Difficult economic conditions are affecting more and more employers. Many employers have undergone recent reductions in force while others are now facing layoffs not anticipated just several months ago. Downsizing and its common traveling companion, restructuring, often generate employee morale problems and associated performance and conduct issues.
Employers may seek to improve morale and relieve some of the stress caused by these uncertain times by giving their employees a “pep talk.” Such talks may occur at an all-employee meeting, in smaller groups, on a one-to-one basis with employees, or any combination thereof.
While wanting to remedy low employee morale is understandable, and indeed laudable, employers must be careful when trying to reassure employees concerning their employment and the future. In some instances, such reassurance may give rise to an employee’s claim that the employer’s statements altered their original at-will employment relationship. The employee may contend that the employer’s remarks constitute an enforceable promise of continued employment, precluding the employer from taking certain actions otherwise acceptable for at-will employment, such as terminating an employee without notice or cause. Obviously, employers do not want their benevolent pep talks to lead to this unintended result.
At-Will Employment and the Exception for Promissory Estoppel
In Ohio, employment relationships with no fixed duration are presumed to be terminable at the will of either party at any time for any reason that is not contrary to law. Ohio courts recognize an exception to the employment-at-will doctrine in the situation of promissory estoppel. This exception could come into play if an employer attempts to boost employee morale with statements regarding job security.
Under the “promissory estoppel” exception to atwill employment, an employer may be estopped (i.e., precluded) from discharging an employee at will if the employer’s representations or promises of continued employment induced reasonable reliance by the employee. To succeed on this claim in the context of job security, an employee must show that the employer made a clear and unambiguous promise of continued employment. The promise must be one that could be reasonably interpreted as limiting the employer’s ability to terminate the employment relationship. The employee must also show that the employee relied on the promise and that such reliance was reasonable and foreseeable to the employer and caused harm to the employee.
For example, in one case an employer reassured an employee that she would have a job “if her performance was satisfactory.” Based on this reassurance, the employee ended her search for other employment. On these facts, the court permitted the employee to present her claim to the jury rather than dismissing the claim before trial.
In another instance, an employee expressed concern to his supervisor about the financial condition of the employer and wondered whether his position might be eliminated to save money. The supervisor assured the employee that he was doing “a very good job” and there would be “no reason” for the employer to get rid of his position. The employee also claimed that his supervisor told him that he could expect to be with the company for a long time. When the employee was later terminated, he sued the employer on a promissory estoppel claim. Here, the court rejected the claim because the employee had not testified to any promise, verbal or otherwise, of employment for a specific period of time, nor did the employee say that anyone ever promised him he would only be discharged for cause. Moreover, the employer did not eliminate the position itself, but rather simply fired this particular employee.
An employer’s praise with respect to job performance or discussion of future career development alone is typically not sufficient to modify the employmentat- will relationship. Yet, given the heightened and widespread level of concern generated by today’s difficult economy, supervisors and managers may feel increasing pressure to comfort their subordinate employees and possibly overstate their job security in an effort to do so.
An increase in the frequency of morale-boosting remarks, and in the degree of reassurance contained therein, could lead to an increase in claims of promissory estoppel against employers. While such claims may ultimately fail on their merits, they are nonetheless costly and distracting for employers. To limit such claims, employers should remind their supervisors and managers to refrain from making statements concerning continued employment when attempting to improve employee morale. For suggestions on ways to improve employee morale without making unintended promises of job security, read this HR Pro Corner article.
The Bottom Line
Employers must exercise caution when communicating with their workforce to boost morale. You do not want your good intended “pep talk” to pave the way to . . . the courthouse.