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As Dunder Mifflin struggles, Jan sues the company, unsuccessfully, for wrongful termination.
She also bankrupts Michael, and then the two break up after throwing the world's worst dinner party.
In spite of this, Michael tries his best to increase company morale through less-than-successful means, which include a haphazard basketball game between the office and warehouse workers, an impromptu birthday party for alcoholic Meredith Palmer, and a botched Christmas gift exchange.
Perhaps the best boost for the employees' attitudes comes in the form of an undercover reading of Michael's screenplay, , along with a healthy dose of office-based Olympics.
Back in the Scranton office, Ryan the temp finally goes full time.
Michael kicks off the fall of 2006 by outing and then kissing gay accountant Oscar Martinez … The manager follows this up by dramatically shepherding the office through grief counseling after receiving news of the unexpected death of former manager Ed Truck.
Beet-loving salesman Dwight Schrute and uptight accountant Angela Martin begin a secret relationship, and by January 2006, salesman Jim Halpert breaks up with his girlfriend, Katy.
Not long after this, Michael reveals to corporate that he's been in a "relationship" with Jan, although he manages to explain that it wasn't serious enough to warrant termination.
However, she stays with her fiancé, warehouse worker Roy Anderson — although they break up soon afterward — and Jim takes a job at the Stamford branch of Dunder Mifflin.
Dwight is also framed by Andy and fired, although he's quickly rehired afterward.
This period of time also sees a lot of drama in the relationship department.
Soon after the wedding, Michael interviews with CFO David Wallace to replace Jan at the corporate office, but ultimately, that job goes to Ryan Howard, who becomes the youngest VP in the company's history.
In the aftermath of Ryan Howard's promotion, Jim breaks up with Karen and finally hooks up with Pam.