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by M. McClure on Jul 8, 2010 at 10:25 AM

"HR promises to employees can create liabilityPromissory estoppel" can also mean trouble for employers.  Promissory estoppel is the legal theory that if you make a promise to someone, and they rely on your promise and suffer some harm because of their reliance, then you could be liable for damages if you do not fulfill the promise. The 8th Circuit Court of Appeals recently considered this theory in relation to alleged promises made by a company's Human Resources employee. 

In Binkley v. Entergy Operations, an employee was terminated for falsifying timesheets.  It had been the employee's practice to fill out his timesheets before the beginning of the work week and then to make any corrections at the end of the week.  This method had been approved by the employee's previous supervisor.   After a change of supervisors, the employee was fired. 

At the time of his termination, the employee was told by a Human Resources representative that he could challenge his termination through a panel of employees or through his management team.  And, he was told that if either group agreed with the employee, he could be reinstated.  The employee was also told that the employee panel was unable to review disputes involving unethical or illegal conduct.  The employee chose to appear before the panel of employees, which sided with him.  However, the company’s Vice President determined that falsifying timesheets was unethical or illegal, and, therefore, outside of the panel’s authority.  The employee was not reinstated.

The employee sued under the theory of promissory estoppel and claimed that the review process was a promise that the employer would follow the decision of the panel and that he relied on the promise by not appealing up the line of management.  The 8th Circuit Court disagreed. 

The court said that it doubted that there was a promise at all, but more importantly that employee did not suffer a harm because of his reliance.  If the employee had appealed though the line of management, two of the three managers who would have reviewed his case were his immediate supervisor (who fired him) and the VP that refused to reinstate him after the panel issued its decision. Because it was unlikely that the outcome would have been different had employee chosen to appeal to management, he suffered no harm by not doing so.  

Bottom Line: Employers can be liable for promises on which an employee relies to his or her detriment.  Human Resources professionals can be the source of these types of promises and should be aware of the importance of promises, particularly when discussing offers of employment and terminations.

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