Constructive Discharge

"Constructive discharge" is a legal doctrine originating in labor disputes going back to the 1930s. Originator of the doctrine was the National Labor Relations Board (NLRB) which was attempting to deal with situations in which employers forced employees to resign by creating intolerable working conditions, usually because the employees were engaged in union activities. The first use of the phrase was in an NLRB case in 1938 called In re Sterling Corset Co., 9 N.L.R.B. 858, 865. The doctrine has been frequently applied in cases brought under Title VII of the Civil Rights Act of 1964, initially in racial discrimination contexts. In recent decades constructive discharge has figured as a doctrine in dealing with sexual harassment cases.

Unemployment compensation is paid employees only when the employee is discharged involuntarily for no fault of his or her own or if the employee resigns but with a qualifying cause. An employee who simply resigns without a qualifying cause is not eligible; neither is an employee discharged for misconduct. Constructive discharge because of an intolerable working environment is one of the qualifying causes, along with illness and other causes. An employee who quits because of sexual harassment or other hostile conditions is constructively discharged; he or she may be found to be eligible for unemployment benefits and will have the right to sue the company for wrongful termination as well—although in this case, the employee took the action on his or her own initiative.

LEGAL HISTORY

In the case of constructive discharge for sexual harassment, the direct involvement of the employer—and thus the employer's liability—has been clarified in three Supreme Court judgments rendered in 1998 and 2004. The issue arises because sexual harassment is seen to arise from the personal desires of the harassing party. Unlike the cases arising from an employer's desire to keep unions out, sexual harassment carries no benefit for the employer. Thus the question arises: if one or more supervisors engage in sexual harassment of an employee, is the employer as such liable for such activity?

The courts, relying on long-established law, had held that if a supervisor uses his powers as an agent of the corporation in attempts to get sexual favors, the mere use of such powers by a supervisor automatically involves the employer in the harassment because those powers are delegated. Thus if a supervisor uses assignments, demotions, promotions, hiring or threat of discharge, and similar means in connection with sexual harassment, the employer is also implicated. But what if the sexual harassment "stands alone," as it were, and does not involve "employment actions"?

Faragher/Ellerth

Two such cases were decided by the Supreme Court in 1998. In one (Faragher v. Boca Raton ) the plaintiff, Beth Ann Faragher sued the City of Boca Raton. She had resigned as a lifeguard in protest at the sexual harassment of two supervisors (Bill Terry and David Silverman) who had created a hostile environment by inappropriately touching and making lewd remarks. The District Court agreed with Faragher, but the Eleventh Circuit Court reversed the District Court's decision arguing that the two supervisors were just acting on their own, not as agents of the city. No "employment actions" were involved, in other words.

In the second case, with very similar facts, the District Court and the appellate court reached diametrically opposed conclusions. In this case (Burlington Industries, Inc. v. Ellerth ) Kimberly Ellerth quit a job as a sales employee after claiming to have endured constant sexual harassment by a single supervisor (Ted Slowik). Ellerth claimed that he had on three occasions made remarks which she interpreted as threats that he would deny her certain job benefits. But this did not actually happen. In fact she was promoted. At the same time, she never filed a complaint against the supervisor although she knew that her employer, Burlington Industries, had a policy against sexual harassment. The District Court ruled against Ellerth but the Seventh Circuit Court reversed the ruling but in a confusing manner: eight separate opinions were rendered which did not result in a clear rationale for reversing the lower court.

The Supreme Court accepted these cases in an effort to make order and reached conclusions later referred to as Faragher/Ellerth. The Court held in essence that 1) the employer was strictly liable for a supervisor's actions if the action culminated in a tangible employment action, such as discharge, demotion, or undesirable reassignment; 2) in the absence of such a direct linkage, the employee may sue the employer anyway, but the employer has a right to a defense on the basis of having responsibly attempted to prevent such conduct; and 3) that the actions of the employee in using or not using available internal channels of reporting abuses should be part of the consideration.

Pennsylvania State Police v. Suders

The most recent event in this legal history was the Supreme Court judgment in the case of Pennsylvania State Police v. Suders decided in 2004 (hereafter Suders ). The nature of this case was to draw the lines sharper than they had been drawn in Faragher/Ellerth.

The case involved Nancy Sue Suders who, while working for the Pennsylvania State Police (PSP), was subjected to sexual harassment by three supervisors (Eric D. Easton, William D. Baker, and Eric B. Prendergast). Suders talked to the PSP Equal Employment Opportunity Officer, Virginia Smith-Elliott, but while told to file a complaint, Smith-Elliott did not provide Suders the form necessary to file the complaint.

In this case the District Court ruled in favor of the PSP without trial on the grounds that Suders had failed to file a compliant and therefore, under the Faragher/Ellerth precedent Suders' hostile work environment claim was untenable as a matter of law. The appeals court in this case, the Third Circuit Court, sent the case back for trial on the grounds that issues of material fact existed about the effectiveness of PSP's program to deal with sexual harassment. The court also held that if Suders proved constructive discharge, that alone would constitute an employment action and would deprive PSP of a defense under Faragher/Ellerth.

The Supreme Court, under Suders, agreed with the Third Circuit that the case should be tried. But the Supreme Court also held that PSP nonetheless had a right to an affirmative defense unless the plaintiff quit "in reasonable response to an adverse action officially changing her employment status or situation, e.g., a humiliating demotion, extreme cut in pay, or transfer to a position in which she would face unbearable working conditions."

The upshot of Suders therefore was that sexual harassment as such suffices as grounds for constructive discharge, whether or not the employee makes use of complaint procedures that may be in place. On the other hand, the employer has a right to an affirmative defense unless the employee quit after employment actions such as those named above. If such actions were shown to have taken place, the employer is strictly liable.

IMPLICATIONS FOR SMALL BUSINESS

The evolving doctrine of constructive discharge makes it clear that reasonable policies and their active enforcement will go a long way toward avoiding the creation of hostile environments and lawsuits that may result from them. Small business owners have the advantage of being closer to their employees than the management of large firms. The disadvantage in small businesses arises from the same cause: informality. Ideally a small business will have:

• A clear policy on sexual harassment signed by every employee. The policy should outline the procedure for filing a complaint and should include at least two names with telephone numbers: the individual who is to receive complaints and a second individual who may be contacted if no action is taken by the first; the second person, ideally, will be outside the company and an objective third party.
• Periodic scheduled discussions of this policy, ideally led by top management people to give it weight.
• A watchful management attitude and close supervision especially in situations where individuals are isolated.
• A personnel review procedure in which the subject is raised by the reviewing manager.
• An action plan for dealing with complaints, for establishing facts, and for resolving the issues, ideally involving a third party if possible outside the company.

see also Employee Termination

BIBLIOGRAPHY

Clark, Margaret M. "Ruling Allows Defense in Harassment Cases." HRMagazine. August 2004.

Mesritz, George D. "Constructive Discharge and Employer Intent: Are the Courts Split over a Distinction without a Difference?" Employee Relations Law Journal. Spring 1996.

Nagle, Mark E. "Suders: the Supreme Court Reaffirms Value of an Anti-Harassment Policy." Employee Relations Law Journal. Winter 2004.

United States Supreme Court. Burlington Industries, Inc. v. Ellerth. No. 97-569. 26 June 1998.

United States Supreme Court. Faragher v. City of Boca Raton. No. 97-282. 26 June 1998.

United States Supreme Court. Pennsylvania State Police v. Suders. No. 03-95. 14 June 2004.

                           Darnay, ECDI