I Quit! Now Pay Me

A Supreme Court ruling provides insight on fighting constructive discharge harassment claims.

By Jonathan A. Segal
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HR Magazine, October 2004

Sally worked for your company for two years. She quit three months ago without giving any indication she’d had any workplace problems whatsoever. That is, until today... when you were notified that she had filed a constructive discharge sexual harassment claim with the Equal Employment Opportunity Commission (EEOC).

In short, Sally alleges that your workplace was such an intolerable place that she had no choice but to quit. And she wants you to pay for essentially forcing her to resign. The $64,000 (or more) question is this: Can your organization be held liable even though Sally never once informed you she had a problem at work?

The answer: It depends. If you find this answer vague and disturbing, as you probably do, blame the U.S. Supreme Court (not me) for not making things clearer or easier. In its June 14, 2004, decision in Pennsylvania State Police v. Suders, the high court set the ground rules for resolving two major issues:

  • It answered whether an objective or a subjective test applies when determining if an employee was constructively discharged.
  • It clarified whether and when an employer can use what is known as the “Faragher-Ellerth affirmative defense” to deflect a sexual harassment constructive discharge claim. This defense essentially means the employer is not liable because the employee never gave the employer a chance to fix the problem.
To help you grasp the significance of this ruling and the preventive advice that flows from it, some background is necessary.

In 1998, in Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth, the Supreme Court held that an employer is strictly liable—meaning that it has absolutely no defense—when sexual harassment by a supervisor involves a tangible employment action (such as discharge, demotion or denial of promotion).

However, in the absence of a tangible employment action, employers can defend themselves by proving two things:

  • They exercised reasonable care to prevent and promptly correct any sexual harassment.
  • The employee who filed the claim unreasonably failed to take advantage of preventive or corrective opportunities provided by the employer, or otherwise failed to avoid harm.
The EEOC and the courts have applied the two-part affirmative defense not only in sexual harassment cases, but also in racial, ethnic, religious and other unlawful harassment cases—even whistle-blower harassment cases. But the lower courts have differed as to whether constructive discharge constitutes a tangible employment action—a conclusion that would make the affirmative defense unavailable.

For example, the 2nd U.S. Circuit Court of Appeals held that constructive discharge does not constitute a tangible employment action, while the 3rd Circuit held—in the Suders case itself—that constructive discharge is a tangible employment action. And the 1st Circuit rejected both extremes, holding instead that the affirmative defense would apply, unless the basis for the constructive discharge claim was “an official supervisory act.”

New Guidance From The Supreme Court

To resolve the split among the circuits, the Supreme Court heard the employer’s appeal of the 3rd Circuit’s decision in Suders. It rejected the 3rd Circuit’s analysis and generally endorsed the 1st Circuit’s approach. Specifically, the Supreme Court held that an employer may invoke the Faragher-Ellerth affirmative defense in a constructive discharge claim involving supervisory harassment unless a supervisor’s “official act” precipitated the constructive discharge.

The high court’s ruling in Suders is certainly a better outcome for employers than if the court had adopted the 3rd Circuit’s approach, but it does create a gray area on the issue of what constitutes an “official supervisory act” that no doubt itself will end up being litigated—thus contributing to the “it depends” answer to the opening question of this article.

In determining the availability of the affirmative defense, the Supreme Court has commanded lower courts to judge whether the “last straw” was an “official act of the enterprise.” If an employee’s resignation was not prompted by his or her demotion, denial of a promotion, reassignment with significantly different responsibilities, a significant reduction in benefits or other significant change in employment status, the employer can defend on the grounds that the employee did not give it the opportunity to solve the problem before the employee quit.

In its decision, the Supreme Court did more than clarify when the affirmative defense will apply. It also, for the first time, articulated the standard for determining whether an employee has been constructively discharged. The court established the following objective test: “Did working conditions become so intolerable that a reasonable person in the employee’s position would have felt compelled to resign?”

The standard for proving constructive discharge is higher than the standard for proving a hostile environment, the court made clear: “For an atmosphere of sexual harassment or hostility to be actionable … the offending behavior ‘must be sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.’ … A hostile-environment constructive discharge claim entails something more: A plaintiff who advances such a compound claim must show working conditions so intolerable that a reasonable person would have felt compelled to resign.”

In other words, not every hostile work environment transforms an employee’s resignation into a constructive discharge.

Within this framework, employers can adopt either or both of two lines of defense if a resigning employee fails to complain of harassment internally before filing externally:

  • The precipitating event for the employee’s resignation was not a tangible employment action, and the employee’s failure to take advantage of the employer’s preventive and corrective opportunities was unreasonable.
  • Regardless of the nature of the precipitating event or the reasonableness of the employee’s failure to complain internally, the conduct about which the employee complained was not sufficiently severe or pervasive to meet the high standard of objective intolerability required to establish constructive discharge.

Applying The New Guidance

Often, employers remain blissfully, but dangerously, unaware of any basis for a constructive discharge allegation until they are served with papers laying out the claim—sometimes long after the employee has quit. Sometimes, however, employers have some notice of employees’ complaints before they ripen into legal action.

Let’s look at how employers can use the new information from the Supreme Court in two different scenarios:

  • When the employee first complains during the course of employment.
  • When the employee first complains at the time of discharge.

Too Little

Some employees first complain of harassment internally but later quit, alleging that the employer took insufficient steps to stop the offending behavior. Employers must anticipate this possibility and build steps into the investigatory and corrective action process that will make it harder for dissatisfied employees to prove they had no choice but to quit. Here are core issues to consider when establishing these steps in your own workplace:

Document allegations. An employee who quits over behavior that is inappropriate but not objectively intolerable will fail to meet the Supreme Court’s high standard for proving constructive discharge. Accordingly, it is crucial for employers to document the limited scope of an employee’s allegations. With that record in hand, employers should be able to undercut the credibility of the former employee in general, and of any new allegations the former employee brings involving the same period of time as the original allegation.

If the employee’s early allegations are relatively minor, you may be reluctant to write that employee a formal memo confirming his or her statement, preferring instead to write only a file memo. Although a file memo is better than no memo, its probative force in litigation is substantially less than a memo the employee has read and acknowledged. Such a memo should also instruct the employee to make any necessary additions, deletions or modifications before signing it.

While you may find this a bit awkward, it will be far less awkward than responding to a deposition when the employee claims your file memo doesn’t contain everything the employee told you.

Secure employees’ input. If complaining employees acknowledge that your corrective response is adequate, they will have a difficult time later proving that working conditions were objectively intolerable. Even though the Supreme Court has held that an objective standard applies, the employee’s subjective tolerance of the situation is a factor that a court most likely will take into account when determining what a reasonable person would do.

Recognizing that employees rarely will volunteer that HR’s response was sufficient, you will need to elicit that information. During investigations, ask employees what corrective action they are seeking. In general terms, discuss with the employee any corrective action you will take (for example, you will probably want to say that the alleged harasser has been formally disciplined, not that he has received a final warning), and ask whether the employee is satisfied.

If the employee expresses satisfaction, confirm this in the follow-up memo to the employee. For example: “You indicated that you did not want George to be terminated. Indeed, you stated that you still could work with him. You stated that the only thing you wanted was for the inappropriate comments to stop.” This should help to establish that, at least as of the time the investigation was completed, the working environment was not intolerable.

If the employee is not satisfied, ask not only why, but also what the employee believes you should do, and document the response.

The extent to which an employee’s demands (“I want a raise”) are unrelated to the employee’s harassment complaint can help to demonstrate that a subsequent resignation is unrelated to any alleged harassment. (The example assumes that the employee did not claim that she was denied a raise as part of the harassment.)

Employee demands that are related to, but unreasonable in light of, the particular allegations (“I want her fired for leering at me twice”) can help demonstrate that a subsequent resignation was not compelled by objectively intolerable working conditions.

Even if the employee has expressed satisfaction with the employer’s corrective action, it is advisable to conclude your memo to the employee by asking whether there are any other actions the employee would like you to consider to ensure a harassment-free work environment. If employees fail to make any suggestions, and then argue later that your failures or omissions compelled them to resign, you have a strong argument that they were not forced to quit.

Follow up. Follow-up is critical to ensuring that there is no subsequent inappropriate behavior or retaliation (even if there was no inappropriate behavior in the first place). If the complainant indicates there are no ongoing problems, document this in the investigatory notes and periodically confirm it in written or electronic communications to the employee.

Again, the formality of this kind of documentation may seem excessive, but it is necessary to prevent the employee from arguing that allegations arising after the initial, documented complaint are credible.

Of course, if the complainant states that there have been continuing problems, investigate new claims immediately, going through all the same steps: confirm the scope of the alleged wrongs, document the employee’s request for corrective action, take appropriate action and follow up—all in written communications addressed to and usually acknowledged by the employee.

Too Late?

Sometimes employees don’t complain of workplace harassment until they give notice of their resignation, during an exit interview or literally while walking out the door on their last day of work: “I love this place. It’s a shame I have to quit because of the daily harassment to which I have been subjected for the past six months."

When that happens, supervisors often believe it is too late for them to take action. But it is not too late to eliminate or at least to minimize the employer’s potential exposure to litigation.

Instruct supervisors to immediately report to HR any and all allegations of harassment, discrimination or other unlawful conduct that employees raise in conjunction with a resignation. Respond promptly to new claims, and communicate with the employee orally when possible and always in writing. Be sure to consider taking action at the key times listed below:

When you are notified of a problem. Document that human resources was unaware of any complaint until it received the supervisor’s report of the employee’s disclosure. This will establish that you reacted as soon as possible. Even if that ends up not being available as a defense to liability (if there was a tangible employment action), it may help mitigate punitive damages.

When you respond to the notification. State that you take the allegations very seriously and that you intend to begin an investigation immediately—and do it! Even if the departing employee never brings a claim, investigating the allegations is important because it can help you root out other possible grievances among remaining employees. At this time, provide the employee with the following four assurances (all of which already should be stated in your antiharassment policy):

  • HR will conduct a full and fair investigation.
  • HR will keep the employee’s allegations as confidential as possible, disclosing them only to those who have a need to know in order for HR to conduct its investigation and take appropriate corrective action.
  • The employer will neither engage in nor tolerate unlawful retaliation against the employee or anyone else who serves as a witness or otherwise participates in the investigatory process.
  • The employer will take appropriate disciplinary and other corrective action against anyone who has engaged in harassment or other inappropriate conduct (even if not unlawful).
A record of these steps will help demonstrate your commitment to doing what is right. That in turn will undercut the credibility of the employee’s argument that the working environment is intolerable.

When an employee resigns. If you really want to take the wind out of a resigning employee’s constructive discharge sails, consider encouraging the employee to reconsider resignation until after you have conducted an investigation and have taken any appropriate corrective action. But make such an offer only in good faith, where there is no chance that you will be tempted to renege.

(If the employee is a poor performer or otherwise unsatisfactory, you can ask the employee to participate in the investigation without inviting the employee to reconsider resigning his or her position.)

If the employee at first refuses to reconsider, you might want to ask what it would take for him or her to feel comfortable enough to return to work—but be clear that you will determine what is necessary or appropriate.

If the employee simply refuses to participate in any such discussion, that will be one factor a court should and probably would consider in determining whether to send the case to a jury. Similarly, for the reasons previously explained, if the employee’s demands are objectively unreasonable or do not relate to the alleged legal wrong, that also may help the employer persuade the judge to dismiss the case on summary judgment.

If the complaint involves the employee’s supervisor, give serious consideration to offering the employee the option of reporting to someone else during the investigation. This not only helps demonstrate the employer’s good faith (which is always relevant to damages), but also makes it less likely that the employee’s refusal to return to work will be seen as objectively reasonable.

Editor’s note: This article should not be construed as legal advice or as pertaining to specific factual situations.

Jonathan A. Segal, Esq., a contributing editor of HR Magazine, is a partner in Philadelphia in the Employment Services Group of Wolf, Block, Schorr and Solis-Cohen LLP. His practice concentrates on counseling clients, developing policies and strategic plans, and training managers to avoid litigation and unionization.

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