Janet's civic election win has long occurred, and Sam and Janet are still dating. Outwardly, Diane should be relieved as her spoken fear was that Janet was just using Sam to score political points during the election. But Frasier calls Diane out on her true motivations, that being her romantic feelings for Sam. He also says that he does not see a future for Sam and Janet. On top of this, Diane overhears Sam admit to Janet that his longest relationship ever was with Diane, to which Janet responds that Sam should let her go professionally and thus personally. So Diane thinks she's going to beat him to the punch, and decides to resign before he can fire her. As she does so, she reneges as she feels she's giving Sam an easy out, betting him that he doesn't have the guts to fire her. As Sam and Diane argue about what to do about their professional relationship, there is always the underlying issue of their associated personal relationship. Meanwhile, Norm is having some issues at home, not with Vera, but Vera's visiting sister, the overtly sexual Donna.
—Huggo