Promissory estoppel in employment relationship

It is presumed in California that unless agreed otherwise between employer and his employee (such as through contract or the union’s collective bargaining agreement), the employment is “at will.” Generally, at-will employee may be terminated for any reason, no reason, or arbitrary reason, as long as it is not an illegal reasons such as harassment, discrimination or constructive discharge (objectively intolerable working conditions that force the employee to quit).

However, in some circumstances an employer may be estopped from claiming that an employment is at will where the employer has made a promise that it should reasonably have known would cause the employee to believe a more permanent employment relationship existed, and the employee has relied to his or her detriment thereon. Under such circumstances, the promise is binding. This kind of obligation upon employer is called “promissory estoppel.” To prove the existence of promissory estoppel, the employee must show that (1) a clear promise was made by his employer, (2) he relied on that promise, (3) to his substantial detriment (by giving up some benefit, such as then existing job), and (4) damages measured by the extend of obligation assumed by the employer and not performed.

The courts have invoked the above principle where an employer changes his mind and rejects a new employee before giving the new employee a good faith opportunity to perform the duties for which he or she was hired. If the new employee has detrimentally relied on the new employment, the employer may be estopped from asserting that the employer was at will.

An employee who resigns from at-will employment in reliance on an unfulfilled promise of other at-will employment may be entitled to recover, on a promissory estoppel theory, the wages plaintiff would have earned had plaintiff remained in the former job. The lost wages must not be speculative or remot, and must be supported by substantial evidence such as a testimony by a qualified expert as to how long the employee was likely to have retained the former job and the wages he or she was likely to have earned.

Promissory estoppel claims are unnecesary where an employee has entered into performance of the services called for in the employment contract. In such cases, traditional breach of contract analysis governs the employer’s liability.