Opinion ID: 986993
Heading Depth: 2
Heading Rank: 2

Heading: Constructive Termination

Text: ¶39 As noted above, Beidel was formally terminated by the board of Sideline in September 2009. He has asserted that he was, in reality, terminated long before that. The significance of the timing is that if the termination took place while the stipulated price was still in effect, Beidel's shares are worth 25 No. 2011AP788 $1,600 each. If the termination took place after the expiration of the stipulated price, his shares are worth many times less. ¶40 The constructive discharge doctrine recognizes that some resignations are coerced, tantamount to a termination. Strozinsky v. Sch. Dist. of Brown Deer, 2000 WI 97, ¶68, 237 Wis. 2d 19, 614 N.W.2d 443. We addressed this scenario in Strozinsky and described the purpose of the doctrine this way: Actual discharge carries significant legal consequences for employers, including possible liability for wrongful discharge. In an attempt to avoid liability, an employer may refrain from actually firing an employee, preferring instead to engage in conduct causing him or her to quit. The doctrine of constructive discharge addresses such employerattempted 'end runs' around wrongful discharge and other claims requiring employer-initiated terminations of employment. Strozinsky, 237 Wis. 2d 19, ¶68. ¶41 The court stated that the significance of the holding was that employers cannot escape liability by coercing a resignation instead of formally uttering the words 'you're fired.' Id., ¶83. It then stated what a plaintiff seeking to establish that a resignation was coerced must show: The plaintiff must prevail under an objective standard, establishing that conditions were so intolerable that a reasonable person confronted with same circumstances would have been compelled to resign. Id. ¶42 Beidel asserts that the situation here is governed by the principle underlying the constructive discharge doctrine— 26 No. 2011AP788 that substance is more important than form. Essentially, he seeks, at least in the context of an equitable claim, an interpretation of the constructive discharge test under which the meaning of being substantially terminated would encompass situations where an employer does not formally terminate an employee, and the employee does not resign. He has not, however, brought to our attention any cases in which a court found constructive termination had occurred where the employee had not resigned. Sideline agrees that the doctrine is key in this case; indeed, it asserts that the dispositive question in this case is whether Beidel can show that he was constructively discharged prior to the expiration of the stipulated price of the shares. Sideline argues that Beidel concedes that his formal termination happened later, and he cannot show that he resigned, as required by the Strozinsky elements. Sideline asserts that those facts are fatal to his claim that the put option was triggered before the stipulated price expired. ¶43 We disagree in key respects with both approaches. Beidel is wrong because he thinks in an equitable case, the test for constructive discharge can be applied in a less formalistic way such that constructive discharge can be found to occur even where there is not a resignation by an employee. Even though the rationale underlying the constructive discharge doctrine is, as Beidel points out, one of making sure that substance prevails 27 No. 2011AP788 over form, courts have established the test for a constructive termination, and every Wisconsin case we have found that meets that test involves a resignation. See Strozinsky, 237 Wis. 2d 19, ¶68. The fact that the test was developed in order to help courts do justice does not mean that it is to be applied without regard to the required elements. We see no need to alter the Strozinsky approach to testing constructive discharge claims. We recognize that this case is unusual in that it involves an employee who is also a shareholder and director, who is arguably compelled by his own self-interest to help keep the company functioning and profitable and therefore prevented from resigning as might an employee without those additional roles. We do not think it wise to alter an established and workable test to fit the unusual situation presented here. ¶44 However, we cannot agree that this conclusion——that the constructive termination test is not satisfied——disposes of Beidel's equitable claim. Sideline argues that specific performance of the contract is precluded because the constructive termination elements cannot be shown. But that argument is based on a fundamental misapprehension of the claim for specific performance: Beidel was not pursuing a claim for wrongful termination and does not allege that the termination of his employment, whenever it happened, violated any contract. As the court of appeals held, the analysis does not end with the 28 No. 2011AP788 disposal of the constructive termination claim. Further, it is unhelpful and unnecessary to graft the constructive termination requirements onto the equitable analysis. On that point, we agree with Beidel that [t]he court's discretion in deciding whether to grant specific performance should not be limited by a test imported from an entirely different legal theory implicating entirely different concerns. ¶45 There is one further, related consideration, given that Beidel's claim turns on the timing of the ending of his employment with Sideline. The foundation for Beidel's specific performance claim is that his treatment by Sideline triggered his right to exercise his put option prior to the expiration of the stipulated share price. The contract, in section 6, Termination of Employment Without Cause; Shareholder's Put Option, cross-references section 7(b) for the definition of Cause: Cause means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty, disloyalty or fraud with respect to Sideline, (ii) failure to devote his entire business time to the business of Sideline (subject to normal vacation leave or time off, illness or sick leave, or other periods of permitted absence), (iii) conduct tending to bring Sideline into substantial public disgrace or disrepute, (iv) gross negligence or willful misconduct with respect to Sideline, or (v) any material breach of this Agreement. 29 No. 2011AP788 However, we observe that the contract does not define termination.22 In the course of weighing the equities in a specific performance claim based on a contract, a court needs to of course consider the terms of the contract, and whether termination is ambiguous, and if so, what the parties intended the term to mean.23 All of this is appropriate to consider when the circuit court weighs the equities involved.