Case Study Situation Go Fast Essay

Situation Go Fast is a motorcycle manufacturer in the southern United States. Though sales have been steady, profits have declined because of increasing operational costs. The Board of Directors felt a fresh look at the operations side was needed. They developed a 5-year plan to increase operating efficiency and set out to find someone to lead the effort. Four months ago, GO FAST found what they saw as â€Å"the person† to be the new operations director and develop a new operational plan to reduce costs. Jill Jones had an outstanding reputation as operations director for a manufacturer of a closely related product. While she was located in a different state and was happy with her current job and lifestyle, she found the 5-year plan exciting. Besides, the offer was too tempting to refuse. Jill was offered the position, including a substantial increase in salary and benefits. She accepted the job, sold her home, and purchased a home near her new job. Her husband runs an in-home business and her children had adapted well to the new community and schools. She did not have a written contract, but was promised a great future with GO FAST and was given a salary of $90,000 per year. With the economic downturn, sales for this past year were the lowest in five years. The company needs to make drastic cost reductions or it could face bankruptcy. All senior managers agreed to a 25% pay cut. Several other high-paid positions will be eliminated. Among them is Jill Jones’ operations director position. Published by DECA Related Materials. Copyright  © by DECA Inc. No part of this publication may be reproduced for resale without written permission from the publisher. Printed in the United States of America. YOUR CHALLENGE The CFO has been asked by the board of directors to investigate GO FAST’S obligation to Jill Jones. You have been assigned the task of doing research. The board of directors assumes their agreement with Mrs. Jones is â€Å"terminable-at-will† based on the law in the state, and therefore GO FAST has no obligation to her. You will prepare recommendations to be presented to the chief financial officer (CFO). Since the decision is ultimately up to the CFO, your presentation should include, at a minimum: 1. How you expect Jill would react to the board’s hard-line approach. 2. Possible ways to deal with Mrs. Jones’ situation, including the positives and negatives of each. 3. Of these, you are to advise the CFO on the best course of action, and how to present it to Jill. While the financial challenges of the company are not a secret, Jill does not yet know that her position has been targeted for elimination. Your presentation to the CFO will begin in one hour. As part of your research you have pulled a copy of The Fair Debt Collections Practices Act, as well as cases related to this issue (see reference information provided). The information in THIS section is the result of research done specifically for this case situation, and has been given to you to help you prepare your recommendations within the allotted time. The judges will also receive this information, in addition to the Case Study Situation and Your Challenge as presented. BACKGROUND INFORMATION The following information provides background related to this situation. State Employment Law Under state law, employment generally is considered to be at will, terminable by either party at any time. This means that an employer may terminate an employee with or without just cause, in the absence of an agreement limiting the employee’s discharge to just cause or specifying the term of the employment. Even where an employer makes assurances seeming to mean job permanence, such assurances are generally considered mere statements of policy indicating only at-will employment. However, state courts have also held that employee personnel manual provisions, if they meet the requirements for formation of a unilateral contract, may become enforceable as part of a contract of employment. An agreement which includes a promise from one party but not from the other is called a unilateral contract. A unilateral contract is, for example, where an employer promises to pay a certain wage if an employee does a certain task for a certain period of time. The employee’s performance of that task for that time makes him or her entitled to the promised wages. The promise of employment on particular terms of unspecified duration, if presented in the form of an offer and accepted by the employee, will create a binding unilateral contract. These types of actions are referred to as â€Å"promissory estoppel† actions and they provide an exception to the employment-at-will doctrine. In order to constitute a contract, the employer’s personnel policy as set out in the personnel policy handbook must be more than a general statement of policy and must provide reasonably definite terms for a fact finder to interpret and apply in determining whether there has been a breach of the contract arising from that handbook. General statements of policy by an employer do not meet the contractual requirements of an offer. Employees frequently couple claims that certain oral representations constitute an enforceable agreement with assertions that certain actions by the employer create an implied contract to terminate only for good cause. For example, employees often contend that an employer has established a custom and practice such that employees are permitted to continue employment until retirement unless discharged for good and sufficient cause. Such an allegation does not meet the requirement of a definite offer. Similarly, an employer’s commendations and approval of the employee’s performance do not alter the employee’s at-will status. Severance pay is not required by legislation. Where it is provided by an employer or labor agreement, it must not be administrated in a discriminatory manner. Where it is provided, severance pay is considered wages in this state. The method of payment of severance pay may delay the employee’s eligibility for unemployment compensation benefits. Promissory Estoppel The state Supreme Court recognized that, despite the absence of a contract in fact, courts may imply the existence of a contract in law by utilizing the principle of promissory estoppel. The doctrine of promissory estoppel is applicable when: 1. A promise has been made; 2. The promissory reasonably expected to induce action of a definite and substantial character by the promise; 3. The promise in fact induces such action; 4. The circumstances require the enforcement of the promise in order to avoid injustice. An estoppel may arise from a promise of future performance. The doctrine of promissory estoppel is based in a promise which the promisor should reasonably expect to induce action of forbearance of a definite and substantial character on the part of the promise and which induces such action or forbearance and is binding if injustice can be avoided only by enforcement of the promise. Under the theory of promissory estoppel, liability on a contract may ensue even if the detriment incurred by one party is not bargained for where it can be shown that the promisor should reasonably have expected its promise to induce another’s detrimental action. The impairment-of-contract clause in the state’s constitution applies to an implied-in-law obligation created by promissory estoppel. The effect of promissory estoppel is to imply a contract in law where none exists in fact. When a promise is enforced pursuant to the doctrine of promissory estoppel, the remedy granted for the breach may be limited as justice requires; relief may be limited to damages measured by the promise’s reliance. RELATED CASE PRECEDENTS INFORMATION The following information is designed to provide samples of cases that may influence decisions made related to the case situation. The participants must decide what, if any, relevance these Related Case Precedents have on this Case Study Situation. Grouse v. Plan, Inc. (1981) The doctrine of promissory estoppel was applied by the court to grant damages to a pharmacist who accepted a job offer, resigned his current job and declined another job offer in reliance on this offer, but was â€Å"terminated† from his new job before he even had a chance to start it. Plan Inc knew that to accept its offer Grouse would have to resign his employment. Grouse promptly gave notice and informed Plan Inc that he had done so when specifically asked by them. Under these circumstances it would be unjust not to hold Plan Inc to its promise. Gorham v. Optical (1995) Former employee was entitled to reliance damages based on theory of promissory estoppel, where he quit his previous job and declined any renegotiations with previous employer in reliance on promise of new job, and on his first day of employment went through hostile reinterview process that led to his immediate termination. Lewis v. Assurance Society (1986) A promise of employment on particular terms of unspecified duration, if presented in form of an offer and accepted by employee, will create a binding unilateral contract. Pine River v. Mettille (1983) Generally speaking, promise of employment on particular terms of unspecified duration, if in form of an offer, and if accepted by employee, may create binding unilateral contract; offer must be definite in form and must be communicated to the offeree. Goodkind v. University (1988) Whether a proposal by employer is meant to be an offer for a unilateral contract is determined by the outward manifestations of the parties, not by their subjective intentions, and employer’s general statements of policy do not meet the contractual requirements for an offer. Gunderson v. Professionals, Inc. (2001) To overcome the presumption that employment is at will, an employee typically must establish clear and unequivocal language by the employer evidencing an intent to provide job security. General statements about job security, company policy, or an employer’s desire to retain an employee indefinitely are insufficient to overcome the presumption that employment is at will. Spanier v. Bank (1993) Terminated employee failed to show any evidence of offer for long-term employment in definite form so as to be entitled to recover for employer’s breach of implied covenant of good faith and fair dealing as result of his termination, where employee’s claims were based on subjective belief and his own inferences that employer’s commitment to commercial lending business would provide him job security and employer’s statements about developing this new area of business did not constitute long-term employment offer.