### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE May 6, 2003 Session
JUDITH ANN WALKER v. CITY OF COO KEVILLE, TENNESSEE, D 

### / B 

### / A 

### COOKEVILLE REGION AL MEDICAL C ENTER
Appeal from the Circuit Court for Putnam County No. 00N0158 John J. Maddux, Judge

No. M2002-01441-COA-R3-CV - Filed August 12, 2003

This appeal involves a

n employ ment dispu

te between the Cookeville Regional Medical Center and
a senior management employ ee. After the hospital’s chief executive officer removed the employee from her position as Interim Assistant Administrator and Director of Qualit y Management, the employee re signed and filed suit in the Circuit Court for Putnam County alleg ing that the hospital breached h er e mployment contract by declining to pay

her the severance benef

its required by her employment

contract. Following a bench trial, the c ourt found that the hospital had breached the employment

contract and awarded the employ ee severance benefits, p

reju dgment interest, and discretionary

costs. Th e h ospital ar

gues on this appe al that the

employ ee was n ot entitle d to
severance pay because (1) she h ad volunta

rily resigned, (2) t

he parti es under sto od t hat the employee’sappoi nt ment as assistant administrator was not permanent, and (3) the employ ee’s demotion did notmate

rial ly alte r her dutie s or st

atus. We affirm the judgment because the hospital breached the emplo ye e’s cont

ract whe n it demote d her and

decline d to pay

her the s everan

ce bene fits required by

her employment contr

act. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed

W IL LI AM C. K OCH , J R ., J., delivered the opinion of the court, in which B EN H. C ANT RELL , P.J., M.S., and W IL LI AM B. C AIN , J., joined.

H. Rowan L

eather s II I, Na shville, T ennesse e, for the appell ant, City of Cookev

ille, Ten nessee d /b/a Cookeville Regional Medical Center. Phillip P. Welty, Nashville, Tennessee, a nd Ronald Thurman, Cook eville, Tennessee, for the appellee, Judith Ann Walker.
OPINION

I.

JudithAnn Walker, a registered nurse with a ba chelor’s and a

master’s degree, was hired by the Cooke ville Regiona

l Medica l Center ( “hospita

l”) in June 1 994 as the

Directo r of Qua lity Mana gement

. She was an at-will employee and was not a member of senior manag ement. As Director of Quality Manag ement, Ms. Walker was responsible solely for mana gin g the Qu ality-2-

Management

Department which

provided support to the medical staff regarding cre dentialing, staff committee s, and peer review and co ordinated the hospital’s quality mana gement training and progra ms.
In 1998, the

hospital w as in turmo il becau se of the departu re of its c hief exec uti v e officer (“CEO”) and the dispute between the hospital’s board of trustees and the city counc il regarding the council’s desire to sell the hospital. Eventually, William Jennings, the hospital ’s chi ef operating officer (“COO”), was named interim chief executive officer with the understanding that he would notbe considered for the permanent CEO position. With a new administration on the horizon, Mr. Jenn ings set outto keep a core group of the hospital’s managers intact by offering them the financial security that come s with an e

mploy ment cont ract. Ms . Walker w as one of these ma nager s.
On March 17, 1998, Ms. Walker and the ho spital ent e red into a contract naming her the hospital’s “Interim Assistant Administrator and Director of Quality Manag ement.” Section 5 of the contract provide d that

[t]he term of

this Agreement shall be for one (1) year c ommencing on the date of the execution of this Agreement. Upon the expiration of this initial term, this Agreement shall continuefor additional terms of
one (1) y ear ea ch y ear upon

the same terms and

condition s herein provided, unless either party gives written notice to the other party at least sixty (60) days pr

ior to the expiration of

the then current term of its or her election to terminate the Agreement at the e xpiration of

the the n curre nt term. I

f such not

ice is g iven, this Agree

ment shall terminat e at the e xpiration of

the then c

urrent te rm.
Ac co rd in gl y, either the hospital or Ms. Walker could elect to terminate the agree ment by giving the other party at le ast sixty da ys notice prior to the expiration of the cur rent term. If no notice wa s given, then the c ontract

would be r

enewed for anot her y ear at th e expirati on of that

term.

In addition, Sec tio n 6.1(h) of the contract contained the following pr ovision regarding
se ve ra nc e p ay: Hosp ital may also term inate thisAgree

ment “wit hout caus e” at a

n y time upon thirty (30) day s prior written notice to Walker. Provided, however, that in the event of Walker’ s termination “without cause” Hospital shall b e ob ligated to pay to Walker, as severance pay , an amount equal to t

he agg regat e compens ation and all benefits due Walker for the balance of the current term of th

is Agre ement, or one (1) yea r, whichever is longer.

The agreement also provided that Ms. Walker

could terminate the agreement “without cause” at any time upon thirty day s prior wr itten n otice, “but no severance pay or benefits shall be paid to her.”

Ms. Walker’sduties an d status a t the hospital c hanged significantly after she became the Inte rim Assistant Admini strator an d Director of Quality Management. Prior to the contract, she1 By thi s ti me, the senior management team consis ted of Mr. Lambert , Mr. Matti ngly , th e chief fin ancial officer, the director of human resources, and the two remaining assi stant adminis trators – one of which was Ms. Walker.

2 The hospital’s lawyer and the Director of Human Resources were present at this meeti ng.

-3- supervisedonly

the Quali ty M anage

ment Depa

rtment. After the contract, she became responsi ble for a ddit ional dep artments , includin g the ho spital re sourceslibrary , educa tion, onco logy

service s, infection control, and environmental services. She answer ed directly to the

interim CEO and was responsi ble for working with the directors of the departm ents unde r her sup ervision

with reg ard to budget matters and problem solving issues. In addition, her requisition authority wa s increased from $250 to $1,000, and she became part of the small group of se nior managers who met pe riodica lly t o discuss hospital policy and to make manag ement and policy de cisions for the hospital.

In February

1998, the hospital hired Tod Lambert as its new per manen t CEO, and M r. Jenn ings tempora

rily returned to his COO position awaiting the hiring of his successor. Mr. L ambert hired a financial consultant and a nursing consultant to review the hospital’s operations and began making personnel changes at the senior mana gement level. At lea st two ot her assistant administrators – Ms. Walker’s peers – stepped down and were g iven their contrac tual s everance benefit s under Section 6.1(h). Because the hospital did not give Ms. Walker the required notice of its intent not to renew her contract as I nterim Assistant Administrator an d Direct

or of Qua

lity Manag ement, her employment contr act was automatically rene

wed on March 17, 1999 for another year.
In April 1999 , Mr. L ambert h ir ed B ernard

Matting ly a s the hospital’s new COO. Short

ly thereafter, the hospital published anew organizational chart that still recognized Ms. Walker’s status and position as Int erim A ssistant A dministra tor. Even though s he now re

ported to Mr. Mattin gly rat herthan Mr. Lambert, Ms. Walker was still a member of the se nior management team 1 and remained responsible for the manag ement and control of the departments placed under he r supervision.

Later in the year, Me ssrs. Lambert and Mattingly decided to combine the co rp orate compliance, internal audit, and quality mana gement programs under

a new Assistant Administrator of Quality and Compliance. The y recr uited and hireda new em

ploy ee for t

his position , and in la

te September 1999, Mr. Lambert met with Ms. Walker to tellher that the hospital had created a new position of Assista

nt Administr

ator of Q uality and Complia

nce and that her curren t p osition of Inte rim Assistant Administra

tor and D irector

of Qualit y Ma nageme nt would be abolished. 2 He also informedher that he intended to “demote” her to Director of Quality Manag ement and that she would answ er to the new A ssistant A dministra tor of Qua

lity and Complia

nce. As a result of this demotion, Ms. Walker would no longer bepart of the hospital’s senior management team and would again become anemployee a

twill. Mr. Lambert also told Ms. Walker that her salary would not be reduced but that she had “topped out” as far as the salary for the Director

of Quality Manag ement position was concerned.

Mr. Lambert advised Ms. Walker to be a “ team player

” and told her that he expected her to teachthe new Assistant Administrator of Qualit y a nd Compliance ever

yth ing she k new. He also told her that “being demoted wasn’t so bad because he himself had been demoted , and that the peopl e-4-

at the hospital were too caught up in titles.” The meeting e nded when Ms. Walker stated that she desired time to think about her circumstances and to talk with her lawy er.
The hospital p

roposed t hat Ms. Walk

er take a brie f admi nistrative leave to consider Mr. Lambert’s proposal. After several day s of leave, Mr. Lamber t asked Ms. Walker for her decision. She informed him that she did not desire to be moved back to the Director of Quality

Management position and that she des ired to invoke the severance rights under her contract. Mr. La

mbert responded

by s ugge sting tha

t Ms. Walker

hire a la wy er and r

esolve the matter

with the hospital’s Director of Human

Resourc es. Ms. Wal

ker also informed Mr. L ambert th at she wa s prepar ed to work out her thirty day s notice or leave immediatel y which ever he preferred. Ms. Walker ha d no other conversations with Mr. Lambert. At some point during the process, the hospital offered her $39,000 to resolve the remaining issues rega rding her termination of employ ment. Ms. Wa

lker did notaccept the offer and left her employment at

the hospit

al with no s everan

ce bene fits of an y so rt.
On May 5, 2000, Ms . Walker f

iled suit a gainst t he City of Cookev

ill e in the Circuit Court for Putnam County, alleging that the hospital had breached her employ ment cont ract by refusin g to pay her seve rance b enefits under Section 6.1(h) of her employ ment contract

after terminating her job
as “Interim Assistant Administrator and Dire ctor of Q

uality Manag ement” without cause. The trial court handed down its ruling at the conclusion of the April 23, 2002 bench trial. In a Ma y 17, 2002 order reflecting its ruling, the trial court conc l uded t hat the ho spital’s p roposed d emotion of

Ms. Walker amounted to a const

ructive discharge because it materially and substantially changed her contractual duties an d manag ement sta tus at the hospital. T

he trial c ourt also

determined that the hospital had breached Section 6.1(h) of Ms. Walker’s contract and awarded he r $90,707 in severance pay and $23,000 in prejudgment interest. On May 21, 2002, the trial court entered another order awarding Ms. Walker

$1,802.15 in discretionary c osts. The hospital h as perf ected th is appea l solely to challenge the trial court’s conclusion that it brea ched Ms. Walker’s contract by refusing to pay

her
severa nce benefits in a

ccorda nce with S ection 6. 1(h) of h er contr act.
II. T HE S TAND ARDS O F R EVIEW
This appeal involves a bench trial that focused on the construction of a written employment contract and t he condu ct of the

parties t o the cont

ract an d their re

present atives. Accordin gly , it requires the use of

two famili ar stand ards of r eview. T he first i s the standar

d in Tenn. R. App. P. 13(d) gover

ning the review o f the fa

ctual findi ngs of a

trial cou rt sitting without a j ury . This standardrequire s the reviewing courts to pre sume t hat th e tria l cour t’s fa ctual findi ngs are correct unless the evidence preponderates ag ainst them. Jones v. Garrett , 92 S.W.3d 835, 838 (Tenn. 2002). It also requires the reviewing courts to def er to fa ctual f

indings predicated on the trial court’s assessment

of the cr edibility of the witnesses. Whirlpool Corp. v. Nakhoneinh , 69 S.W.3d 164, 167 (Tenn. 2 002); Parks Pro

ps. v. Mau ry County , 70 S.W.3d 735, 741 (Tenn. Ct. App. 2001).
However, Tenn. R. App. P. 13(d) does not compel appellate courts to defer to the trial court’s decisions on questio ns of law. A trial c ourt’s re solu tion of legal questions is not entitled to a presumption of correctness, King v. Pope , 91 S.W.3d 314, 318 (Tenn. 2002); Parks Pro ps. v. Mau ry County , 70 S.W.3d at 742, and reviewing courts will reach their own independe nt conclus ion s regarding legal q uestio ns. Nutt v. Champion Int’l Corp. , 980 S.W.2d 365, 367 (Tenn. 1998);-5-

Plac encia v. P lacenci

a , 48 S.W.3d 732, 734 (Tenn. Ct. App. 2000). Questions regarding the interpretation or constructionof a written contract are just such legal questions. Guiliano v. Cleo, Inc. , 995 S.W.2d 88 , 95 (Ten n. 1999); Hamblen County v. City of Mor ristown , 656 S.W.2d 331, 335 -36 (Tenn. 1 983); General Constr. Cont

ractors As

s’n, Inc . v. Grea ter St. Thom as Bapti s t Church , 107 S.W.3d 51 3, 520 (Te nn. Ct. App . 2002); Atkins v. Atkins , 105 S.W.3d 591, 594 (Tenn. Ct. App. 2002).

Courts construe contracts solely to ascertain and to give effect to the contrac ting par ties’ intent ions. Fri zzell Const r. Co. v. G

atlinburg, L.L.C. , 9 S.W.3d 79, 85 (Tenn. 1999). When the parties have reduced their contract to writing, these intentions should be conta ined in the four corners of the contract, BVT Lebanon Shopping Ct r., Ltd. v. Wal-Mart Stores, Inc. , 48 S.W.3d 132, 135 (Tenn. 2001); Whitehaven Cmty. Baptist Church v. Holloway , 973 S.W.2d 592, 596 (Tenn. 1998), and the contracting parties’ rights a nd obligations should be govern ed by t heir written cont

ract. Marshall v. Jackson &Jones Oils, Inc. , 20 S.W.3 d 678, 681 (Tenn . Ct. App. 1999). Thus, in the absence of fraud or mistake, the courts should construe unambiguous wr itten contracts as they

find them. Boyd v. Comdata Network, Inc. , 88 S.W.3d 203, 223 (Tenn. Ct. App. 2002); Willis & Willis , L.P. v. Gill , 54 S.W.3d 283, 286 (Tenn. Ct. App. 2001).

The courts’ initial ta s k is to determine whether the written contract is ambiguous. I f the contract’s langua

ge is pla in and com

plete, the contra

cting pa rties’ in tentions mu st

be gathered

from the language of the

contract alone. T

he rulesof contr

act cons truction c ome into pla y on ly when the court determ ine s that the contract is ambiguous or incomplete. Planters Gin Co. v. Federal Compress & W arehouse Co. , 78 S.W.3d 885, 8 90 (Tenn . 2002). Co ntractu al ambig uity arises o nly when contractual p rovisi ons may rea sonably be re ad to have more than one meaning. Memphis Hous. Auth. v. Thompson , 38 S.W.3d 504, 512 (T en n. 2001); Willia ms v. Ber ube & Assocs. , 26 S.W.3d 640, 643 (Tenn. Ct. App. 2000). It does not arise simply because the contracting par tie s interpret their contract differently

. Johnson v. Johnson , 37 S.W.3d 892, 896 (Tenn. 2 001); Simonton v. Huff , 60 S.W.3d 820, 825 n.3 (Tenn. Ct. App. 2000).

Contract provisions should be considered in the context of

the entire contract. D & E Constr. Co. v. Robert J. Denley Co. , 38 S.W.3d 513, 518 (Tenn. 2001); Pitt v. Tyree Org. Ltd. , 90 S.W.3d 244, 253 (Tenn. Ct. App. 2002); Realty Shop, Inc. v. RR Westminster Holding, Inc. , 7 S.W.3d 581, 597 (Tenn. Ct . App. 199 9). I n addition , the lang

uage u sed in a c ontract

should be given its natural and ordinary mea

ning. Planters G in Co. v. Federal Comp ress & Warehouse, Inc. , 78 S.W.3d at 889- 90; Evco Corp. v. Ro ss , 528 S.W.2d 20, 23 (Tenn. 1 975); Marshall v. Jackson & Jones Oils, Inc. , 20 S.W.3d at 681. The courts should avoid strainedconstructions of c ontract ual lang uage th at crea

te ambiguities where none, in f act, ex ist. Farmers-Peoples Bank v. Clemmer , 519 S.W.2d 801, 805 (Tenn. 1975); Empress H

ealth & Beauty Spa, Inc. v. Turner , 503 S.W.2d 188, 190-91 (Tenn. 1973).

The courts should avoid rewriting contracts for parties who have spoken for themselves and should avoid r elievin g parties from their contractual oblig ations simply because these obligations later prove to be burdensome or unwise. Boyd v. Comdata Network, Inc. , 88 S.W.3d at 223; Marshall v. Jackson &Jones Oils, Inc. , 20 S.W.3d a t 682. I n addition , the cour

ts should ma

intain neutrality between the parties unless they determine that a particular co nt ractua l provision

is ambiguo us. Realty Shop, Inc. v. RR Westminster Holding, Inc. , 7 S.W.3d at 598; Heyer-Jordan & Asso c s., Inc. v. Jordan , 801 S.W.2d 814, 821 (Tenn. Ct. App. 1990). However, if the court3 The con trac t di d not s pell out a ll of Ms. Walker’ s dut ies in de tai l, but i t re fer enced h er “ curr ent job

description” and reci ted th at she was obli gated t o “perfor m all dut ies t hat may be require d of her by virt ue of her pos ition.” Th e hos pital did not introduce Ms. W alker’s j ob description, and there is no evidence in t his record that s he was not effect

ively perf

orming all the duties required of her.
-6- determines that a co ntractu al provis ion is ambig uous, it should constr

ue the pr ovision ag ainst t

h e party responsible for drafting it. Hanover Ins. Co. v. Haney , 221 Tenn. 148, 153-54, 425 S.W.2d 590, 592- 93 (1968) ; Marshall v. Jackson & Jones Oils., Inc. , 20 S.W.3d at 682.

III. M S . W ALKER ’ S M ARCH 17, 1998 E MPLOYM ENT C ONTRACT
The hospital in sists that Mr. Lambert did not breach Ms. Walker ’s employment contract in September

1999 when he informed her that he had demoted her from Int

erim Assistant Administrator

and Director of

Quality Management to Director of Quality Management. Pointing to the fac t that Ms. Wa

lker’s jo b title con

tained the word “ interim,”the hospit al argues that M s. Walker’s appointme

nt as an a ssistant a

dmin istrator wa s never intended to be permanent and, therefore, that it had the contractual leeway to remove her as an assistant administrator at any time. This argument ignores the contract’s distinction between not renewing Ms. Walker’s contract and terminating her without cause.

Ms. Walker’s March 17, 1998 emplo yme nt contra ct is not ambig

uous. Unde

r the con tract, she became the hospital’s Inter im Assistant Administrator and Director of Qu al ity M anage ment with all the duties and status attendant to that position. 3 The term of the contract was for one ye ar, and Section 5 of the contract provided for the automatic renewa l of the contract for a one-y ear period on its annual a

nniversa ry date unle ss one of the parties notified the other sixty da ys before the contract’s expiration of its desire to terminate the contract.

In addition to Section 5 governing the termination of Ms. Walker’s contract at the end of its term, her March17, 1998 contract contained provisions governing the termination of her contract at other time s. Section

6.1 permitted the h ospital to terminat e the contract any

time “for cause” or “without cause.” Section 6. 1(h) pro vided tha t the hospital ma

y terminate Ms. Walker’s contract without cause

by giving

her thirty day s written notice. In the event of a termina tion withou

t cause under Section 6.1(h), the hospit al beca me contr actually obligated to pay

Ms. Walker “as severance pa y, an amount

equal to the agg regat e compen sation an d all bene fits due Walker for the balance of the curren t term of t his Agr eement, or one (1) y ear, whichever is longer.”Section 6.2 permits Ms. Walker to terminat

e her contract “without cause” upon giving thirty day s written notice and provides that Ms. Walker is not entitled to severance pay if she does so.

We do not disagree that the use of the term “interim” in the job title of Ms. Walker’s employment

contract signal s an understanding that her employment as a ssistant administrator was notint ended to be permanent. We could easily draw the same conclusion from the facts that the initial term of her contract was for only one yea r and that the hospital was actively recruiting a new CEO when Ms. Walker’s contract was signed. However, the fact that her appointment as assistant administra t or

was not long-term did not give the hospital a license to ignor e the termination provisions of her signed contract whene ver it decided to remove her from that position. Thus, if the-7-

hospital desired

to remove

Ms. Walker

as In terim Assi stant Admi nistrator and Dire ctor of Q

uality Mana gement , it was required to follow the procedures in either Section 5 or Section 6 of her contract.
The hospital’ s argum

ent blurs the distinction betw een a Se ction 5 and Section 6.1(h) termination of Ms. Walker’s contract. A Section 5 termination does not trigge r the contract’s
severance pay provision. A Section 6.1(h) termination does. Had the hospital notified Ms. Walker
s ixty days in advanc e of March 17, 1999 that it did not intend to renew her cont ract, Ms. Walke r would have no contra

ctual cla imfor seve

rance p ay under Se ction 6.1(

h). Acc ordingl

y, t he thres hold question for

us to decide is whether the hospital undertook to terminate Ms. Walker’s contract under Section 5 or Secti on 6.1(h) . The evi dence isoverwhe lming tha t the hospit al did not a

tt empt to terminat e Ms. Walker’s employment contra ct pursuant to Section 5. Because the hospital has never asserted that it terminated Ms. Walker for cause, Section 6.1(h) is the only termination provision relevant to this dispute.

IV. T HE H OSPI TAL ’ S C ONSTRUCTIVE D ISCHAR GE OF M S . W ALKER AS I NT ER IM A SSI STANT

A DMINIS TRATOR AND D IRECTOR OF Q UALIT Y M ANAGEMENT
The hospital seeks to cir

cumvent its ob ligation to pay seve rance benefits under Section 6.1(h) by arguing that

it did not terminate Ms. Walker. It asserts that Ms. Walker voluntarily terminated her contract under Section 6.2 and, therefore, tha t she is not entitled to severance ben efits under Section 6.1(h). We

disagr ee. L ike the tr ial court, we find that Ms. Walker did not terminate her contract and emplo ym ent “with out cause .” Rathe r, we find that the

hospital c onstruct

ively discharged

Ms. Walker. She resigned only after the hospital terminated her contract without ca

use by demoting

her fro m Inte

rim Assista

nt Administr

ator and Directo r of Qua li ty M anage me nt to Directo r of Qua lity Manag ement. Terminating an employ

ee trig gers potentially

signific ant leg al consequences for an empl oyer. Accord ingly , employers may , on occasion, attempt an “end run” around these c onsequences by engaging in conduc t calcula

ted to induce an employee to quit. Turner v. Anheuser-Busch, Inc. , 876 P.2d 1022, 1025 (Cal. 1994), criticized on other grounds , Romano v. Rockwell Int’l, Inc ., 926 P.2d 1114, 1125 (Cal

. 1996); Balmer v. Hawkeye Steel , 604 N.W.2d 639, 641 (Iowa 2000). The doctrine of constructive discharge recog nizes that some resign ations ar e coerc ed and tha

t employ ers shoul d
no t be permitted to escape liability simply because they

forced an employee to resign. Smith v. Brown-Forman Distillers Corp. , 241 Cal. Rptr. 916, 920 (C t. App. 19 87); Stronzinsk y v. Sch ool Dist. of Brown Deer , 614 N.W.2d 443, 461 (Wis. 2000); WIL LI AM J. H OLLOW AY & M ICHAEL J. LEECH , E MPLOYMENT T ERMI NATION : R IGHTS AND R EMED IES 142 (2d ed. 1993) (“H OLLOW AY & LEECH ”); LEX K. L ARSON , U NJUS T D ISMISSAL § 6.06[2] (1999). The doctrine disregards form and rec ognizes that some resign ations, in

substanc e, are a

ctually terminat ions. Beye v . Bureau o

f Nat’l Affai rs , 477 A.2d 1197, 1201 (Md. App. 1984).

Courts today rec ognize two varieties of constructive dismis sal. H OLLOW AY & LEECH , at 79; 2 M ARK A. R OT HST EIN , E MPLO YMENT L AW § 8.7, at 256 (2d ed1999); Ralph H. Baxter, Jr. & John M. Farrell, Constructi

ve Disch arge – W hen Quitti ng Means G

ett ing Fired , 7 Employee Rel. L .J. 346, 352-57 (1981). The first, and currently most frequently enc ountered, variety appears in the cont

ext4 Other courts have reach ed simi lar r esult s in c ases wher e an employee resigns i nstead of accepting an of fer of
a lesser p osition

. Bree n v. Cent ral Iowa Power & Li

ght Co. , 224 N.W. 562, 564 (Iowa 1929) (whether an employee w as dischar ged or resigned is imm aterial when an em ployer’s attempts to alter the em ployee’s job status to a mark edly different positi on provides a bas is for the e mplo yee to consider that hi s employment contract has been breached); Miller

v. Win sha ll , 400 N.E .2d 1 306 , 131 0 (M ass. Ap p. Ct. 1 980 ) (if an exe cutive e mplo yee is em ploye d to fi ll a p arti cular position, any ma terial red uction in rank c onstitutes a bre ach o f the em ploym ent agr eem ent and is tanta m ountto a discharge); Howard v. Conl in Furni ture No. 2, Inc. , 901 P.2d 116, 119-20 ( Mont. 1995) (an e mploy ee t ermi nate d fr om his manageri al posi tion wa s “dis charged” and hi s subseque nt ref usal to a ccep t a n offer o f a lesser p osition , at best, aff ected his duty to mitigate d ama ges); Sand er s v. May Broadcast ing Co. , 336 N.W .2d 92, 95-96 (N eb. 1983) (a constructive discha rge an d br each of co ntract o ccurs when an em ploye e con tracts to fill a p articular positio n an d subse que ntly unjust

ifi ably s uff

ers a mat er ial c hang e in du ties or sign ificant red uction in rank) ; Hondares v. TSSSeedm an’s Stores, Inc. , 543 N.Y. S.2d 442, 444 (App. Di v. 1989) (any material chang e in duti es orsi gni fi cant reduc ti on of rank of an em ployee und er contract to fill a particular posi tion m ay be tre ate d by t he empl oyee a s a br each of contract); Kloss v. Honeywell, Inc. , 890 P. 2d 480, 485-86 ( Wash. Ct. App. 1995) (an em ploye r brea ched a con tract to employ an em ploye e as an industria l nurse b y offering the em ploye e a ma intenan ce po sition). But see Rubin v. Ho useh old Com mercia l Fin. Servs. , 746 N.E. 2d 1018, 102 8 (M ass. Ap p. Ct. 200 1) (the lender w ho took over a b usiness did not constructi vely discharge the pre siden t and C EO even th ough it limited so me o f his pow ers whe n it allowe d him to kee p his title, his o ffice, his salar y, and h is bene fits).
-8- of hostile work environment discrimination claims. In these cases, a constructive discharge arises wh e n an employer pe

rmits a hostile working environment to render an employ ee’s working conditions so in to le ra bl e t ha t r es ig na ti on is th e e mp lo yee ’s on ly rea sonable alternative. E.g. , Campbell v. Florida Steel Corp. , 919 S.W.2d 26, 34-35 (Tenn. 1 996). Thi s case does not involve that variety of c onstructive discharge.

The sec ond varie

ty o f constr

uctive di scharg e, and the

one implic ated in

this case, involves the demotion of exec u tive emplo ye es who ha ve a posit ion-spec ific con

tract. Pr ofessor Corbin poin

ts outthat an e

mploy ment cont

ract may involve a

posi tion of digni

ty a nd privile ge and

that these contracts are bre ached w

hen an e mploy er redu ces an e

mploy ee to an inferior

status. He observes that
[o]ne who has been hired to be superintendent or ge ner a l sales manager would ge

nerally be j ustified i n quitting if he [or sh

e] is ordered to act as floorwa

lker or s ales cle

rk, even though th

e salar y is notreduced. Such an order would also freque n tly be held to be a wrongful discharge by

the employer.

8 C ATHERI NE M.A. M C C AULIFF , C ORBI N ON C ONT RACTS § 34.10, at 256 (Joseph M. Perillo ed., rev. ed. 1999 ). Acco rdingly, whe n an employee

with a position-specific employment c ontract resigns after the employer f

orces the employ ee to choose among demotion, termination, or resignation, the employer remains liable for breach of contract unless the facts clearly demonstrate a fairly

bargained for release of the

employer. Kass v. Brown Boveri Corp. , 488 A.2d 242, 245 (N.J. Super. Ct. App. Div. 1985). 4

Tennessee courts have

recog nized this pr

inciple in two unre ported c ases. I

n the firs tcase, a Texas insur

ance co mpany

removed seventy -five pe rcent of the dutie s of th e executi ve vice president of a Ten

nessee i nsuranc e compan y it h ad acquir ed. The executive vice president’s employment

contract was not only

position-specific, but

it also provided for

the continuation of the employee’sduties. After the employee filed suit for breach of contract, the Te xas company arg

ued-9-

that it had not demoted the emplo ye e becau se it had “r etained him in the sa

me titular position.”This court held: Contrary to the insi ste nce of de

fendant , such re duction in authority and responsibility did constitute a violation of the contract for which defendant was responsible in damage s. Super fici ally , it may be arg ued that a n employ ee whose titular position and salary ar

e continued has no basis for complaint as to reduction in work load. However, to those highly skilled and motivated employees who ha

ve deep pride in their accomplishments and responsibilities, salary is not the only remunera

tion for emplo yme

nt. To such e

mploy ees, the

loss of re sp on si bi li ty o r a ut ho ri ty i s e qu al to or wo rs e t ha n l os s o f p ay.
Smith v. American Gen. Corp. , No. 87-79-II , 1987 WL 15144, at *5 (Tenn. Ct. App. Aug. 5, 1987), perm. app. denied (Tenn. Nov. 23, 1987).

The second case involved an employer’ s abolition of a “Spec ial Assista

nt to the Pr

esident” position as part of a reorganization. The i ncumbent in th e position, who had a written, five-year employment

contract, was re assigne d to a production job, purportedly f ive levels below his former position. The emplo ye

r later o ffere d the empl oyee a seve rance p ackag e if

he would le av e “ qu ie tl y” and then terminated him for cause when he would not resign. The employee filed suit for breach of contract. Reversing a summary judgment for the employ er, this court noted:

The reassig

nment of p laintiff

to a job “f

ive levels” lower

than the job for which he was hired without more, would constitute a breach of the employment contra ct. Plaintiff was hired fo

r a spec ific position of Specia

l A ssistant to the President, and his duties were described in the emplo yme

nt agreement as being c omparab le to that of senior management. While his salary remained the sam e, his duties were significantly diminished with his reassignment to a pr od uction job, and it has been held that such a demotion can be characterized as a discharg e of the employee. Phillips v. Morrill Elec., Inc. , No. 03A01-9901-CH-00030, 1999 WL 771511, at *3 (Tenn. Ct. App. Sept. 15, 1999) (No Tenn. R. App. P. 11 application filed).

The largely

undisputed evidence in this case clearly supports the trial court’s conclusion that the hospital constructively discharg ed Ms. Walker. Her employment contractwas positi on-spec ific and was for a

definite term. Fo llowing h

er contr act’s a utomatic renewal in March 1999, Ms. Walker
was the hospital’s Interim Assistant Administrator and Director of QualityManagement for a oneyear t erm en ding in March 2000. Her duties, responsibilities, and rank as I nterim Assistant Administrator

were significantly

broader than her former duties as Director of Qua lity Manag ement.

In September 1999, the ho spital dec ided to de mote Ms. Wal

ker to Dir

ector of Quality Manag ement, to reclassify he r former position, and to hire someone to replace her. T he hospital, at least initially , offer

ed Ms. Walk

er no sev erance

benefit s. Thus, sh

e had the choice o f eith e r5 Giving an emp loyee’s j ob to som eon e else a mou nts to a co nstructive discha rge. See Mille r v. Win sha ll , 400

N.E.2d at

1310.
-10- accepting the demotion or resigning. When she requested seve rance benefits under Section 6.1(h), the hospital offer ed to pay her the sa lary she would ha

ve earned for the remainder of her contract rather than to pay

her the severance benef

its under Section 6.1(h) of her employ ment contract.

We do notquestion Mr. Lambert’s authority to reorganize the hospital’s manage ment team

. However, he was r

equired to undertake the reorganization in light of the e mployment contracts of the affec ted mana

gement employ ees. He could hav e shuffl ed his ma nagement personnel without exposing the hospital to paying se verance benef

its by timin g the changes to coincide with the termination of the affected employ ees’ co ntracts in accordance with Section 5. For some re ason not apparent in the record, Mr. Lam bert dec ided that

he could not wait unt

il March 2 000 to full

y implement the reorganization.

Under the facts of

this case , Mr. L ambert c onstruct ively dischar ged Ms. Walker a s Inte

rim AssistantAdministrator

and Director of

Quality Manag ement when he demoted her during the ter m of her w ritten co ntract. Not only

were Ms. Walker’s duties and rank significantly

diminished, but Mr. Lambert hired her r

eplacem ent and instructed Ms. Walker to teach her every thing she knew. 5 In addition, he breached Ms. Walker’s employ ment contract when he declined to pay her the
severance benefits provided in Section 6.1(h ). Acco rdingly, the r ecord supports the trial court’s conclusion that Ms. Wal

ker did not terminate her contract “without cause” when she resigne d rather than being demoted and that the hospital became liable to Ms. Walker for severance

benefits under Section 6.1(h) of her contract when Mr. Lambert removed her from her I nterim Assistant Administrator

and Directo

r of Qua lity Manag ement whi le her wr itten empl oym

ent contr act was s till in effe ct.
V.

We affirm the judgment and remand the ca se for whatever further proc eedings may be required. We tax the costs of this appeal to Cookeville Regional Medical Center and its surety for which execution, if necessary , may issue.

_____________________________ WILL IAM C. KOCH, JR., JUDGE