Early Termination of Employment Contract by an Employee

Early termination of an employment contract by an employee, and a discussion of how to terminate an agreement. In any employment agreement, it’s going to have term, meaning, how long it lasts, and many times there’s a fixed term. So, one, two, three years. And then at the end of that term, it will likely have language that states it will automatically renew for a one-year term after that unless it’s terminated by one of the parties. I’d say more recently, over the last five years, evergreen contracts have become more popular. And that just means there’s no fixed term. It just simply states that the contract continues forever until the contract is terminated by either party.

So, identifying the actual term of the agreement is important. And then the next step is termination. In any employment agreement, there’s going to be language that states how the agreement can be terminated by either party. The ways that an agreement can be terminated, one, if it is a fixed term with no renewal language, let’s just say it’s a two-year term, two years ends, doesn’t automatically renew, and neither party wants to renew, it just ends, that’s it. So that’s one way. Mutual agreement, if either party says, you know what, this isn’t working out, we don’t need to provide notice. We can just agree it’s not working; we move on. Those are rare, to be honest. Almost every contract is terminated in one of two ways, either for cause meaning somebody breached the contract and didn’t fix it, or without cause which is easily the most common way of terminating a contract.

For cause, we’ll usually have a list of things that the employer, so the company you’re working for can terminate you for. For healthcare professionals, they lose their license and DEA registration, they’re uninsurable, there’ll be maybe something about criminal issues, professional responsibility, behavioral concerns, obviously, like death, disability, those types of things. So, what we’ll list is what the employer can terminate the contract for immediately. And then there may be a section that just states if there is breach by the other party, that party must provide written notice to the other. And then at that point, the other party has what’s called a cure period. A cure period simply means a limited amount of time to fix whatever the breach is. Let’s say an employer promised to pay a bonus to an employee at the end of every month or I guess monthly. Other blogs of interest include:

• What Should be in a Termination Agreement Letter?
• Is There a Penalty for Early Termination of an Employment Contract?

Then it would be within period after the month ends and then they just stop paying the bonus and it was earned. Well, the employee can state, you’re not paying me my bonus. You’re in breach of contract. You have 15 days to pay me or I’m going to terminate the contract immediately. That’s one way to end or terminate a contract early is if the employer breaches the contract and then ultimately doesn’t fix it. That’s how someone could end the contract early. The most popular way, at least in this scenario, would be called without cause termination or no good reason, something like that. Without cause termination simply means either party can terminate the agreement for any reason at any time with a certain amount of notice to the other. Normally, it’s going to be somewhere between 30 to 90 days.

Let’s say you’re an employee, you find a new job or whatever, and you want to leave. If the without cause termination language simply states, you must give 30 days’ written notice, then give written notice to the employer stating, I’m giving you notice, I plan to terminate the agreement. You work out your 30 days and you can move on. That’s the most common way of terminating an employment agreement early is without cause termination. Now, there are some huge red flags if there is no language like that for a couple of reasons. One, no one wants to stay in a job that they absolutely hate. You can’t be forced to work somewhere, right? So, if you’re into a job and after five months, it’s clear, this is not working out, no one wants to have to stay around. Let’s say the initial term is two years.

Stick it out for those two years. You want the ability to get out of the contract if it’s not working out and the employer should feel the same way. If they bring in an employee and for whatever reason, it’s just not working out, they want the ability to get rid of that employee as well. Now, why is there a notice? Well, kind of depends upon the industry, but normally it’s just to smooth out the transition of the employee. If you’re a healthcare provider and the employer comes in and says you’re fired, go home immediately. Well, there are a ton of patient care issues as far as continuity of care. Who’s going to write the prescriptions? Are you going to refer out the patients? Who’s going to see all the patients on the schedule? That’s why there’s at least some window of time to kind of get the transition in order and allow for safe patient care.

In other industries, maybe they’re going to bring someone else on and hope that there’s training between the person leaving and the person coming in, or it’s like a sales job and there’s a ton of contacts you want to give notice to those people that the salesperson is leaving and someone else will be replacing them. It just allows for a smooth transition and having absolutely no notice at all for an employee to leave or employer to fire you for that matter can be kind of drawing to a business. And that’s why there’s always at least some kind of notice period for without cause termination. Another red flag would be a super long notice period for without cause termination, like 180 days. It can get awkward for a professional if they’ve given notice and they’ve let the employer, hey, I’m going to leave.

I think feelings can be hurt. Relationships can change. And so, in some places, it’s no big deal at all, but in others, they act like it’s the biggest disaster of all time and they’ll treat the professionals poorly. Any very long notice period is a bad idea in my opinion for several reasons. So, that’s how you can terminate a contract early. You absolutely should have in the employment agreement language that allows that being stuck in a contract without any language, which allows you to terminate the contract early is a terrible idea. And I would say, do not sign a contract for employment that has that.