Risky Business: Giving Employees the Option of Resignation Instead of Discharge Can Be Dangerous

David Ball
December 11, 2006 — 2,727 views  
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Employers often give employees the option of resigning instead of being discharged and often fail to appreciate the dangers of this approach. The fact that forcing a resignation is actually the legal equivalent of a discharge is not known to all employers. A resignation also gives the employee a potential retaliation claim after refusing to sign a legal release and being fired. A claim can be made that the firing occurred because the employee refused to give up federal civil rights. Also, offering employees a choice to resign frequently leads to shortcuts, because the employer incorrectly believes that if the employee resigns, the employer doesn't have to comply with its polices or otherwise support a discharge.

That is what happened in a recent federal court of appeals decision that resulted in an employer win on every point except a breach of contact claim for failure to follow its own policies and procedures on discharges. McWilliams v. Jefferson County, C.A. No. 05- 1081, 2006 U.S. App. LEXIS 22656 (10th Cir. September 6, 2006).

When Jefferson County decided to terminate Christie McWilliams for falsifying her time sheets, the county gave her two options: discharge – following county policy – or resignation by signing a release of all claims and earning a two-month severance package. After taking the severance and signing a release, McWilliams sued the County for breach of its discharge procedures.

Jefferson County argued that the release negated McWilliams’ claim. McWilliams countered that the release was invalid because it was the product of a forced resignation – made under the duress of being fired. The court agreed with McWilliams and sent her case to the federal district court for a trial to determine whether Jefferson County failed to provide McWilliams with the procedural protections stated in its discharge policies.

There is no safe shortcut. According to jury verdict statistics kept by HRO’s employment practice group, failure to follow personnel policies to the letter is by far the most common reason why employers lose employment cases in court. For example, employers lose about 62% of all cases claiming breach of contract for failing to follow policies, as compared to less than 30% of racial discrimination cases. So an employer is twice as likely to lose a case claiming failure to follow personnel polices than a racial discrimination case. This shows that employer personnel polices are extremely dangerous documents that need to be very carefully drafted to make them flexible and easy to follow.

Contact HRO’s employment practice group for guidance in reviewing or developing personnel procedures that minimize legal exposure.

David Ball

Holme Roberts & Owen LLP