There are many reasons why an employee and employer may need to end their relationship. When the time comes for them to part ways, the situation must be handled delicately, especially for higher level executives. Companies must be sure that they follow the letter of the law, including adherence to the terms of the employee’s contract where applicable. The business lawyers at Harty Law Group help companies and employees protect their interests when a business-related termination occurs.
Stipulations in Employment Contracts
If an employer seeks to terminate an employee, they must first go back to the beginning of their relationship and examine the employment contract. Most companies employ workers at-will, meaning that either the employer or the employee can terminate the relationship at any time and for any reason, provided no laws have been violated; an employee cannot be terminated because of discrimination, harassment, or protected activities such as whistleblowing.
If the employee is not employed at-will, their agreement may include other terms, such as length of employment, specific duties that will be performed, or a mandatory notice period for termination. Many executive agreements also include a non-compete clause, which stipulates that the employee will not work for any of the company’s direct competitors for a certain period after they leave the company. These clauses must strike a delicate balance, protecting the interests of the company without inhibiting the former employee from earning a living. Non-compete agreements can be contested in court if they are considered unreasonable or place an undue burden on the employee.
Firing For Cause
When employees engage in behaviors that could have a negative impact on the business, they may be fired for cause. These behaviors include acts that could hurt the business’s profits or reputation or threaten the safety of its employees, such as:
- Frequent absences or lateness
- Incompetence or poor work quality
- Insubordination or violation of company policy
- Theft of company property or trade secrets
- Deceptive business practices
- Sexual harassment or discriminatory behavior
- Physical violence or threatening behavior
If an employee is fired for cause, in most cases the employment contract will be invalidated, as the employee failed to live up to their responsibility. In other cases where the employer wants to let the employee go before the terms of the contract have been fulfilled, they will have to sever the agreement, usually with a signed release agreement. A separation agreement would lay out the conditions of the termination, release both parties of any liability, and ensures the continued protection of the business’s property, including intellectual property. This document can help to tie up any loose ends, particularly if the executive has multiple roles within the company and its subsidiaries.
Executives often have severance agreements written into their contracts, stipulating that the company will award them certain benefits if they are terminated, such as:
- Lump-sum payments
- Continued salary payments
- Stock options or other equity
- Health benefits
Today’s job landscape shows a high rate of executive turnover, so it is in their best interest to negotiate seven- or eight-figure severance packages into their employment contracts at the start of their employment. Depending on how the contract has been written, executives might still be eligible for their severance even if the company suffered under their leadership. There are some conditions that can invalidate a severance agreement, however, which can make terminating an employee extremely contentious; companies want to avoid paying out large sums unless absolutely necessary, while employees want to collect what they feel they are owed.
If a termination-related dispute cannot be resolved amicably, it may be necessary to take the issue to court. Employees may file a wrongful termination lawsuit if their termination has violated any nondiscrimination, harassment, or labor laws, or if the employee was fired in violation for whistleblowing. Employees may also sue for their severance if the company tries to deny it to them. The business must thoroughly document its reasons for termination, including any meetings that were had leading up to the termination or other disciplinary action that was taken.
Philadelphia Business Lawyers at Harty Law Group Provide Comprehensive Representation in Business Termination Cases
When dealing with a business termination, it is essential to have an experienced lawyer by your side to avoid any missteps. The business lawyers at Harty Law Group have the knowledge and resources to achieve the best possible outcome after a business-related termination. Armed with the latest technology and extensive business litigation experience, we successfully represent clients in all types of termination cases.
With offices conveniently located in Philadelphia and Haddonfield, we handle business terminations throughout Pennsylvania and New Jersey. Call us today at 267-262-5650 or contact us online to discuss your case with a Philadelphia business lawyer.