Posted: March 23rd, 2023
The Turnip Plaza hotel case involves Mark Piper, a tour guide who worked for Colossal Corporation’s subsidiary in Michigan for several years. After being in the business for many years, Mark develops a reputation among tourists for his outstanding skills. Based on his successes, Mark is approached by Stacey Nguyen, the manager of Turnip Plaza’s rival firm, who offers him a job at the company and a substantial salary increase. After receiving news about the new proposition, Edward, Turnip Plaza hotel’s manager, promises Mark a guaranteed contract for a two-year term, a 50 percent raise, and a promotion, which encourages Mark to turn down the offer made by Stacey. However, a few days before Mark receives his new contract, Turnip Plaza undergoes a corporate restructuring, which leads to Mark’s dismissal. While Mark has not taken any legal action against Turnip Plaza’s management, he may do so in future, a process that might involve critical aspects of the case, including some of the legal theories that Mark might use to enforce the promise made by Edward, damages he may be entitled to if he wins the lawsuit, ethical obligations involved in the case, and actions that the company should take to prevent similar occurrences in the future.
Among the legal theories that Mark might use in the scenario includes enforcement of verbal contracts. According to scholars, employment contracts may either be a combination of oral terms and written contractual terms or entirely verbal agreements (Golding, 2017). For this reason, it may be argued that an oral contract between Mark and Edward exists, in which the former agreed to continue working for Turnip Plaza and turned down the offer made by Stacey, the manager of Turnip Plaza’s rival firm. Therefore, from such a perspective, it may be reasoned that the verbal promise made by Edward qualifies for enforcement as a legally binding employment contract.
However, for enforcement of verbal contracts to be accepted in the court of law, different tenets of oral agreement must be examined. Research indicates that for an oral statement to be included during negotiations, contractual force as a “warranty” rather than a “mere” representation should be established (Golding, 2017). Scholars further argue that a statement qualifies as a contractual force if it entails words that suggest that a promise was made (Rasmuben, 2014). The fact that Edward used promissory words in his oral statement through the phrase “I promise that” indicates that the agreement had a “warranty” and a contractual force. Furthermore, it is observed that such statements carry contractual relevance if people with expertise or knowledge make such pronunciations (Golding, 2017). Edward possesses unique expertise in management based on the aspect that he is the manager of the Turnip Plaza; thus, his oral statement may be an indication of a contractual force. Therefore, if such tenets of the law are satisfied, it indicates that the verbal agreement may be ruled as legally enforceable in the court of law.
Apart from the tenets of oral agreements, other legal doctrines such as promissory estoppel might also impact the outcome of the application of the legal theory of verbal employment contracts. Promissory estoppel is regarded as the “secondary rule of enforceable promises, and a narrow and limited substitute for consideration” (Gan, 2015, p. 56). Besides, under the principle of promissory estoppel, a promise made, whether in formal or informal considerations, may be made enforceable by law. However, for the doctrine to apply, four crucial elements must prevail in the case. For instance, the first aspect must reveal a “clear, definite, and unambiguous promise.” For the second condition to apply, “the promisor must have had the reason to expect reliance on the promise.” For the third requirement to take place, “the promise must have induced such reliance and a consequent detrimental change of position, and injustice can be avoided only by enforcement of the promise” (Gan, 2015, p. 56). Hence, if the four elements exist within the identified scenario, Mark might legally enforce the promise made by Edward.
Based on the information provided in the case, it is evident that Edward’s oral statement fulfills some of the elements of the doctrine of promissory estoppel. Firstly, it is possible to see that definite promises exist in words uttered by Edward, which indicates, “I promise that next month you will receive a promotion with a 50 percent raise and a guaranteed contract for a two-year term.” In addition, the fact that Mark turned down the other job offer implies that the above promise induced reliance, which consequently led to detrimental changes in his employment status. Furthermore, it may be possible to argue that Mark’s dismissal was a breach of contract; thus, the only approach to tackle the injustice is to enforce the promise. Since the elements of promissory estoppel are prevalent in the Marks’ case, the verbal agreement may be made enforceable in the court of law.
Mark might also use the theory of vicarious liability to enforce the promise made by Edward legally. Under this theory, an employer is considered liable for the actions of his employee (Al-Tawil, 2015). Notably, under vicarious liability, employees are regarded as agents of the principal; hence, they are viewed to act on behalf of their employers. Thus, it may be argued that Edward acted as an agent of Colossal Corporation, and hence, failure to fulfill the promise was a breach of contract by the latter. However, for such an argument to be accepted in the court of law, it must be established that when Edward made the promise, he had the authority to enter into an employment contract with Mark. Besides, Mark must provide evidence suggesting that the corporation’s policy includes liability coverage for employees’ actions under the mentioned circumstances. Therefore, if Mark can prove that the company’s policies accept vicarious liability for the actions of their manager, he may be in a better position to legally enforce the promise made by Edward and hence seek compensation.
From the above analysis, it is clear that multiple legal theories and doctrines exist, which Mark might use to enforce the promise made by Edward legally. However, efforts must be made to prove that the company is indeed under vicarious liability for Edward’s actions. Furthermore, many doctrinal tenets that the oral agreement made by Edward ought to be compared against to prove that his statement was a contractual force. For instance, the evidence must be provided to show that Edward’s promise induced Mark’s actions and that a legal injustice exists for the failure of an obligation to be fulfilled. While the above argument may imply that Edward’s verbal agreement is enforceable, further considerations must be made because employment contracts vary from one city to another. Overall, it will be essential to determine the labor laws that support Mark’s case.
Damages and Remedies for a Lawsuit
While Mark is yet to take any legal action concerning his dismissal, he may eventually file a lawsuit in the civil court or an employment tribunal against a breach of contract. Scholars note that employment tribunals, otherwise known as labor courts, enforce employment protection legislation and adjudicate rights-based disputes between employers and employees (Paul, 2017; Lord & Percy, 2015). Synthesis of Mark’s case reveals that an employment dispute between Mark and his employer may exist following his dismissal from work. Hence, Mark may file a lawsuit with the employment tribunal to adjudicate his case. The lawsuit may also be filed with the civil court because such courts deal with legal disputes involving two parties, for instance, the case between Mark and Turnip Plaza. In a scenario where Mark successful files and wins the case, he may be entitled to damages for breach of contract.
Under a contract breach, Mark may be awarded a remedy of monetary damages. As the name suggests, monetary damages may be provided in the form of money or other material possessions. Notably, the kind of monetary compensation awarded to Mark will be based on consequential rather than general damages. Consequential damages are considered as indirect losses that occur for the failure of a party to uphold an agreement. In this scenario, the failure of Edward to fulfill his promise to Mark is the root cause of his unemployment; thus, if he wins the lawsuit, he may be awarded consequential monetary damages.
While the amount of monetary compensation that Mark may be awarded is not specified, the jury might rely on two primary methods used in determining damages. In the first model, damages may be calculated by multiplying Mark’s unemployment duration by the pre-layoff pay and the expected length of unemployment (Macpherson & Stephenson, 2016). The approach implies that upon winning the case, Mark will be entitled to compensation for the wages, employment benefits, and salary increase that he would have received while still working for the corporation. Alternatively, the jury may rely on the second method, whereby damages are calculated by subtracting but-for and “actual” wages for each year (Macpherson & Stephenson, 2016). Under the second method, it is expected that after the dismissal, the plaintiff shall seek employment elsewhere. Therefore, the expected length of unemployment under the second model may be easy to determine, thus limiting the amount of monetary compensation offered to Mark.
Furthermore, if Mark wins the trial, he may be offered specific performance as a remedy for contract breach. Such a remedy is granted by the court of law, requiring a breaching party to perform according to the terms of the contract (Lei, 2015). Arguably, Turnip Plaza may be required by the civil court to fulfill Edward’s promise of offering Mark a guaranteed two-year contract, salary increase, and job promotion. However, the remedy may also be limited by the fact that specific performance is issued in instances where the contract in question involves rare goods or services. In the case scenario, it may be argued that tourism is a common social activity within Port Austin; thus, considering Mark’s reputation in the industry, he may be better positioned to secure another job in tour guiding. Hence, the tour guide may not be regarded as a rare job to obtain in the industry. Overall, if the above argument is considered, specific performance may not necessarily be a remedy for breach of contract in Mark’s case.
While it is likely that Mark may win the case, it is also possible that he may not be compensated based on multiple reasons. As the literature suggests, compensation may not be feasible, if a contract is terminated wrongfully and immediately an individual“finds a new job that meets or exceeds the old job pay, then no damages exist” (Macpherson & Stephenson, 2016, p. 1). Hence, it implies that remedies for breach of contracts, such as monetary damages and specific performance, may not be available for employees who suffer the least transitional loss after wrongful dismissal from work. In this scenario, Mark may receive a better paying job in the industry, considering that representatives from Turnip’s rivals had previously approached him for a job opportunity. Thus, mitigation of the financial losses suffered during the transition may reduce the chances of the plaintiff from receiving monetary compensation after winning the lawsuit.
The circumstances under which Mark was laid off from work raises multiple concerns. On the one hand, it may be argued that corporate restructuring was essential to reduce the firm’s liability risks involved in managing high adventure tours. Hence, the previous workforce would be underutilized, necessitating dismissal of some of the employees. On the other hand, from an ethical perspective, it is clear that Mark’s dismissal was done wrongfully. In particular, the firm failed to consider the formal procedures and laws governing fair termination grounds (Madinda, 2014). Although it may not be clear from the extract, it can be possible that Mark was not notified about the planned changes; thus, the news about his dismissal may have come as a surprise to him and other employees. In addition, the circumstances under which Mark was laid off did not offer him enough time to be psychologically prepared for the changes. Overall, it was wrong to lay off Mark, considering that he had been promised a promotion and was just about to sign his new employment contract.
Despite that Edward may have made a hasty decision without seeking consent from the rest of the management, it is the ethical obligation of the Turnip Plaza to ensure that the promise made to Mark is fulfilled. Notably, the responsibility is pillared against the moral principle of fidelity. Although commonly used in medical contexts, the principle of fidelity governs workplace relationships and involves the act of fulfilling professional roles and creating a trusting relationship (Haslam & DePaul, 2019; Rupp, Shao, Jones & Liao, 2014). Possibly, an oral agreement was made in Mark’s case; thus, under the above principle, it is only right that the promise is fulfilled to ensure that trust prevails among other employees working for the company. Besides, although Edward made the promise, he acted as the company’s agent, hence under the legal theory of vicarious liability, Colossal Corporations is obliged by law to fulfill the obligation. Therefore, from an ethical perspective, Turnip Plaza should offer Mark a job promotion, increase his salary, and pay some monetary compensation for the damage of wrongful termination of employment.
Recommendation for Action
Based on findings from the case analysis, it is recommended that the corporation should first deal with Mark’s case effectively to mitigate the chances of being sued. Notably, Colossal Corporations should consider offering Mark a job within one of its subsidiary firms and compensate him for the damages caused. Such action is essential because it will not only restore trust among employees but also facilitate further revenue generation in the company, considering that Mark has a good reputation among tourists. Besides, offering Mark a job will be a reflection of Colossal Corporation’s adherence to ethical principles that govern workplace relationships.
Furthermore, Colossal Corporations should establish clear policies to govern the management of its subsidiary firms. In particular, clear guidelines should be initiated regarding the role and extent of authority granted to managers, employees, and other stakeholders. Amidst such policies, it will be easy to determine whether a manager has the power to offer an employment contract for workers. Well defined regulations regarding the extent to which the parent firm is liable for its employees’ actions should be established. Having such rules may determine whether promises made by other employees are legally enforceable in a civil lawsuit or if the venture is ethically obligated to fulfill the obligations. Besides, clear policies governing termination of employment within the subsidiary firms ought to be initiated. Such legislation will protect the parent firm against lawsuits that entail wrongful termination of employment.
Apart from policies, Colossal Corporations should have proper decision-making processes. Synthesis of information from the case reveals that niches in communication protocols exist regarding significant decisions made in the company. For instance, it appears that Edward may not have been aware of the planned corporate restructuring. For this reason, he may have made the offer out of a need to keep Mark in the company and without knowledge that the latter would eventually be dismissed from work. Thus, it shows that proper communication within the business is lacking, while some middle-level employees are not involved in the decision-making process. Hence, to prevent such occurrences in the future, the venture should ensure that the decision-making processes are inclusive of key stakeholders while communication protocols are observed.
Finally, the fourth course of action should involve developing liquidation contracts. Often, contracts to have liquidation are offered as remedies in lawsuits that involve contract breach. Under this remedy, the breaching party may be required by law to pay some monetary compensation for damages caused to the other party. However, the tool may also be used in Colossal Corporation, especially in instances where the firm faces legal suits. Notably, the venture should develop a policy that specifies the monetary damages that ought to be awarded to an employee in a scenario where a contract is breached. Therefore, to elaborate, a liquidation contract in Mark’s case would specify the amount of compensation that he ought to receive for his dismissal. Such policies may protect the corporation against incurring a heavy financial burden associated with lawsuits. Besides, the amount of money required to hire an attorney may be avoided by having a contract of liquidation because the matter can be solved within the company and without the need for the plaintiff to file a
Al-Tawil, T. (2015). Vicarious liability for breach of fiduciary obligation. The Company Lawyer, 1(10), 295-301.
Gan, O. (2015). The justice element of promissory estoppel. St. John’s Law Review, 89(1), 55-100.
Golding, G. (2017). Terms implied by law into employment contracts: Rethinking their rationale. Edelaide. Retrieved from https://digital.library.adelaide.edu.au/dspace/bitstream/2440/111407/2/02whole.pdf
Haslam, L., & DePaul, V. (2019). Case study application of an ethical decision-making process for a fragility hip fracture patient. Canadian Geriatrics Journal, 22(1), https://doi.org/10.5770/cgj.22.272
Lei, C. (2015). Availability of specific remedies in Chinese contract law in Chen-Wishart, Loke, & Ong. Studies in the Contract Laws of Asia: Remedies for Breach of Contract, Oxford University Press.
Lord, J., & Percy, D. (2018). The location and type of employment tribunal claim can determine the chances of success: A unique investigation into the history and current workings of the employment tribunal system. British Academy of Management Annual Conference Paper, 1-5.
Macpherson, D., & Stephenson, S. (2016). Assessing economic damages in wrongful termination cases. Journal of Legal Economics, 23(1), 1-22.
Madinda, A. (2014). Unfair termination of employment at workplaces: The case of Tanzania. International Journal of Emerging Trends in Science and Technology, 1(5), 764-769.
Paul, L. (2017). The economics of employment tribunals. Institute for the Study of Labor (IZA), 1(331), 1-13.
Rasmuben, A. (2014). The influence of face-to-face communication: A principal-agent experiment. Central European Journal of Operations Research, 22(1), 73-88.
Rupp, D., Shao, R., Jones, K., Liao, H. (2014). The utility of a multifoci approach to the study of organizational justice: A meta-analytic investigation into the consideration of normative rules, moral accountability, bandwidth-fidelity, and social exchange. Organizational Behavior and Human Decision Processes, 123(2), 159-185.
Place an order in 3 easy steps. Takes less than 5 mins.