What are my rights if my employer eliminated my job and is giving me no option but to take a much lower paying position?

Our company was sold. I was told by the new company that my position was safe. Now at the last minute they are saying they have decided to eliminate my position and place me in an entry level position with less than 1/2 my current salary, however I have been management for over 12 years. A little background, 1 year ago I was in the same position at my company, they eliminated my position and respectfully offered me a fair severance package. At the list minute a comparable management position became available so I declined the severance and stayed with the company in new management role. If I refuse the job, can I still collect unemployment?

Asked on October 6, 2017 under Employment Labor Law, Michigan


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You *may* be eligible to collect unemployment if you quit. You would file based on the theory of "constructive termination" or "constructive discharge": that the employer changed your job in such a way that it become intolerable and unreasonable to keep doing it. A significant salary cut is sometimes held to be qualify, but is not guaranteed to do so: that is because under the general employment law of our nation, "employment at will," the employer has significant legal power to change salary/wages at will and set them at whatever level it likes; allowing an employee to receive unemployment whenever salary is cut undercuts that fundamental power of the employer, by essentially making their salary/wage reduction improper, and courts are reluctant to do that. 
A 1/2 cut in pay is at the level that could reasonable support a claim based on "constructive termination," but because this is a subjective judgment (i.e. there is no hard-and-fast rule in the law for when a pay cut is large enough) you could get an examiner who does not feel that you were forced out by an intolerable reduction. Therefore, you can reasonably try to get unemployment on this basis, but do not assume that you are guaranteed to get it. If your pay, even cut, is more than you'd get in unemployment, you may wish to take the lower-paying job, do the minimum for it that you can get away with, and look for a new position while doing so.

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