International Society of Primerus Law Firms

Employers May Be Liable for Constructive Discharge Based on Failing to Reimburse

Written By: Samson Elsbernd 
Wilke, Fleury, Hoffelt, Gould & Birney, LLP
Sacramento, California

Employees who resign sometimes sue their employer for constructive discharge. An employee is constructively discharged under California law when the employer intentionally creates or knowingly permits working conditions that are so intolerable that a reasonable person in the employee’s position would have been forced to resign. The conditions must be so objectively bad that the employee’s only reasonable option is to resign or quit. This situation may arise when employers fail to reimburse non-exempt employees for necessary work expenditures.

In Vasquez v. Franklin Management Real Estate Fund, Inc., 222 Cal.App.4th 819 (2013), Vasquez drove his personal vehicle as part of his job and earned $10 per hour. Vasquez resigned after his employer failed to reimburse him for vehicle expenses (e.g., gasoline and maintenance), and sued his employer for constructive discharge. Vasquez alleged he was unable to meet basic living expenses and effectively earned less than the state minimum wage because he had to apply his wages towards his vehicle expenses. Vasquez also alleged that he repeatedly asked for reimbursement from his supervisors, and that his supervisors were aware of his financial situation. The court of appeal allowed Vasquez to proceed with his claim because a reasonable trier of fact could find that an employee had no option but to resign when an employer passes on its operating expenses to a low wage worker by failing to reimburse the employee for the expenses.

Employers should be mindful that they are statutorily obligated to reimburse employees for necessary work expenditures. Failing to reimburse employees for expenses the employer should have covered will not generally be sufficient to pursue a constructive discharge claim. However, it may when the employee’s hourly wage is close to the minimum wage. (The minimum wage will increase from $8.00 per hour to $9.00 per hour beginning July 1, 2014.) More commonly, employees will seek recovery of unreimbursed expenses by filing a claim with the Labor Commissioner.  Awards for reimbursement carry 10% interest.

For more information about Samson Elsbernd and Wilke, Fleury, Hoffelt, Gould & Birney, LLP, please visit the International Society of Primerus Law Firms (Primerus).

The general information contained herein is intended for informational purposes only. It is not intended to be, and should not be construed as, legal advice or legal opinion on any specific facts or circumstances.

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