Unemployment benefits upheld for man who resigned after threatened demotion

The Indiana Court of Appeals affirmed the grant of unemployment benefits to a man who voluntarily resigned from his job after being told he would be demoted, finding the man’s employer failed to provide evidence as to why it demoted him.

In October 2017, S.W., who worked full time as a department head at his company, was placed on a 30-day performance improvement plan by his employers. The plan stated that unless he demonstrated significant improvement in his work, S.W. would be subject to discipline. However, the company never informed S.W. that his job performance did not meet the level of improvement that it wanted. 

At the end of the duration of the plan, the company met with S.W. informing him that he had a choice: he could be demoted to a lower position with lower pay or he could resign. S.W. was not eligible for discharge at that time and chose to resign. He later applied for unemployment benefits, which were granted by an administrative law judge in February 2018 and upheld by the Department of Workforce Development review board.

On appeal, the company argued the review board erred by determining S.W. voluntarily left his position for good cause in connection with the work. But in testimony given to the ALJ, S.W. argued his supervisor bore him ill will and created a hostile work environment, leading S.W. to file a complaint with the human resources office, among other things.

“Regarding the basic, underlying facts, the Review Board found that Company placed S.W. on a thirty-day performance improvement plan ostensibly out of concern that he was not performing his job duties, such as not properly training his subordinates and not being in his work area at scheduled times,” Judge John Baker wrote. “But the Review Board found that, in fact, S.W. had performed his assigned duties both before and during the implementation of the improvement plan.”

The appellate court then found the company failed to provide supporting details about the specific incidents resulting in S.W.’s placement on the improvement plan and his demotion.

“The specific circumstances leading to S.W.’s resignation differ greatly from cases in which this Court has found that an employee who resigned when facing a demotion did so without good cause,” Baker wrote. “…S.W.’s performance was not deficient, and Company’s unilateral change in employment terms was so unreasonable or unfair as to compel a reasonably prudent person to quit work under similar circumstances.”

Thus, the appellate court found the review board did not err by finding that S.W. voluntarily terminated his employment for good cause in Company v. Review Board of the Indiana Department of Workforce Development and S.W., 18A-EX-917.