Earl may have gotten out of prison, but the prison isn't quite out of him. At his Welcome Home party at the Crab Shack, Earl tells Darnell he feels good, but truthfully, he doesn't know how he feels. Karma has Earl confused, since doing good things hasn't done him any good, and the only way he got out of prison was by doing something bad. Randy's retrieved Earl's list, but he wants to get his life back in order before getting back to the list.
There's only one room left at the motel - the laundry room, which has a lot of other people sleeping in it. The only job Earl can get is delivering foreign food, and the uniform has him feeling grouchy. He's surprised to deliver food to Ralph, who's been living the good life, masquerading as Stan Johansson. After Ralph escaped from prison, widow Doris took him in, and dressed him in her dead husband's clothes. As long as he wears them, she thinks Ralph is Stan.
Doris gets nervous with strange men in the house, so Earl and Randy have to keep sleeping in the laundry room. Hoping to make Earl feel better, Randy picks #205 off the list, because mistletoe sounds Christmas-y. A few years ago, Earl caused stripper Mistletoe to fall off the stage while fooling around with Randy's laser pointer. Now she has to wear a brace for the next two years. Earl doesn't apologize, and Randy reminds him that he usually uses his nice guy voice when he talks to people on the list.
Earl doesn't want Mistletoe to choose what he's going to do to make things up to her while she's pissed off at him. Still, she wants him to feel the humiliation of being laughed at on stage. Earl dons short shorts and tassels to do a shift at Club Chubby. Feeling stressed, he steps outside to smoke, only to see Ralph drive by in Stan's hot convertible Cadillac. Deciding that if karma existed, something good would have happened to him by now, Earl tosses his list and stalks off.
Earl, Randy and Ralph hang out at Club Chubby. Ralph smacks Catalina's ass, but when Earl tries the same thing, she gets mad at him, since she expects more of him. Catalina doesn't like the new Earl, but he claims that he's reverted back to the old Earl, before the list. The guys go back to Joy's trailer with a few strippers, since Joy and Darnell are out of town. Jumping around, they tip the trailer over.
Joy and Darnell aren't happy to find the trailer tipped over, and now Earl and Randy have nowhere to stay. Earl steals Stan's clothes while Ralph's in the shower. Now Doris thinks that Earl is Stan, and kicks Ralph out of the house in his underwear. Randy and Ralph sleep in the car outside of Doris' house on Christmas Eve. The next morning, the whole gang shows up at Doris' house for an intervention.
In the commotion of the intervention, Ralph steals Stan's clothes back. Wearing pajamas, Earl leaves in disgust - screw karma! But karma comes looking for him. Earl is hit by a car. Before he passes out, he catches a glimpse of the driver. It's Billie, Frank's ex, who Earl has the hots for. Finally, karma has brought him a good thing. Maybe they'll even spend their lives side by side. When Billie goes to get help, she is hit by another car, and winds up unconscious in the road, lying next to Earl.