On October 20, 2014, the U.S. Court of Appeals for the Fifth Circuit found that performance improvement plans (“PIPs”) do not constitute an intolerable working condition sufficient to support a constructive discharge claim.
The plaintiffs in Perret et al. v. Nationwide Mutual Ins. Co. argued that their former employer, Nationwide Mutual Insurance Company (“Nationwide”) issued them negative performance reviews despite their continued success in their respective management positions and placed them on PIPs as a pretext for eventual termination based (in part) on their age.[1] Both plaintiffs were the oldest managers in their region and had presented evidence that they were at or on par with the top sales performers in the region. Although the conditions of their employment (hours, salary, position title, responsibilities, etc.) did not change, both individuals resigned within three months of being placed on the PIP. The jury found that the plaintiffs were constructively discharged, but that they would have been placed on a PIP regardless of their ages.
On appeal, the Fifth Circuit reversed the jury verdict, finding that a PIP does not constitute a constructive discharge. The PIP did not change the parameters or benefits of plaintiffs’ employment, nor did the PIP make their jobs “so intolerable that a reasonable person in the employee’s position would have felt compelled to resign.” Further, the appellate court held that a PIP does not indicate future termination or that termination is inevitable.
Laconic Lookout: Employers utilizing PIPs should be careful not to change any of the conditions of the employee’s employment while the plan is in place. Employers should make it clear that the PIP is intended to remedy deficient performance and is not punitive.
[1] One of the plaintiffs alleged race discrimination as well, however he testified that he was treated identically to his Caucasian co-plaintiff.
