Perceived Breach of Contract for One's Own Layoff vs. Someone Else's Layoff: Personal Pink Slips Hurt More

By Rust, Kathleen G.; McKinley, William et al. | Journal of Leadership & Organizational Studies, Spring 2005 | Go to article overview

Perceived Breach of Contract for One's Own Layoff vs. Someone Else's Layoff: Personal Pink Slips Hurt More


Rust, Kathleen G., McKinley, William, Edwards, John C., Journal of Leadership & Organizational Studies


In this study we examine how the perception of layoff as a violation of a psychological contract can vary depending upon one's perception of employer contractual obligation. We also investigate how perceptions of layoffs vary depending on whether one is focusing on his/her own layoff or the layoff of someone else. Survey results from 81 layoff victims reveal that respondents perceive their own layoff as a breach of contract more than they do the layoff of someone else. In addition, respondents who believe strongly in employee self reliance perceive their own layoff as less of a contract breach. Ideas for future research and implications for managers are discussed in our conclusions.

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Layoff announcements abound in today's business press. According to a recent report released by Challenger, Gray, and Christmas, the 2002 job-cuts announced by U. S. corporations totals 1,004,617. This is the second time in thirteen years that annual job losses exceeded the one million mark. In 2001 over one million job cuts were announced (Daily Herald, October 2002). Given the vast numbers of layoffs and the abundant news coverage of such events, it seems unlikely that employees can avoid reading about some of these layoffs. We wonder how employees might react to announcements of layoffs. Do employees react the same to an announcement of some one else's layoff as they would to their own layoff? Are there factors that moderate a person's perception of how layoffs impact themselves and others? To what extent are layoffs perceived to be a breach of contract? In this paper we hope to provide some answers to these questions by examining the relationship between layoffs and perceived breach of contract via beliefs about employer obligation to an employee's employability.

A perceived breach of contract occurs when an organization fails to adequately fulfill the obligations entailed in the psychological contract (Morrison & Robinson, 1997). A psychological contract is the set of beliefs about reciprocal obligations between an employee and employer (Rousseau, 1989, 1990). Breach of psychological contract is subject to the perception of individuals and, therefore, it is likely that certain beliefs influence a person's view of a breach of contract. One belief with the potential to powerfully influence perceptions of contract breach is the extent to which one perceives their employer as responsible for their own employability. This concept is enveloped within the ideology of employee self-reliance.

The ideology of employee self-reliance is defined as the belief that employees should lessen their dependence on employers, and that employees should realize the traditional exchange of loyalty for job security is no longer viable (McKinley, Mone, & Barker, 1998). Edwards, Rust, McKinley, and Moon (2003) showed that employees with a strong belief in an ideology of employee self-reliance perceived less of a breach of contract following a layoff than did employees with a weak belief in the ideology of employee self-reliance. Thus, it seems that an ideology of employee self-reliance is one factor that affects the relationship between layoffs and perceived breach of contract.

One purpose of this paper is to determine whether employees perceive their own layoff as more of a breach of contract than they do someone else's layoff. This information is useful in determining the impact of layoff announcements on employees in general, and on employees of companies announcing layoffs. It may be that the recent flurry of layoff announcements has a major impact on individual employee's perception about the ability of specific companies to fulfill employee obligations.

A second goal of this paper is to test whether the moderating effect of an ideology of employee self-reliance is a factor in one's own layoff. We hope to determine whether the moderating effect of an ideology of employee self-reliance observed in experimental conditions, and when subjects responded to a vignette (Edwards et.

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