Constructive Discharge

Employer Who Failed to Protect Employee From Racist Customer to Face Trial

An employer’s duty to protect its employees from racial or sexual harassment on the job isn’t limited to harassment committed by supervisors or co-workers.  In some circumstances, an employer can be liable for harassment committed by customers, vendors, or other people an employee might encounter in the workplace, if the employer exercises sufficient control over them. The case of Creacy v. BCBG Max Mara Group is one example.  Beranbaum Menken LLP represents the plaintiff, Danielle Creacy, who worked as a Floor Supervisor for defendant BCBG Max Azria (“BCBG”), a retailer of women’s clothes. The BCBG store where Creacy worked was located in a Lord & Taylor (“L&T”) department store in Scarsdale NY. (The plaintiff settled with L&T before the summary judgment motion).

Creacy, an African-American, was physically and verbally assaulted by a customer, who among other things, referred to her as “you people” and “your kind.” Creacy reported the harassment to her employer, BCBG, but BCBG failed to protect her from the customer. In all, the customer came to the store three times. The last time, following BCBG’s orders, Creacy removed herself to a stock room at the back of the  store while the customer was allowed to shop. Creacy felt her exclusion from the store’s shopping area to be a form of racial segregation. After Creacy’s attempts to have the customer banned from the store be allowed to transfer to another store proved futile, Creacy quit, claiming she was constructively discharged.

The court’s decision rejected BCBG’s argument that the harassment was not “severe or pervasive,” and, therefore, not actionable. In particular, the court found significant that the customer’s behavior was physically threatening. The court also held that given the context of the harassment, a reasonable jury could find that the customer, in referring to Creacy as “you people” and “your kind,” was motivated by racial bias.

The court also found that a genuine factual dispute existed as to whether BCBG failed to adequately protect Creacy from the harassing customer. BCBG, the court found, effectively relied on L&T, the building owner, to protect Creacy. The court held that even if L&T was responsible for the safety of all store employees, including BCBG employees, BCBG, upon notice that L&T’s corrective actions were inadequate, had a duty to protect its employee by raising the issue with L&T’s corporate officials – something it did not do. Thus, the court found that BCBG’s measures to protect Creacy were inadequate, and liability for the customer’s racial harassment could be imputed to the employer, BCBG.

As to plaintiff’s claim that BCBG constructively discharged her by allowing intolerable working conditions to exist, the Court rejected plaintiff’s argument that a recent U.S. Supreme Court decision held that conditions in establishing constructive discharge, an employee needn’t prove that the employer intentionally created the intolerable conditions. The district court held that while a showing of intent, or deliberate action, is required, specific intent (i.e. the employer acted with the intention of forcing the employee out) is not. Intent, as interpreted by the district court, is a fairly easy thing to prove: the plaintiff need only show that the employer acted deliberately. The court found that Creacy showed “intent” – even if the deliberate action was BCBG’s deliberately not taking appropriate action.

Finally, the court allowed Creacy’s punitive damages claim to proceed to trial, finding that BCBG failed to provide adequate protective measures for Creacy in the face of a perceived risk that it was violating the discrimination laws. The court noted that BCBG was a sophisticated employer with 651 stores worldwide --  effectively saying that it should have known better.

The Decision is a clear statement that an employer has primary responsibility to protect its employees from third-party racial harassment, whether that third-party is a discriminatory customer at a retail store, an independent contractor performing work on the employer’s premises, or an Uber driver directed to pick up a customer known to have engaged in sexist/racist behavior. With employment relationships becoming increasingly fluid, and with more and more workers no longer in a traditional employee-employer relationship, claims of third-party harassment will likely increase in number and importance.

Constructive Discharge

What is a “constructive discharge”? A constructive discharge is a legal concept meaning that even though an employee has resigned, the law will treat the resignation as an involuntary discharge so long as the employee quit because of intolerable discriminatory or retaliatory working conditions. Here, “constructive discharge” means, “it’s as if” the employee were discharged.

You may ask, what does it matter if I resigned or the employer discharged me as long as I was discriminated against at the job? It matters because if you decide to sue your employer for discrimination, you can claim a lot more economic damages if you were discharged (actually or constructively) than if you quit. If you were discharged for discriminatory reasons, you may claim economic damages arising after your termination (e.g. loss of wages or other benefits). But if you resign, even though you have been discriminated against, you effectively forfeit your right to claim post-termination damages because, so reasons the courts, you made a voluntary decision to give up your job and the economic benefits coming with that job.

When is a resignation a constructive discharge? Or put differently, when can you resign in the face of discriminatory work practices without giving up your right to post-termination economic damages? The touchstone for a constructive discharge claim is the existence of “intolerable working conditions.” As the Supreme Court has written, a constructive discharge occurs when “working conditions become so intolerable that a reasonable person in the employee’s position would have felt compelled to resign.” Pennsylvania State Police v. Suders, 542 U.S. 129 (2004).

The mere existence of discrimination or retaliation at a job does not turn a resignation into a constructive discharge. The discrimination or unlawful conduct must be severe for there to be a constructive discharge. For instance, the sexual harassment experienced by an employee must be of a heightened form, or, in the words of the Supreme Court, “ratcheted up.” Id. Likwise, merely suffering a discriminatory demotion or pay cut does not qualify as a constructive discharge. For there to be a constructive discharge, the demotion must be “humiliating,” the pay cut “extreme,” a transfer so unfavorable that the employee would face unbearable working conditions. Id.

The burden of showing “intolerable working conditions” is a very difficult one. Most claims of constructive discharge fail. Courts are very hesitant in finding an employee’s conditions so bad as to justify his or her resignation. The New York State and federal courts within the Second Circuit (that includes New York, Vermont and Connecticut) require in order to prove a constructive discharge, a plaintiff must not only show that the working conditions were objectively intolerable, but that the employer acted intentionally in creating those conditions. Under this standard, it is not enough to demonstrate that the employer was negligent in allowing the intolerable working conditions to exist. In the Second Circuit, a plaintiff who shows that the employer knew that the plaintiff was suffering intolerable sexual harassment, but did nothing to stop the harassment, still has not established a constructive discharge because the employer’s inaction or ineffectiveness in stopping the harassment was negligent, not deliberate.

Fortunately, there are signs that the courts within the Second Circuit have begun to recognize that inequitable results occur when the constructive standard requiring a plaintiff to prove the presence of intolerable working conditions as well as the deliberateness of the employer’s conduct. I predict that in the coming years, we will see the New York and Second Circuit courts relax the “employer deliberateness” requirement. If that development occurs, the burden of proof for a constructive discharge within this Circuit will be a little less daunting.

What is the lesson if you are laboring under discrimination at the job and are considering quitting? Wait if you can. At least wait until you have had a chance to speak to a lawyer. Otherwise, you may find yourself out of your job without being able to prove a constructive discharge. And if you cannot prove a constructive discharge, you will have lost your claim to post-termination economic damages, no matter how clear the discrimination. Also, you or your lawyer are always in a better position to negotiate some form of severance if you haven’t quit and you are still employed. So, if in doubt, stay at the job. You can always quit later.

John A.Beranbaum