Is it Really a Done Deal When Employee Resigns Then Signs a Release?

I just read a decision by the Michigan Court of Appeals that involved a “constructive discharge” and a “waiver of rights” and thought it might be an interesting example of how things can go wrong. Let’s see what happened in Bowen v Alpena Regional Medical Center.

The plaintiff, a union employee, had been employed by the medical center for about five years when his employment ended. On his last day, he was presented with a disciplinary action indicating his employment would be terminated for excessive absenteeism and failure to follow job duties or treat others with courtesy and respect. 

The plaintiff was offered a choice: (1) he could be terminated, and retain the right to pursue a grievance under the collective bargaining agreement; or (2) he could resign. If the plaintiff resigned, the medical center would not challenge his claim for unemployment benefits or disclose the reasons for his discharge to potential future employers. The plaintiff chose the latter and signed the following statement:

My resignation from Alpena General Hospital is voluntary.  I am aware [sic] applicable Hospital policies and procedures, as well as what rights I may have under a union contract, and hereby waive any and all of those rights/processes I may have, including the right to contest or grieve this or any employment action in accordance with that union contract.

Three months later, the plaintiff filed a lawsuit claiming his “termination” was “the culmination of years of harassment suffered at the hands of [p]laintiff’s supervisor and other employees following plaintiff’s reporting of another employee’s workplace misconduct in August 2012.” The plaintiff claimed he was “coerced” into signing the document under threat of losing unemployment benefits and having his reputation disparaged to potential future employers.

The plaintiff brought claims under the Whistleblowers’ Protection Act, the Elliott-Larsen Civil Rights Act and the Public Health Code and, in an amended complaint, alleged he had been constructively discharged. 

The Alpena Circuit Court granted the medical center’s motion for summary disposition, finding that the plaintiff could not show he signed the agreement under duress and, therefore, was bound by a waiver of all claims, including the statutory claims brought in the lawsuit. The plaintiff appealed and the Michigan Court of Appeals reversed.

The scope of a release is a matter of contract that must be enforced as written if it is unambiguous. Here, the agreement was limited to “those rights/processes [he] may have, including the right to contest or grieve this or any employment action in accordance with that union contract.” The appellate court noted that the phrase “rights/processes” was a reference to the “Hospital policies and procedures” and those he “may have under the union contract.” However, the release did not make any reference to statutory claims, and, therefore, those claims were not included within the scope of the release agreement.

Next, the appellate court found that the plaintiff may be able to prove he was constructively discharged. Quoting prior court decisions, it explained that:

[T]he doctrine of constructive discharge is a legal fiction created to determine whether a plaintiff’s facially voluntary resignation was, in  actuality, a result of the defendant’s improper conduct such that the court will consider the resignation to be a de facto involuntary termination of the plaintiff’s employment. Constructive discharge is not a cause of action in-and-of-itself; rather constructive discharge is “a defense that a plaintiff interposes to preclude the defendant from claiming that the plaintiff voluntarily left employment.” A constructive discharge depends upon the facts of each case and occurs when a reasonable person in the plaintiff’s position “would have felt compelled to resign” as a result of the employer’s improper conduct.

(Citations omitted). The appellate court further explained that a constructive discharge can be established without showing duress, but the mere fact that a plaintiff was given the choice of resigning or being fired is insufficient unless the plaintiff can also show that the employer lacked “good cause to believe that there were grounds for the termination.”

The “very nature of constructive discharge is that a seemingly voluntary resignation was, in fact, an involuntary discharge in the face of intolerable conditions.” However, intolerable conditions years, or even months before the resignation are likely not relevant; there should be some temporal proximity between the events/resignation to establish a causal connection.

Where the plaintiff cannot establish a constructive discharge, a statutory retaliation or discrimination claim will fail because it lacks the requisite adverse employment action. Here, discovery had not yet closed when the case was dismissed and there remained a question of fact about whether the plaintiff was constructively discharged or voluntarily resigned.

So, what is the take-away from this case? First, make sure the release agreement is written broadly enough to include statutory claims. Also, allow the employee to take the agreement with him or her and think about it for a few days, especially if the employee makes this request.

Most of my clients involve me in termination decisions and in drafting their release agreements. Even an unsigned release agreement can be enforced where the employee accepted the consideration tendered in the agreement. The key is to always consult with experienced employment counsel, before the employee is terminated.  

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Such a great post.Thanks for sharing .

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