Constructive Termination occurs when an employer renders an employee’s working conditions so difficult and intolerable that a reasonable person would feel forced to resign. An employee that has been constructively terminated may be entitled to recover lost wages and other damages suffered as a result of the termination. In determining whether an employee has been constructively terminated, a number of important questions must be answered.

First, is the employee an employee-at-will or a contractual employee? While either type of employee may be constructively terminated, the standards for establishing constructive termination are very different.

An employee-at-will may be terminated for any reason, or no reason at all—directly or constructively—provided that the termination does not implicate public policy concerns. Contract employees are employees who, among other things, have a written employment contract. However, the mere fact that an employee has a written employment contract does not mean that he or she is a contract employee. The critical aspect of the relationship between employer and employee that distinguishes at-will employment from tenured employment is not the existence of a written employment contract. Instead, it is the establishment of a definite term of employment.

Under Massachusetts law, as in many other states, a contractual employee may pursue a claim for breach of contract, while at-will employees may only pursue a claim for wrongful termination. The requirements to prove wrongful termination in such a case are twofold:

• First, prove that the employer’s decision to constructively terminate his employment was motivated by bad faith, malice, or retaliation; and
• Next, show that the employee was constructively discharged because they performed an act that public policy would encourage, or refused to perform an act that public policy would condemn.

Constructive termination occurs most often with contract employees, typically employees in executive and/or managerial positions. Most cases finding that an executive has been constructively discharged involve express employment contracts and a material breach by the employer not contemplated by the agreement that is so important it makes continued performance seemingly pointless. Thus, courts have found constructive discharge if the employer effectively gave the employee’s job to someone else, transferred the employee’s responsibilities leaving him without any authority, or reassigned the employee to a nonexistent job. The case law does not prohibit justifiable reduction in rank or material change in duties. If the employee is not performing his or her duties effectively, for example, these changes may be appropriate.