Firing an employee can frequently lead to complications, and, unfortunately, the situation may get even more complex if the person in question is performing services for you under the scope of an employment contract. Put simply, the fact that a contract exists may limit your ability to fire an employee. However, there are other things to note that could prevent you from running into legal troubles.
A Contract Can Be Legally Binding Even When It’s Not a Written Document
When people commonly think of contracts, written documents usually come to mind. However, oral contracts can be legally binding in some states, as well as so-called “implied contracts.” Sometimes those contracts can be created even when an employer doesn’t consciously realize it.
For example, if an employer speaks to an employee about which days to come to work and for how long, and an agreement is reached, that conversation could be considered an oral contract. Furthermore, implied contracts usually occur when an employer makes a promise to an employee about something. Often, the topic of discussion is job security.
Even if the associated statements were made very quickly, a court of law could still rule these contracts as legally binding. That’s especially true if it can be determined the employee relied on the promises that were made and that the statements had a significant amount of weight behind them.
You May Only Be Able to Fire a Contractually Bound Employee for Certain Reasons
If you have done your due diligence and found that, to the best of your knowledge, the employee does not have a contract, that means you may terminate him or her for any reason that is not illegal. For example, you may not fire an employee for reasons based on discrimination, because that individual refused to take a lie detector test, or if the person complained the work environment does not meet federal health and safety standards.
However, if a contract exists, you’ll likely only be able to fire an employee for “good cause.” Over the years, there are several scenarios that courts of law have determined fall under such an umbrella. They include:
- Characteristic and consistent tardiness
- Making threats of violence while at work
- Not performing well
- Refusing to learn proper procedures or otherwise follow instructions
- Harassing coworkers
- Failing to be productive
- Revealing company trade secrets
- Being dishonest
- Endangering personal safety or the well being of others
The list above is not an exhaustive one. However, it should give you a good idea of whether you truly have a valid reason to terminate an employee who’s bound by a contract. Generally, remember that to be considered good cause, the reason for termination must somehow relate to the needs and goals of the business and suggest that the employee is somehow hindering those things.
You Must Always Treat the Employee Fairly
Whether an employee is under contract or not, you are obligated to treat him or her with fairness. Legally speaking, this is known as the covenant of good faith and fair dealing. It indicates you should do everything you can to ensure you’re acting in such a way where you do not destroy the person’s ability to receive any benefits he or she is eligible to receive even after the termination has occurred.
Post-termination benefits vary by state. However, they may include severance pay, unemployment insurance, the continuance of health and life insurance, and retirement plans.
Terminating an employee can be nerve-wracking, especially when you’re taking care to abide by the respective laws. Although a contractual agreement may limit the reasons for which you may fire an employee, it doesn’t necessarily mean you’re stuck with the worker until the document expires. When in doubt, contact an employment law attorney before making decisions.
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