This chapter discusses the notions of affective events and employee emotions, and integrates these concepts into previous work on psychological climate, as represented in the multicontingency model (Burton et al., 2006; Burton and Obel, 2004). Furthermore, this chapter discusses the effect of organizational emotions on organizational information processing and decision making, which helps to explain the role of organizational climate in the multicontingency model. In the first part of the chapter, we define the concept of psychological climate and its apparent lack of association with employee behavior. Building on recent research findings on the role of emotions in organizational behavior, we propose psychological climate as affective events, which influence employee emotions. Emotions, in turn, represent a conditional state of mind, which influences employee information processing and consequent behaviors. Thus, psychological climate, conceptualized as affective events, is an important concept within the multi-contingency model of organizational design. The final part of the paper provides a first step towards integrating emotions, through their relationship with psychological climate, into the multicontingency model. Here, we discuss the concept of rational emotionality, which captures how emotions influence peoples’ abilities to make rational decisions.