In Morris v Schroder Capital Mgt. Intl. & Schroder Inv. Mgt. N. Am. Inc., 2006 NY Slip Op 08638, the New York Court of Appeals considered the following certified questions from the United States Court of Appeals for the Second Circuit:
(1) Is the factual determination of 'involuntary termination' (i.e., whether an employee quit or was fired) under the New York common law employee choice doctrine governed by the 'constructive discharge' test from federal employment discrimination law?
(2) If not, what test should courts apply?
In Morris, the plaintiff sued and alleged that his former employer had forced his resignation by reducing his job responsibilities and sought recovery of compensation benefits that he alleged were due to him. The defendant alleged that the plaintiff had forfeited his compensation benefits since he had violated a non-compete clause in his employment contract and further alleged that the plaintiff's claims were barred by New York's "employee choice" doctrine, which is an exception to New York's general disfavor of non-compete clauses in employment contracts, and applies when an employer conditions receipt of post-employment benefits upon compliance with a restrictive covenant.
As the Court explained in its decision:
The (employee choice) doctrine rests on the premise that if the employee is given the choice of preserving his rights under his contract by refraining from competition or risking forfeiture of such rights by exercising his right to compete, there is no unreasonable restraint upon an employee's liberty to earn a living...An essential element to the doctrine is the employer's "continued willingness to employ" the employee...In some circumstances, an employee's decision to resign from his job may not be a free and voluntary choice. Federal courts created the constructive discharge test in the context of employment discrimination cases for determining whether the employee's resignation was "voluntary"... In order to meet this threshold, "the trier of fact must be satisfied that the ... working conditions [were] so difficult or unpleasant that a reasonable person in the employee's shoes would have felt compelled to resign"...(Internal citations omitted).
The Court then concluded that the constructive discharge test applies in the context of the employee choice doctrine since "(t)he sense and purpose of the "employee choice" doctrine is that an employee is given a choice in either preserving his rights under an employment contract by not competing or losing them by engaging in competition...(A)n employer should not be permitted to enforce an unreasonable non-compete clause and simultaneously deny the employee his benefit under the guise of the employee choice doctrine."
In so holding, the Court rejected the plaintiff's argument that the appropriate standard was whether the employer was willing to employ the worker in a same or comparable job.
Not exactly great news for employees in our fine state. This is a holding that employees may well want to consider prior to giving notice to their employers. From now on, if your contract provides for post-employment benefits contingent upon compliance with a covenant not to compete, make sure that your working conditions are downright unbearable prior to telling your boss to "take this job and shove it".