By Francine Foner, Esq. and Ty Hyderally, Esq.

The sudden impact of the COVID-19 pandemic on business as usual took many New Jersey employees and employers by surprise. Suddenly, many businesses have been ordered to shut down, and even those that can continue to operate are likely to be suffering financially, with no certain end in sight. Companies in this predicament may take drastic measures to cut costs in anticipation of reduced revenues. This will inevitably lead some employers to rescind job offers to those who were slated to start working just as COVID-19 began its spread across the United States, with a forecast of a dramatically increased community spread.  So, is there any recourse available against the offeror if you are faced with a rescinded job offer due to the COVID-19 pandemic?

In New Jersey, under certain circumstances, an employee may have a claim of “promissory estoppel” against a potential employer if the potential employee relied on a job offer and was harmed by relying on it. One requirement for such a claim is that in relying on the job offer, the employee took particular actions, such as quitting their existing employment, giving up other opportunities, or relocating for the job. Also significant is whether the new employer was aware that the employee took such actions in reliance upon the job offer.  In order to recover on a claim of promissory estoppel, the employee must prove that: “(1) there was a clear and definite promise; (2) the promise was made with the expectation that the promise (Employee) would rely upon it; (3) the promisee (Employee) reasonably did rely on the promise; and (4) the promise (Employee) incurred a detriment in said reliance.” Swider v. Ha-Lo Indus., Inc., 134 F. Supp. 2d 607, 619 (D.N.J. 2001) (citing Peck v. Imedia, Inc., 293 N.J. Super. 151, 165 (App. Div. 1996)).

Based on these elements, “New Jersey courts have applied the doctrine of promissory estoppel to circumstances where a prospective employee incurs expense in reliance on an at-will job offer but the employer withdraws the offer.”  Peck, 293 N.J. Super. at 165.  Further, the Peck Court held that such a claim exists even if the job offer is for employment “at-will” – where the employment could be terminated at any time for almost any reason. Id. at 167.

However, where the promise of employment is not sufficiently clear and definite, the claim may fail. For example, an offer letter that does not sufficiently describe the position, benefits and salary may not be “clear and definite” enough to support a claim of promissory estoppel. Acad. Express, LLC v. Rutgers, 2015 N.J. Super. Unpub. LEXIS 2356, *13-14, 2015 WL 5884956, citing Peck, 239 N.J. Super. at 679.

In addition, a claim of promissory estoppel requires that the employee made the new employer aware that he or she resigned from employment, or turned down another job opportunity, in favor of the new offer. See Moore v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 1991 U.S. Dist. LEXIS 10628, 1991 WL 149881, at *7 (D.N.J. 1991) (holding that plaintiff’s claim failed for lack of evidence of a bargained-for exchange and reliance where plaintiff never informed defendant that she was considering another job offer or that she turned down that offer).

Further, more than just leaving one position to take another is required to succeed upon a claim of promissory estoppel.  Rather, the employee must show that he or she “incurred a detriment of a definite and substantial nature in reliance upon the promise of employment.” Sercia v. Red Bull N. Am., Inc., 2009 N.J. Super. Unpub. LEXIS 466, *15-16, 2009 WL 648988, citing Peck, 293 N.J. Super at 158.  This may include such things as being induced to relocate, surrender one’s home in another state, obtain housing in this state, and contracting with movers. Id.

Unfortunately, for those who are faced with a rescinded offer which was made prior to the offeror’s awareness of the COVID-19 pandemic and its harmful financial impact upon many businesses, the employer may have a safe haven against a claim of promissory estoppel, based upon the defense of impossibility of performance.  The doctrine of “impossibility of performance,” is one in which a “supervening event” makes a party’s obligations impractical or impossible to perform. It may be that the COVID-19 pandemic is such a supervening event.

Thus, whether you have a potential claim of promissory estoppel against an employer who has rescinded an offer because of the COVID-19 pandemic will depend upon the particular facts and circumstances involved, the timing of when events occurred, and the novel issue of whether the COVID-19 pandemic made it impossible for the employer to maintain the offer.

This blog is for informational purposes only.  It does not constitute legal advice, and may not reasonably be relied upon as such.  If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts.  This blog may constitute attorney advertising.  This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state of jurisdiction.