North Carolina Business Litigation Report

Downsized Employee Who Took Early Retirement Couldn't Claim Unemployment Benefits

When an employee quits his or her job, unemployment benefits aren't available unless there was "good cause" for leaving the job. Today, the North Carolina Supreme Court answered the question whether an employee who quits in the face of a downsizing, accepting a "voluntary" retirement package, can show the good cause necessary to receive unemployment benefits.

The answer to that question of first impression, in the case of Carolina Power & Light Company v. Employment Security Commission, was "no."  Along the way, the Court made some interesting observations on downsizings in general, and the rights of employees at will.

The case involved a former CP&L employee named Roberts, who accepted a Voluntary Early Retirement Package. Roberts took the package in the face of a downsizing by CP&L.  His position had been eliminated, he was relocated and put in a temporary position, and when he asked if he would continue to have a job, he didn't receive any assurances. Although the opinion doesn't say it, Roberts must have been very concerned that if he didn't take the package, he wasn't going to have a job much longer.

Roberts' right to unemployment benefits turned on N.C. Gen. Stat. § 96-14(1), which disqualifies an employee from benefits if he is "unemployed because he left work without good cause attributable to the employer." It's the employee's burden to show the good cause.  Id. at §96-14(1a),

The argument by Roberts was that the downsizing itself was good cause, as was his employer's failure to tell him whether he would still have a job if he didn't grab the retirement package. The Supreme Court, in an opinion written by Chief Justice Parker, rejected both arguments.

As to the downsizing, the Court said "[d]ownsizing of the workforce is a recognized means by which corporations and businesses maintain their productivity and profitability. Although downsizing may ultimately lead to the loss of some jobs, downsizing to a desired number of employees is often achieved through attrition.  Downsizing or a reduction in force does not automatically trigger layoffs."

The Court also gave short shrift to Roberts' argument regarding his uncertainty as to continued employment because CP&L didn't answer his question about whether he still had a job. Justice Parker said "[t]o construe the failure to answer that question as good cause assumes that claimant, who from the record appears to have been an employee at will, was entitled to an assurance tantamount to a contract guaranteeing him a job after the downsizing was completed. An employee who has no such guarantee of a job before the employer begins downsizing certainly has no legal basis to use the failure of the employer to give such assurances as good cause entitling him to unemployment benefits when he voluntarily accepts an enhanced early retirement package."

As the Court described the situations where good cause is present, they are limited to (1) "circumstances which make continued work logistically impractical," and (2) "when the work or work environment itself is intolerable." Roberts' arguments didn't fall in either category.

Trackbacks (0) Links to blogs that reference this article Trackback URL
http://www.ncbusinesslitigationreport.com/admin/trackback/153128
Comments (0) Read through and enter the discussion with the form at the end
Mack Sperling
Brooks Pierce, LLP
2000 Renaissance Plaza
230 North Elm Street
Greensboro, NC 27401
336.373.8850

1600 Wachovia Capitol Center
150 Fayetteville Street
Raleigh, NC 27601
919.839.0300