Grouse v. Group Health Plan, Inc.
306 N.W.2d 114 (1981)
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Rule of Law:
A promise of at-will employment is binding under the doctrine of promissory estoppel if the promisor should reasonably expect the promisee to rely on the offer to their detriment, and the promisee does so, such that injustice can only be avoided by enforcement.
Facts:
- John Grouse, a pharmacist employed at Richter Drug, sought employment in a clinical setting.
- Grouse applied and interviewed for a pharmacist position with Group Health Plan, Inc.
- On December 4, 1975, Group Health's Chief Pharmacist, Cyrus Elliott, telephoned Grouse and offered him a position, which Grouse accepted.
- In reliance on the offer, Grouse informed Elliott that he would give Richter Drug two weeks' notice and promptly resigned from his job.
- Grouse also declined another job offer from a Veteran’s Administration Hospital because he had accepted the position with Group Health.
- Before Grouse started, Group Health's management learned that Elliott had been unable to secure favorable references for Grouse.
- Due to the lack of favorable references, Group Health hired another person for the position.
- On December 15, 1975, when Grouse called to report he was ready to begin work, Elliott informed him that the position had been filled.
Procedural Posture:
- John Grouse (plaintiff) filed a lawsuit against Group Health Plan, Inc. (defendant) in a Minnesota trial court seeking damages.
- The trial court judge granted judgment in favor of Group Health, concluding that Grouse's complaint failed to state a claim upon which relief could be granted.
- Grouse (appellant) appealed the trial court's judgment to the Minnesota Supreme Court.
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Issue:
Does an employer's revocation of an at-will employment offer, after the prospective employee has relied on the offer by resigning from current employment, give rise to a cause of action for damages under the doctrine of promissory estoppel?
Opinions:
Majority - Otis, Justice
Yes. The doctrine of promissory estoppel can be invoked to grant relief to a prospective employee who relies on an offer of at-will employment to their detriment. Although no employment contract existed because the relationship was terminable at will, the principle of promissory estoppel implies a contract in law to prevent injustice. The court applied the Restatement of Contracts § 90, finding that Group Health made a promise it should have reasonably expected Grouse to act upon. Grouse did act by resigning from his job and declining another offer. Enforcing the promise is necessary to avoid injustice. The court reasoned that while Grouse could have been fired after one day, he was entitled to a good faith opportunity to perform his duties. The remedy is not for lost wages from the new job, but for reliance damages—the losses incurred from quitting his prior job and forgoing other employment opportunities.
Analysis:
This case is significant for extending the doctrine of promissory estoppel to offers of at-will employment, which traditionally lacked contractual protection against pre-employment revocation. It establishes that while an employer can terminate an at-will employee for nearly any reason after they start, the employer is not free to revoke an offer without consequence after a prospective employee has detrimentally relied on it. This decision creates a cause of action for reliance damages, protecting job-seekers during the vulnerable period between accepting an offer and their start date. It curtails the absolute power of employers in the hiring phase by holding them accountable for the foreseeable consequences of their promises.
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