Colorado Court of Appeals Adopts Definition of “Actual Discharge” Applied by Federal Courts in Colorado Employment Law Wrongful Discharge Lawsuits

In a case of first impression in Colorado, the Colorado Court of Appeals adopts a test for evaluating a claim of actual discharge under Colorado law.

In this Colorado employment law case, Plaintiff ex-employee, Ms. Potts, sued her former employer alleging that she had been wrongfully discharged against public policy. Here, Plaintiff was an employee of a childcare facility and was a mandatory reporter. As such, she reported perceived shortcomings of the facility and the state of Colorado investigated. During an on-site investigation by the state, Plaintiff’s employer asked her to go home early and then texted her to take off and enjoy the long holiday weekend as well. Perceiving this to be a sarcastic text message, Plaintiff assumed she had been terminated, and went to work the next week to collect her check and return the company’s property. The employer took Plaintiff’s actions to mean that she quit.  Plaintiff then brought a lawsuit for wrongful discharge.

Some background on Colorado Employment Law

Under Colorado employment law, unless otherwise agreed upon, the default employment arrangement is at-will employment — meaning either the employer or the employee may terminate the relationship at any time, for any reason, so long as any termination is not in violation of public policy.

However, there is an exception to an employer’s ability to terminate for any reason at all under an at-will employment. That is, an employer cannot terminate an at-will employee in violation of public policy. Thus, a plaintiff may recover for wrongful discharge in violation of public policy in Colorado by proving the following:

1. The employer directed the employee to perform an illegal act as part of the employee’s work-related duties or prohibited the employee from performing a public duty or exercising an important job-related right or privilege.
2. The action directed by the employer would violate a specific statute related to public health, safety, or welfare, or would undermine a clearly expressed policy relating to the employee’s basic responsibility as a citizen or the employee’s right or privilege as a worker.
3. The employee was terminated as the result of refusing to perform the act directed by the employer.
4. The employer was aware that the employee’s refusal to perform the act was based on the employee’s reasonable belief that the directed act was unlawful.

In the Potts case, Ms. Potts claimed she was subject to working conditions that became so difficult or intolerable that she had no other choice but to resign but did not. The trial court concluded that the Plaintiff’s complaint must be dismissed because she failed to allege sufficient facts to support a reasonable inference that she did not resign but was actually or constructively discharged. Potts appealed.

Actual Discharge vs. Constructive Discharge

The question of what constitutes “actual discharge” had not yet been answered by Colorado courts. So, the Colorado Court of Appeals turned to Federal courts that have addressed the issue – who generally recognize that, regardless of the legal context, “[a]n actual discharge . . . occurs when the employer uses language or engages in conduct that ‘would logically lead a prudent person to believe [her] tenure has been terminated.’” As the court of appeals stated, the “[i]nquiry focuses on the reasonable perceptions of the employee, not on whether formal words of firing were in fact spoken.” Thus, the Colorado Court of Appeals adopted an objective test to determine whether there has been actual discharge, stating:

“The test is therefore objective rather than subjective and requires consideration of whether the circumstances would lead a reasonable employee to understand that she has been discharged from employment.”

When the Court of Appeals considered the facts of the case in totality, viewing them in the light most favorable to Ms. Potts, it concluded that Ms. Potts’s complaint included sufficient factual averments to nudge the question of actual discharge “across the line from conceivable to plausible.” (Keep in mind the standard under at C.R.C.P. 12(b)(5) motion to dismiss for failure to state a claim is the Twombly/Iqbal plausibility standard).

The Court of Appeals held that the trial court’s ruling was erroneous because, when read in the context of Ms. Potts’s other allegations, a reasonable person could interpret the text message as sarcastic and insincere. Because that interpretation favors Ms. Potts, the court held that the district court should have adopted it when resolving the employer’s motion to dismiss. The Court of Appeals conceded that the conduct of both parties was ambiguous, but nonetheless reversed “because the court was considering a motion to dismiss, it should have resolved that ambiguity in favor of Potts.”

Constructive Discharge

Plaintiff’s second argument, that she was constructive discharged, did not fare as well, and the trial court’s decision to dismiss that claim was affirmed. In Colorado, to prove constructive discharge, a plaintiff must establish deliberate action on the part of an employer that makes or allows an employee’s working conditions so difficult or intolerable that the employee has no choice but to resign.

Employees cannot simply “quit and sue,” claiming they were constructively discharged. Instead, the conditions giving rise to the resignation must be sufficiently extraordinary and egregious to overcome the normal motivation of competent, diligent, and reasonable employees to remain on the job to earn livelihoods.

Generally, constructive discharge occurs over a period of time and through a series of incidents. On the facts in the Potts case, the Court affirmed the trial court’s dismissal as the facts simply did not support the claim, stating:

“Potts was not threatened with demotion, undermined in front of her coworkers, or harassed over a period of time; instead, she was sent home from work and told to stay home for the remainder of the week. If that were the standard, then virtually any employee suspension could constitute constructive discharge.”

Takeaway for Colorado Employers:

When an at-will employee quits, be mindful of and consider the circumstances leading to the termination of employment and consider confirming they are terminating their employment, and not under the impression that they have been terminated.

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