Tuesday, November 3, 2009

Do you know? Promissory estoppel versus at-will employment

In Ohio, the default rule governing employment relationships is employment at-will. Under at-will employment, unless otherwise agreed, either the employer or the employee can terminate the employment relationship at any time and for any reason. Promissory estoppel is one exception to the general rule of at-will employment. It is defined as “a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” In layman’s terms, if it is unfair or unjust to permit a party to back out of definite promise because of some reasonable action taken by the other party on that promise, then the court will enforce the promise like a contract. To prevail on a promissory estoppel claim, a plaintiff must show:

  1. the existence of a clear and unambiguous promise
  2. upon which one would reasonably and foreseeably rely, and
  3. the plaintiff actually relied on the promise
  4. to plaintiff’s detriment.

According to Ohio law, to overcome the presumption of at-will employment, the promise not only must be sufficiently clear and unambiguous, but also must promise continued employment for a specific period. An employee cannot rely upon promises of an indefinite duration, promises of any otherwise nebulous nature, or generalized representations about the employee’s job performance.

Even if you avoid promising employees jobs for a definite period of time, a terminated employee can still try to claim reliance on some other statement or promise. The best defense against an employee claiming promissory estoppel based on some oral statement made by a manager is a clearly worded disclaimer in an employee handbook. Disclaimers should cover the following issues:

  • Setting forth that all employees are at-will;
  • Describing what at-will employment means;
  • Stating that no one has the authority to enter into any agreement altering that at will-relationship; and
  • That is not reasonable for any employee to rely on any statement by anyone to the contrary.

With such a disclaimer signed by an employee, any reliance by that employee on any promise or statement will likely be found to be unreasonable.

Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.