Showing posts with label promissory estoppel. Show all posts
Showing posts with label promissory estoppel. Show all posts

Monday, October 7, 2013

Fired for posing for Playboy? Or, how does an employer prove a negative?

Jessica Zelinske, a 33-year-old Minnesota mom, is suing her former employer after it fired her for appearing in Playboy’s 2011 “Hot Housewives” issue. 

According to her lawsuit, she claims that before posing nude, she spoke with her boss at Charter Communications, Timothy McBain, who Zelinske says told her she would not risk her job if she posed nude. Weeks after the magazine’s publication, however, McBeain handed her a “Corrective Action Report,” notifying her of her termination for violating the company’s “standards of common decency.” The notice went on to say: “You have violated Charter’s professional conduct policy by making the personal choice to pose nude in a well-known publication.” The company claims that Zelinske never told anyone that she wanted to pose nude in Playboy, let alone ask for permission.

Zelinske’s main claim in her lawsuit is for promissory estoppel—that the company made her promise about job security, upon which she relied to her detriment by posing for Playboy. To defend this claim, the employer is in a very difficult position—having to prove a negative. The employee claims she had meeting where her boss blessed her photo shoot, and may even have notes (legitimate or not) to support her claim; the employer claims that no meeting ever took place, and certainly will not have any notes or other evidence to support an event that it claims never happened. How does an employer prove that it never made such a promise to an employee? Sadly for this employer, the answer may be a costly and time consuming jury trial. 

Proving a negative—that conversation never took place, or, you did not work those extra hours that your timesheet says you did—is the most difficult position for an employer, and, often, the most expensive for an employer to defend.

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

Wednesday, August 5, 2009

The importance of handbook disclaimers

Employee handbooks come in all shapes and sizes. For example, some employers have different policies that cover exempt versus non-exempt employees. Some employers have policies that create a probationary period for employees during the initial few months of employment. Some employers have progressive discipline policies. And some even grant formal appeal rights to employees who are disciplined or terminated.

In Fennessey v. Mount Carmel Health System (Franklin Cty. Ct. App. 7/30/2009) [PDF], a terminated nurse claimed that each of these policies set forth in Mount Carmel’s employee handbook either created an implied contract of employment, or consisted of a definitive promise on which she reasonably relied thereby binding her employer.

Thankfully for Mount Carmel, its handbook contained two items that no employee handbook should be without – an at-will employment disclaimer, and a signed acknowledgement by the employee affirming her at-will status. The disclaimer stated:
110.1 Employment At Will 
An employee of Mount Carmel Health System is an employee at will. The employee or Mount Carmel Health System can terminate the employment relationship at any time for any reason. No statement in this manual will be interpreted or applied as a contract of employment.
The signed acknowledgement stated:
I recognize Mount Carmel Health System has the right to change provisions in this manual and other policies…. I understand that no representative of Mount Carmel Health System has the authority to make an agreement contrary to the provisions of this manual. 
I recognize this manual does not constitute a contract of employment. I understand that, at any time, for any reason, I can separate my employment relationship and that Mount Carmel Health System has the same right regarding my employment status.
Based on these two statements, the appellate court affirmed the trial court’s dismissal of Fennessey’s promissory estoppel and breach of implied contract claims.

This case not only illustrates the vital importance of disclaimers and acknowledgements in handbooks, but also the need that certain critical language appear in all handbooks
  1. A specific statement that employment is at-will, without exception.
  2. An explanation, in plain English, of what at-will employment means.
  3. A statement that no one can create a contract contradictory to the provisions of the handbook.
  4. A statement that that handbook is merely a unilateral statement of rules and policies which creates no rights or obligations.
  5. A statement that the handbook is not a contract and not intended to create an express or implied contract.
  6. A statement that the employer has the unilateral right to amend, revise, or eliminate policies and procedures as needed.
  7. A statement that employees should not rely on any statement in the handbook as binding on the company.

Thursday, July 24, 2008

Don't estop yourself into coverage

Lots of statutes have thresholds that must be met for coverage. For example, the FMLA only applies to employees with at least 1 year of tenure who worked at least 1,250 hours in the preceding year for an employer with 50 or more employees. As Peters v. Gilead Sciences (7th Cir. 7/14/08) illustrates, those thresholds are not the only way an employee can be covered.

There was no dispute that Peters was not eligible for statutory FMLA leave. Nevertheless, at the outset of his medical leave of absence, Gilead sent him a letter stating that "all employees" were eligible. Gilead's employee handbook makes a similar promise of 12 weeks of medical leave. Because of those representations, Peters might be eligible for medical leave under a promissory estoppel theory, and it may have been illegal for Gilead to replace him while on such leave:

Gilead’s handbook does not exclude any employees from the entitlement to 12 weeks of family and medical leave except those who do not meet the basic prerequisites of 12 months’ employment with the company and 1,250 hours of work in the preceding 12 months. There is no reason employers cannot offer FMLA-like leave benefits using eligibility requirements less restrictive than those in the FMLA .... and that is what Gilead did. Peters’ statutory ineligibility is irrelevant....

In other words, because Gilead promised leave, Peters was entitled to rely on that promise and enforce it to the extent that he relied on it to his detriment.

There are two critical lessons for employers to take away from this case:

  1. Triple-check employee handbooks for appropriate disclaimers. The key to a promissory estoppel claim is that any detrimental reliance was reasonable. A disclaimer in a handbook that tells employees that the handbook is not a contract but a general statement of company policy, that the company has the ability to modify such policy at any time, and that employees are not to rely upon anything in the handbook as binding on the company, would go a long way to showing that an employee's reliance was not reasonable.
  2. Be careful what you tell employees. The handbook notwithstanding, if you represent to an employee that s/he is entitled to a benefit (such as FMLA leave) you better be prepared to stand behind that statement and live up to everything that goes along with it. Before you tell an employee that s/he is covered by the FMLA, it is best to check whether that statement is accurate. That checking may require a 15 minute phone call to your employment counsel. That 15 minute phone call, however, could save your company 2 years of litigation hell.

Thursday, May 10, 2007

A Cautionary Hiring Tale

In May 2004, Pfizer hired Dr. Dale Thurman as a veterinary pathologist. Thruman claims that prior to hiring, Pfizer's recruiting manager, Ruth Butts, orally told him that under the company's pension plan, he would be eligible for retirement at age 62 with a full pension benefit of $3,100 per month. Relying on that statement, Thurman quit his job in Ohio and moved to Michigan for the position at Pfizer. Shortly after he started working, Pfizer informed Thurman in writing that the pension calculation Butts gave him was incorrect, and the actual benefit amount would be $816 per month, a sizeable difference. And, like any disgruntled employee, he took his dispute to court, suing Pfizer for fraud and misreprentation. Pfizer defended the lawsuit, asserting that because the claims relate to its pension plan, the claims are exclusively governed by ERISA and the state law claims are preempted. The District Court agreed and dismissed the doctor's complaint.

In Thurman v. Pfizer, Inc., however, the Sixth Circuit disagreed, and in the proceed provided some cautionary language for employers in making representations during the hiring process. Critically, because Thurman sought damages based on what he lost by quitting his old job (i.e., lost of stock options, salary, benefits, and moving expenses) and not damages incurred by relying on Butts' representation (i.e., the higher pension benefit), the remedy sought was not plan-related and therefore the state law claims did not implicate ERISA. According to the Sixth Circuit, the claims were garden variety mispresentation claims that were too far attentuated from the Plan to invoke ERISA or its preemption provision:

What we have here is simply a case of a person who left his old employer based on promises made by his new employer. These promises could have concerned anything — for example, an increase in wages, more vacation days, or free parking. Here, these promises just so happened to concern retirement benefits. We see no reason to bind employers to some promises used to induce acceptance of an employment offer, but give them a "get out of jail free card" when their promises concern the scope of a plan governed by ERISA.

The Court then admonished employers to be more carful in what they tell applicants, and advised that a company will not be able to hide behind ERISA if a misreprentation made during the hiring process causes the applicant to rely to his or her detriment in accpeting the position:

We simply hold that employers who misrepresent certain benefits provided by ERISA-governed plans to prospective employees cannot later use preemption as an end-run around liability for fraudulent or innocent misrepresentations. If adhering to promises regarding ERISA-governed plans proves too cumbersome for employers, then during the recruitment process, those employers must simply be more careful before informing potential employees of the ERISA-governed benefits to which they might be entitled. This is a duty created by state law, with which we see little basis for federal law to interfere.