Be Careful What You Do Not Say: Ohio Appeals Court Reverses Employer's Summary Judgment on Promissory Estoppel Claim

Earlier this month, the Jefferson County Court of Appeals reversed an employer’s summary judgment on an employee’s claim that the employer should be estopped from terminating her after its CEO had earlier implicitly consented to her living arrangements before she moved in with her boyfriend in reliance on that acquiescence. Trehar v. Brightway Ctr., 2015-Ohio-4144.  Even though the employer’s handbook contained a strong and standard employment-at-will disclaimer, the Court observed that promissory estoppel constitutes an exception to employment at will.  In addition, the CEO’s silent acquiescence to her announcement about moving in with her boyfriend constituted consent where he otherwise had a duty to speak against it if he intended to terminate her employment on that basis.   His subjective intent on the issue is not controlling if a reasonable employee would have interpreted his silence as consent.  Moreover, even if the employer were estopped from terminating the plaintiff for moving in with her boyfriend after the CEO had consented to it, her employment would otherwise remain at will.

According to the Court’s opinion, the plaintiff worked for a Christian non-profit organization.  The plaintiff testified that she informed the CEO that she planned to move in with her boyfriend in a month and he congratulated her.  He later approved her absence from a work-related event in order to help her boyfriend move into their new home.  About two weeks later, the subject came up during a work lunch. (The CEO claimed that this was the first he learned of her living arrangements.  He claimed that he only knew that the boyfriend was moving, but there were emails to him about her moving as well, etc.).    A month later, the Board of Trustees suspended her for a month with pay while she considered whether to move out or get married.  When she did not move out or get married, her employment was terminated at the end of the month and she brought suit asserting that the employer should be estopped from terminating her for living with her boyfriend out of wedlock when she had relied to her detriment on the CEO’s prior representations. 

The Company’s employee handbook contained a standard employment-at-will disclaimer that an employee can be terminated at any time and for any reason regardless of any policies or verbal statements to the contrary.  It also provided that only written agreements signed by the CEO can modify at-will employment.  The Court noted that this would not affect her promissory estoppel claim:

 The handbook does little more than re-emphasize that [the plaintiff] was an employee-at will. And an exception can be made to employment at-will by means of promissory estoppel. Moreover, if in fact promissory estoppel exists in this case it would not alter [her] status as an employee at-will in all other respects. [The employer] could still fire her for any other reason.

The Court distinguished this case from the typical one where a plaintiff relies on compliments about job performance or discussions of career development to infer a promise of continued employment.  Without “clear, unambiguous promises of continued employment,” a plaintiff cannot rely on the doctrine of promissory estoppel to preclude an employer from terminating her under any circumstances.  

In this case, however, there is evidence [the CEO] silently assented to [the plaintiff] moving in with her boyfriend and his silence can be construed as a promise that no adverse employment action would come as a result of her move. Other cases have stated that silence can be sufficient to establish a promissory estoppel claim.

Furthermore, even though the plaintiff did not explicitly seek the CEO’s permission and he did not specifically state to her that she would not be terminated for moving in with her boyfriend, his silent acquiescence to her news constituted sufficient consent on which she could base a promissory estoppel claim:

Promissory or equitable estoppel arises when “ * * * ‘one, by his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist, and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.

In other words,

In essence, the expression of estoppel in the form of a rule is that one party will not be permitted to deny that which, by his words, his acts, or his silence (when there was an obligation to speak), he has induced a second party reasonably and in good faith to assume and rely upon to that party's prejudice or pecuniary disadvantage.

While a jury may reach different inferences and evaluate the parties’ credibility, at this point a material factual dispute on these issues precluded a summary judgment.

It is possible that these actions and inactions might be construed as a promise that [the plaintiff] would not be fired for her cohabitation and that [she] relied on [the CEO’s] silence on the issue. Reasonable people could conclude that if [he] intended that [her] cohabitation would result in her termination, he should have spoken.

In a promissory estoppel claim, the employer’s subjective interpretation of the alleged promise does not control. Mers at 104-105. Instead, “the employer's representation is to be determined by what the ‘promisor should reasonably expect’ the employee to believe the promise means if expected action or forbearance results.” (Emphasis sic.); Id. at 105. Assuming as true that [the plaintiff] told her boss she was going to move in with her boyfriend and he congratulated her instead of objecting to the move or advising her she could suffer adverse employment consequences, it may be construed as reasonable for her to believe she would not be fired for cohabitating with her boyfriend.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appellate Court: It Takes More Than Sour Grapes To Prove Tortious Interference and Fiduciary Breach

Late last month, the Cuyahoga County Court of Appeals rejected the claims of a disappointed parts distributor against a former executive and his new employer (a used parts distributor). N. Coast Engines, Inc. v. Hercules Engine Co., 2008-Ohio-793 (2/28/08). In that case, the plaintiff company (the parts distributor) had an exclusive distribution agreement with a manufacturer. The plaintiff-company had promoted the defendant executive to president of the company because of his years of experience selling that manufacturer’s parts and because he had been an excellent employee for five years. The executive was employed at will for $50,000/year and, importantly, did not have any non-competition, confidentiality or non-solicitation agreements with the plaintiff company. The defendant-company was a used parts distributor, who hired the defendant executive (at the same salary, but subject to a non-compete agreement, and a three- year employment agreement with health insurance benefits) on January 10, 2005 and then shortly thereafter – on January 25, 2005 -- won the exclusive right to resell the manufacturer’s new parts. The plaintiff company ended up without a talented president and without its exclusive deal with the manufacturer.

The plaintiff company had considered selling itself to its former president during the prior year. However, when the defendant company learned of that possibility, it expressed its interest in buying the plaintiff instead. When the plaintiff presented the defendant with a confidentiality agreement before permitting due diligence, the defendant company realized that it did not want the business that much and withdrew its interest. Learning that the plaintiff company was for sale, the defendant executive then began exploring other employment opportunities, including going to work for defendant-company. He gave his notice of resignation to the plaintiff-company on January 17 and continued working for the plaintiff through January 28. The last few days were spent helping transfer its inventory to his new employer, which had won the exclusive distribution agreement from the manufacturer on January 25 when the manufacturer learned that it had hired defendant executive.

The Court rejected the breach of fiduciary duty claim against the executive because there was no evidence that the executive “sustained any financial gain, any kickback, or any promotion for joining: the defendant-company or showing that he “intentionally changed employment in order to divest the” plaintiff employer of its exclusive agreement with the manufacturer. As an at-will employee, he was free to resign at any time. In the absence of a restrictive covenant, he was also free to begin working for a competitor following his employment and to continue serving former business contacts also served by his new employer. There was no evidence of any secret dealing or conflict of interest.

The Court rejected the claim that the defendant-employer tortiously interfered with the executive’s fiduciary duty because there was no breach of fiduciary duty. Moreover, there was no tortuous interference with the plaintiff’s exclusive distributorship arrangement with the manufacturer because there was no evidence that the executive had been hired with the intent of inducing the manufacturer to terminate its relationship with the plaintiff company. Rather, the defendant company hired the executive because of his extensive knowledge of the manufacturer’s parts (which the defendant company sold used).

Insomniacs may read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/8/2008/2008-ohio-793.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.