Here’s something to keep in mind when you are tempted to give an employee a choice between termination and early retirement: He may allege that the retirement option was really a constructive discharge.
Recent case: Bruce Knappenberger began working for the Phoenix Police Department in 1973. In July 2004, the department’s Professional Standards Bureau notified Knappenberger that it would begin investigating allegations that he had made sexually suggestive comments to a female officer and had also made unwelcome physical contact.
Investigators interviewed Knappenberger and other witnesses and then placed Knappenberger on administrative leave. It then notified Knappenberger that it was going to implement a new rule that would allow the department to terminate employees who had committed the sorts of infractions he had allegedly committed.
The day after that hearing, Knappenberger learned that if he were fired, he would lose the right to lifetime health insurance coverage. He could, however, retire earlier than he had planned and keep the insurance coverage. Because Knappenberger’s wife had a history of breast cancer, Knappenberger said he “could not afford to lose the insurance coverage.” Rather than running the risk of being terminated and losing his health coverage, he retired early.
Then he sued, alleging he had been forced to quit.
The 9th Circuit Court of Appeals made it clear that in the right circumstance, choosing to retire rather than work under intolerable conditions can be constructive discharge.
But the court said Knappenberger’s case did not meet that standard. He had not yet been threatened with discharge, nor had he been told it was retirement or discharge. He simply made a reasoned decision not to risk losing the benefits. (Knappenberger v. City of Phoenix, No. 07-15774, 9th Cir., 2009)