extreme cut in pay
• Transfer to a position in which the individual would face unbearable working conditions
• Reduction in job responsibilities, particularly for reasons other than poor job performance or economic circumstances
• Reassignment to menial or degrading work
• Badgering, harassment, or humiliation
• Offer of early retirement where the employee would be worse off if he or she did not accept it
• Blocking an employee’s access to information required to perform a job and then disciplining the employee for failing to accomplish the task
• Ignoring an employee’s harassment complaint or failure to follow the company’s procedure for investigating the complaint
• Retaliating against an employee who lodges a legitimate complaint of harassment

In most states, the burden of proof for constructive discharge in unemployment cases is much lower. Employees may be able to obtain unemployment when they resign due to a personal medical condition, divorce, or the inability to find appropriate childcare. Of course, one could argue that these situations may not necessarily “force” an individual to resign...but that’s another story. I’ve even seen cases where the constructive discharge doctrine was used to support an award of unemployment for individuals who refused to sign a noncompete agreement or to transfer to a position at a location that required a slightly longer commute time. In these cases, the unemployment compensation divisions took the position that the employees were forced to resign due to circumstances beyond their control, including position terms and conditions that had changed. 

The question of whether or not a particular situation or conduct is so intolerable that it necessitates resignation will be determined on a case-by-case basis and will depend upon the venue in which the question is being raised – the courts, a government agency such as the EEOC, or the unemployment compensation division. Regardless of the venue; however, this new Supreme Court ruling reinforces an employer’s obligation to carefully scrutinize all separations.

Jean Seawright is president of Seawright & Associates, a management consulting firm located in Winter Park, Florida. Since 1987, she has provided human resource management and compliance advice to employers across the country. She can be contacted at 407/645-2433 or jseawright@seawright.com.