In a very recent breach of contract case, a former employee of the defendant was held not to have been constructively discharged from employment, and, therefore, was not entitled to a bonus provided for in his employment agreement. The Court of Appeals of Tennessee determined that the former employee voluntarily terminated his employment based on the totality of the facts.
Here are the key facts:
- The former executive employee (“Executive”) signed a two- year contract (“Employment Agreement”) with the Defendant, a real estate business, to be an executive vice-president
- In addition to his salary of $275,000 per year, the Employment Agreement provided that Executive would receive a “minimum annual bonus” of $275,000 per year
- As the Employment Agreement was interpreted by the court, the annual bonus was payable even if Executive was unable to work, for any period (even one longer than thirty days), so long as he did not voluntarily terminate his employment
- As the Employment Agreement was interpreted by the court, if the Executive became sick and unable to work, he was only entitled to receive his base salary for thirty days, e., he only had thirty days of paid sick leave
- Executive began work in late February of 2017
- Within weeks of beginning work, Executive suffered a heart attack and had to stop working
- On April 27, 2017, Executive entered a twelve-week cardiac rehabilitation program
- Executive was paid his full salary through May 18, 2017 (well beyond the thirty-day sick leave period provided for in the Employment Agreement)
- After May of 2017, Executive and Defendant engaged in discussions about his continued employment, his entitlement to a bonus, and the amount thereof
- In the above discussions, there was disagreement between Executive and Defendant
- After June of 2017, Executive did not respond to Defendant
- On July 28, 2017, Executive filed a beach of contract suit against Defendant requesting that the court award him, among other items, the $275,000 bonus
On appeal, one of the determinative issues was whether or not the Executive had terminated his employment with Defendant voluntarily or whether, on the other hand, he had been constructively discharged from employment, as he alleged. If it was determined that he was constructively discharged, he was entitled to the $275,000 bonus.
Constructive discharge, under Tennessee law, occurs when an employer engages in conduct which is intended to cause an employee to quit. The constructive discharge theory recognizes that some voluntary terminations of employment are, in fact, involuntary terminations. Tennessee law requires a court to consider the “totality of facts” related to the termination of an employee’s employment in deciding whether there was a constructive discharge.