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Firing an Employee with an Employment Contract | LegalMatch Law Library

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Can an Employer Fire an Employee under Contract?

If an employer is considering firing an employee, they should first determine if the employee is under an employment contract. The type of contract will dictate how an employee can be fired legally.

How can you Determine whether an Employee Has an Employment Contract?

Employment contracts come in three form: express (written), express (oral) and implied.

Express Employment Contracts

An employer would or should know if an employee has an express contract because there will either be written proof of the contract or the employer would knowingly came to an agreement with the employee orally.

Implied Employment Contracts

However, an employer can make an implied contract without even meaning to do so. Because of this, it is harder to determine whether an implied contract has been reached. Generally, implied contracts are formed when you make promises to employees, usually regarding job security. These promises can be made in many different ways, such as during casual conversations or formal discussions about the employee handbook.

When determining whether an implied contract was made, a court will consider whether the promise is meaningful enough and whether the employee relied upon the promise. Whether an implied contract has been made will be evaluated on a case-by-case basis. A few examples of promises courts have held to be contracts include:

  • Promising a prospective employee they will not be fired if they perform well;
  • An employee manual stating that once an employee has worked for a certain number of days, they are considered to be a permanent employee; and/or
  • A supervisor telling an employee during an evaluation they are doing great and will have a long future with the company so long as they do not make a significant mistake.

When Can an Employee under Contract be Fired?

If the employee you wish to fire has an employment contract, then you owe that employee a duty of good faith and fair dealing. This duty requires you to treat the employee fairly.

If the contract is written, there is likely a termination provision which lists the circumstances under which the employee can be fired. This will act as a guide for when that employee can be fired.

If the contract was oral, it is likely that termination was discussed verbally. However, the termination agreement may be harder to prove since the contract was not in writing.

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 for a legitimate business related reason. A few examples of this are:

  • Poor work performance by the employees;
  • Harassing other employees;
  • Threats of violence; and/or
  • Divulging trade secrets.

Do I Need an Employment Lawyer?

Employment law is very complex and is always changing. A local employment lawyer can help you determine whether one of your employees has an employment contract and if so whether you have good cause for firing them. Also, an employee who has been fired may file a wrongful termination lawsuit against you. A  lawyer can represent you in that matter.

Photo of page author Ashley Folk

, LegalMatch Legal Writer

Last Modified: 05-21-2018 11:57 PM PDT

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