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February 12, 2014.

On February 10, 2014, the Court of Appeal of the State of California, Second Appellate District, issued its opinion in Kelley v. California Unemployment Insurance Appeals Board (2014) ___ Cal.App.4th ___, 2014 Cal. App. LEXIS 128 (Feb. 10, 2014), holding that the plaintiff-employee, Stephanie Kelley, had not “constructively voluntarily quit” as contended by her employer, real party in interest-appellant Merle Norman Cosmetics, Inc., and therefore was eligible for unemployment benefits.


In 2010, Stephanie Kelley went on a stress leave from her job as marketing director for Merle Norman Cosmetics, her employer, one month after filing a claim with the California Department of Fair Employment and Housing, which alleged that she was retaliated against for reporting ongoing sexual harassment. Kelley was cleared by her physician to return to work in November 2010. Prior to returning to work, Kelley’s attorney emailed the employer concerning certain “assurances” Kelley wanted before she returned to work. [ [1]] The employer would not agree to the requested assurances. [ [2]] Merle Norman noted it had already offered a severance package but invited Kelley to submit a further settlement proposal. Kelley responded with a $300,000 settlement demand. Finally, asserting that Merle Norman did not agree to the conditions Kelley had set for return to work, the employer terminated her.


Kelley applied for unemployment benefits. The employer contended she was ineligible under the seldom-used “constructive voluntary quit” doctrine, because Kelley insisted on conditions the employer was not obligated to satisfy. The California Employment Development Department (“EDD”) agreed and denied Kelley’s claim for benefits. The decision was reversed on appeal to an administrative law judge. The California Unemployment Insurance Department disagreed and reinstated the EDD’s denial of Kelley’s claim.


Kelley brought an administrate mandate action to the California Superior Court. The trial court found that Kelley had not constructively voluntarily quit. The court characterized the emails from Kelley’s counsel as “requests” and not “ultimatums” or “conditions.” The employer, the court stated, was not placed in a position where its only reasonable alternative was to fire Kelley. It should have waited until the date Kelley was due to return to see whether she showed up for work. Employer Merle Norman appealed the adverse ruling.


The Court of Appeal affirmed the superior court’s ruling. In so doing, the court analyzed the eligibility standards for unemployment benefits. There exists a presumption that an employee has been discharged for reasons other than misconduct and not to have voluntarily left employment without good cause unless the employer provides written notice to the contrary, with facts sufficient to overcome the presumption. Both misconduct and voluntary resignation, the court noted, render an employee ineligible for benefits. An otherwise involuntary discharge, in contrast, renders an employee eligible for unemployment benefits.

In affirming the trial court, the appellate court interpreted EDD’s regulation that defines when a voluntary leaving of work occurs. [ [3]] Under Regulation 1256-1(b), an employee leaves work voluntarily “when the employee is the moving party causing his or her unemployment.” In contrast, an employee involuntarily leaves work “when the employer is the moving party in causing the unemployment of an employee at a time when the employee is able and willing to continue working.” (Regulation 1256-1(c).) Regulation 1256-1(f) provides that even when an employee is discharged by the employer, the employee may be deemed to have left work voluntarily under the doctrine of “constructive voluntary leaving.” This occurs when the employee is the moving party and engages in a voluntary act or course of conduct which leaves the employer no reasonable alternative but to discharge the employee and the employee knows or reasonably should know would result in his or her unemployment. [4] ( Ibid.)

Analyzing the facts, the Court of Appeal determined that Kelley had made no demands or conditions, merely requests. It characterized the exchange of emails as “pre-litigation poker” (that is, an unbinding type of preliminary negotiations), which did not rise to the level of demands or conditions that would invoke the constructive voluntary quit doctrine. Merle Norman was the moving party in the termination, not Kelley, the court held, and she was therefore entitled to unemployment benefits.


Employers and Employees: Kelley is instructive concerning whether an employee has voluntarily resigned and is thus ineligible for unemployment benefits or has been involuntarily discharged and, therefore, is eligible for benefits.

However, the case has application to the broader area of civil lawsuits involving alleged “constructive discharge” from employment. Generally speaking, a constructive discharge occurs when the conditions of employment become so intolerable that a reasonable person would resign rather than continue to work under the conditions. Traditional examples of constructive discharge include an employee who resigns after the employer has moved the employee’s office from the company facility to a storage facility or when an employee has resigned when threatened with being blacklisted if the employee doesn’t quit.

Kelley does not address constructive discharge in civil lawsuits. However, companies should be aware of the lesson from Kelley: Honestly judge who the “moving party” is — employer or employee. If the driving force is the conduct of the employer, and such conduct is egregious or unlawful, a resignation may be found by a court in a civil lawsuit to be not voluntary and a “constructive discharge.” Such a finding transforms a seemingly voluntary resignation into a firing.

The damages that flow from a constructive discharge lawsuit include lost income for present and future income for the contract period or in the case of an “at will” employee for a period the jury determines to be the reasonable length of employment. The employee’s attorney will always look for other egregious conduct that will permit the employee to sue for tort damages; that is; damages for severe physical and emotional distress and an award of punitive damages. As in Kelley, a constructive discharge case may have underlying claims for employment discrimination or harassment under state and federal anti-discrimination statutes, which would entitle an employee to an award of attorney’s fees and costs if the case is successful. Finally, the employee may also include a claim for unpaid wages – for example, failure to timely pay last paycheck or vacation, sick and/or personal time off (PTO) — for which attorney’s fees and costs and statutory penalties are awardable to the employee. Waiting time penalties provide for payment of the employee’s daily wage by the employer for up to 30 days.

Employer Defendants: An employer defendant in a wrongful discharge case may plead the constructive voluntary quit doctrine as an affirmative defense to overcome “good cause” where a good or substantial reason is necessary to terminate an employee. Under the authority of Kelley, an employee who forces the termination may be barred from recovery, because he or she made an unreasonable demand that has caused the employer to terminate the individual.

NOTE: This Alert is designed to provide a summary of the case entitled Kelley v. California Unemployment Insurance Appeals Board. It is not intended to, nor does it, offer solutions to individual problems. Employers and employees with specific questions should consult legal counsel. 

Kenneth J. Sargoy, Esq. provides assistance and representation in connection with employment matters. Questions involving this case as well as other employment issues may be directed to Mr. Sargoy, telephone 310-208-1003 or , email him, or via his website at THIS EMPLOYMENT ALERT IS CLASSIFIED AS A NEWSLETTER AND CONSTITUTES ADVERTISING MATERIAL UNDER APPLICABLE RULES OF PROFESSIONAL CONDUCT. .

[1] The assurances requested in a first email were: (1) a written job description; (2) a written statement of goals and objectives; (3) written confirmation of Kelley’s job title, duties, pay, and benefits; and (4) the status of her earlier request for vacation during the Christmas holiday period. A second email from Kelley’s counsel sought written confirmation that Kelley would not be retaliated against for her previous complaints and reporting of sexual harassment. The second email further stated that a Merle Norman executive had found a replacement for Kelley, would take her back to work, but would dismiss Kelley after she returned. The email cautioned that if this were true, it was constitute further evidence of retaliation.

[2] The employer replied to the requested assurances that Kelley should meet with her supervisors on her return to work to discuss job duties and responsibilities, assured counsel that Merle Norman would not retaliate and would not tolerate such behavior, and that the allegation of dismissal purportedly made by an executive was false and slanderous.

[3] The EDD regulation is set forth at California Code of Regulations, title 22, section 1256-1. It defines “voluntary leaving of work” under California Unemployment Insurance Code section 1256. The Unemployment Insurance Code governs unemployment benefits. It was enacted to provide “benefits for persons unemployed through no fault of their own [in order to] reduce involuntary unemployment and the suffering caused thereby to a minimum.” (Unemp. Ins. Code, § 100.)

[4] Regulation 1256-1 provides three examples which would invoke the constructive voluntary quit doctrine despite the fact that the employee was actually discharged by the employer: (1) a truck driver who lose his driver’s license; (2) an employee who refuses to join a union or pay his union dues; and (3) a cannery worker on a Monday through Saturday schedule who suddenly refuses to work on Saturdays.