Constructive discharge – also referred to as constructive termination or constructive dismissal – is a situation where an employee is forced to resign because of the company’s conduct.
Understanding constructive discharge
Constructive discharge occurs when an employee is forced to resign due to their employer’s inappropriate conduct.
In the United States and many other jurisdictions, constructive discharge is essentially a form of involuntary termination.
Whilst it appears that the employee has resigned voluntarily, a hostile work environment created by the employer forces them to leave. In this situation, the employee resigns because they feel there are no viable alternatives.
Hostile work environments contravene employment contracts and/or common law and tend to be characterized by:
Bullying or sexual harassment from superiors or colleagues (and the failure by the company to manage or address it).
Poor treatment, such as unreasonable demotion or punishment.
Removal of access to equipment, materials, or tools.
Underpayment of entitlements, such as a reduction in salary to below mandated levels or a decrease in the number of work hours, and
Serious concerns over workplace safety.
Legal implications for constructive discharge
There is no specific law forbidding constructive discharge per se.
But since the legal definition of the practice depends on a violation of labor laws, constructive discharge is de facto illegal and can form the basis of legal action on the employee’s part.
For a constructive discharge to qualify in the legal sense, it must pass a three-part test developed by the Equal Employment Opportunity Commission (EEOC). In short, the three parts include:
Working conditions such that a reasonable person in the employee’s position would also have found intolerable.
Intolerable working conditions that were the direct result of discriminatory conduct against the employee, and
The employee’s involuntary resignation that was caused by the intolerable working conditions.
Constructive discharge examples
To conclude, we’ll discuss some hypothetical examples of constructive discharge in the workplace.
Example 1 – a start-up company
James joins a new tech start-up as its fourth employee. The three other employees are childhood friends and also the company’s founders.
James is set to be paid after his first month of work, but two weeks go by without payment. Upon raising the issue, James is told that money is tight and is the company is actively trying to secure seed funding.
Another fortnight passes and James has still not been paid. In the office, he overhears one of the founders discussing how he is going to spend his salary for that month and concludes that he is the victim of unfair treatment.
He is forced to leave the company soon after to find paid work elsewhere.
Example 2 – feedback on the leadership team
When employees are offered the chance to provide feedback on the leadership team, Rachel completes the survey with some constructive criticism for one individual in particular and how they could better manage others.
The day after, leaders react badly to the survey, band together, and take retaliatory action against Rachel. It starts when the management team does not greet Rachel as she arrives at work and then continues in the morning meeting where they avoid asking for her input.
Weeks later, Rachel is overlooked for a promotion despite being the most qualified and senior employee. Ultimately, Rachel’s exclusion from operations becomes untenable and she is forced to resign.
Key takeaways
Constructive discharge occurs when an employee is forced to resign due to their employer’s conduct. In the United States and many other jurisdictions, constructive discharge is essentially a form of involuntary termination caused by a hostile work environment.
Hostile work environments contravene employment contracts and/or common law and tend to be characterized by bullying, harassment, unreasonable demotion or treatment, no access to materials, tools, or equipment, a lack of workplace safety, and underpayment of entitlements.
There is no specific law forbidding constructive discharge, but if hostile work environments have violated labor laws, then constructive discharge is de facto illegal and can form the basis of a wrongful termination lawsuit.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
