NH’s Top Court Takes a Stand on Wrongful Demotion

March 4, 2019

Published in NH Business Review (2/15/2019)

In its first employment decision of 2019, the NH Supreme Court declined to recognize a claim for wrongful demotion under New Hampshire law.

In Clark v. NH Department of Employment Security, Clark sued the agency, her current employer, on multiple grounds, including “wrongful discharge/demotion.” Clark brought her claims after being demoted from her supervisor position for, as she alleges, raising concerns to her superiors in furtherance of public policy.

NHDES has been Clark’s employer since the mid-1990s. In October 2010, Clark was promoted to a supervisor position in the Benefit Support Unit, where she was responsible for overseeing 15 employees, including three interns. Two of the interns were the children of other NHDES employees, who Clark also named as defendants in the case. Clark received a positive performance evaluation for her first few months on the job.

During this timeframe, Clark became concerned about the interns’ hours, responsibilities and behavior in the workplace. Clark raised these concerns to her supervisor and to the director of the Unemployment Compensation Bureau. Clark also wanted to advise union representatives of her concerns, but she claims her superiors prevented her from doing so.

Clark further alleges that she suspects her superiors altered a review she prepared for another employee in which she mentioned that the employee had also raised concerns about the interns to her superiors.

After bringing her concerns about the interns to her superiors, Clark received a negative performance evaluation and was advised that she would be laid off as part of an unrelated mandatory reduction in force. Prior to the layoff, however, Clark accepted a demotion to a different position within NHDES. In her current position with the agency, Clark claims she has no supervisory duties and is not eligible for a wage increase unless and until she becomes a supervisor.

Clark brought suit against NHDES seeking various forms of damages, including back pay and future wages, as well as reinstatement to her former position. The trial court dismissed the wrongful discharge/demotion claim on the grounds that the plaintiff’s employment was not in fact terminated, and Clark appealed to the NH Supreme Court.

On appeal, Clark argued that the theory behind wrongful discharge supports extending it to situations where an employee is demoted, but not terminated, for retaliatory purposes.

To succeed on a claim for wrongful discharge in New Hampshire, a plaintiff must show, first, that her discharge was motivated by the employer’s bad faith, retaliation or malice and, second, that she was discharged for performing an act that public policy would encourage or refusing to do something that public policy would condemn.

The court emphasized that it has only recognized one exception to the termination requirement of a wrongful discharge claim — constructive discharge. A constructive discharge occurs when an employee’s working conditions have become so difficult or intolerable that a reasonable person would feel forced to resign, and in fact does resign, thereby ending the employment relationship.

While recognizing that an employee does have an “interest in maintaining his or her position without fear of retaliatory demotion by his or her employer,” the court distinguished a wrongful demotion from a wrongful discharge as the “consequences of expanding judicial review to an employer’s decision to demote carries with it significantly greater risks of interfering with an employer’s ability to operate his business efficiently and profitably than that of wrongful discharge.”

The court also determined that, because a cause of action for wrongful demotion “would extend the reach of this judicial intervention from an employer’s right to discharge an employee to its right to manage its employees’ duties and responsibilities in the workplace,” recognizing such a claim “would require courts to become increasingly involved in the resolution of workplace disputes … which involve decisions that result in less serious consequences for employees than a discharge.”

In reaching its conclusion, the court was also influenced by decisions from other state courts that declined to recognize a claim for wrongful demotion and wrongful failure to promote.

Employers should not, however, interpret the court’s decision as permission to demote an employee who raises concerns in the workplace that implicate public policy. Employees who believe they have been subject to retaliatory demotion are not without recourse under the law. As the court noted in its decision, New Hampshire’s Whistleblower’s Protection Act provides statutory remedies for employees who are retaliated against for disclosing or refusing to participate in their employer’s illegal activity. Employers should never take adverse employment action against an employee in retaliation for reporting in good faith activity that is unlawful or against public policy.

Alexandra Geiger, an attorney practicing in the Employment Law Practice Group in both the Woburn, Mass., and Manchester, NH, offices of McLane Middleton, can be reached at 603-628-1483 or alexandra.geiger@mclane.com.