Firing an Employee with an Employment Contract

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Firing an Employee with an Employment Contract

If an employee has an employment contract, you can fire the employee, but usually only if you have "good cause." This means you must have a valid reason for firing the employee. If you're thinking about firing any employee, the first step is to figure out whether s/he has an employment contract. 

How to Determine whether an Employee Has an Employment Contract

Employment contracts can come in three forms. Employment contracts can be express, either written or oral, or they can be implied. If an employee has an express written contract, it should be easy to find. Determining whether an employee has an implied contract can be much harder. This is because you can make an implied contract without even meaning to do so. 

Have I Formed an Implied Contract with an Employee?

Implied contracts are formed when you make promises to employees, usually promises of job security. These promises can be made in a variety of circumstances, from informal casual conversations to formal discussions about the employee handbook. A court will consider whether the promise is meaningful enough and whether the employee relied upon it to determine whether there is an implied contract. It can be very hard to tell whether an implied contract has been formed, but a few examples of promises courts have held to be contracts include:

When Can I Fire an Employee Who Has an Employment Contract?

If the employee you wish to let go has an employment contract, then you owe that employee a duty of good faith and fair dealing (link to Covenant of Good Faith and Fair Dealing and Good Cause' article). This duty requires you to treat the employee fairly. If the employee has a written employment contract, there is likely a termination provision which lists the circumstances under which the employee can be fired. Follow the provisions of the written contract. If the employee has an implied contract then you can only fire the employee for "good cause." In other words, you can only fire the employee if you have a legitimate business related reason for doing so, such as he harasses other employees. 

Do I Need an Employment Lawyer?

Employment law is very complex and is always changing. An experienced employment lawyer can help you determine whether one of your employee's has an employment contract and if so whether you have good cause for firing him/her. Also, if you do let an employee go and s/he files a wrongful termination lawsuit against you, a lawyer can represent you in court.

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Last Modified: 10-31-2014 04:23 PM PDT

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