Employee contracts are a type of traditional written agreement between an employer and employee that outline the terms between the two entities. They can also be verbal agreements and, in many cases, employee handbooks and policies govern the terms. While many people probably don’t realize they are under contract or perhaps forgot they had signed an employment contract when they were hired, these pieces of paper can cause a lot of upheaval and confusion. It is becoming increasingly rare for an employee to stay with one company for the duration of their professional career, which means most people leave a job and find another one elsewhere at least once or twice in their career. Leaving a job can take many different forms, whether through resignation, termination or retiring.
In the event an employer would like to terminate an employment contract, it is important they understand the legal ramifications of this. Sure, employees land in hot water for a host of reasons, but this doesn’t necessarily mean you have the legal right to terminate an employment contract. It is generally recommended that the employee and employer come to some mutual agreement to end their relationship. However, this is not always the case.
In order to fully understand what is involved in terminating an employment contract, it may help to look at the different types of termination and contracts.
- Voluntary Termination – When an employee resigns from his or her job, it is considered voluntary termination. This could be because the employee accepted a job in a distant location, is retiring, going back to school, or taking on a new position. There are also less pleasant scenarios that may result in voluntary termination, such as sexual harassment and job responsibilities have changed.
- Involuntary Termination – In the event of an involuntary termination, an employer typically fires the employee or removes them from their job. This usually occurs when the employer is dissatisfied with the employee’s performance or something else has happened. Involuntary termination can be complicated, especially when a binding employment contract has been signed. It is always a good idea to read your employment contract and make sure you understand the circumstances surrounding involuntary termination.
- Mutual Termination – In rare instances, an employer and employee both recognize they are not a good professional fit and decide to mutually dissolve their agreement. In these instances, the aforementioned employment contract doesn’t really come into play.
The number one takeaway from this should be that it is imperative you have read and understood any employment contract, inside and out. Contract termination can occur for a host of reasons, but some contracts protect employees and can get you into legal trouble. Here is a brief look at some of the legal reasons why an agreement can be terminated:
- Poor performance
- Breach of contract
- Prior agreement
- Rescission of contract (this occurs when an employee has misrepresented themselves, acted illegally, or made a mistake)
- Contract has been completed