Not For Cause Termination (DIFFERENCES With For Cause)

What is termination not for-cause? In an employment contract, it can be terminated in several ways, and probably the most common way for a contract to be terminated is not for-cause. It’s also known as without-cause for no good reason. I think without-cause is probably the most used name. I’m going to refer to no good causes without-cause just to avoid confusion. As far as terminating an agreement, an agreement can terminate in many ways. Let’s say it’s a one-year contract if it’s just a fixed term. There’s no language that it automatically renews. The one year is finished, and neither party decides to restore it, the contract is terminated, and that’s it. A contract can be terminated with mutual agreement. Either party, for whatever reason, decides, you know what, this isn’t working out, let’s go our separate ways. 

Employment Contract Termination: With or Without Cause

One of the ways to terminate a contract is for-cause. Suppose there is a breach of contract amongst the parties. In that case, there will be language in the contract stating that if this happens, one of the other parties can terminate the agreement immediately at their options. For instance, let’s say you’re a healthcare professional and have a license to do what you’re doing. Let’s say it’s a physician. This physician loses their medical license. As a result, they can’t perform the terms of the contract. The employer can automatically terminate the agreement. 

Then the other way of terminating a contract is without-cause for no good reason. In this case, what does that mean? Well, almost every employment contract states that the agreement can be terminated at any point, for any reason, with a certain amount of notice to the other party. And this is the crucial part. Typically, in a contract, without-cause will usually be somewhere between 30 to 90 days. Let’s say the professional wants to leave. Maybe there are better job opportunities. 

Then they provide written notice that states, per the without-cause termination section, I’m giving you the 90 days’ notice. And then the professional works out those 90 days. At the end of the 90 days, they can move on to their new job opportunity. Things to think about as far as without-cause termination: if the contract states you can only do it after a certain period, that’s a red flag! Some contracts will state you can only give without-cause termination after the first year or after the initial term of the agreement. You don’t want to sign a contract that has that. Why?

What if the Contract Does Not Have Without Cause Termination?

Well, if you enter a contract, many times, the employer kind of talks up the position, and it doesn’t turn out to be what you were expecting. And if you have no way of terminating the contract without-cause termination, you are stuck. So, you always want the ability to get out of the contract. If it simply isn’t working out, then maybe the volume isn’t there, and you’re not making as much money as you like. Perhaps the hours are much different than they told you, or your call responsibilities are much more than they expected. There could be hundreds of reasons someone isn’t happy in a job. 

But it is a problem if you cannot get out of that job at any time. So, you need without-cause termination, 30 to 90 days is reasonable. Anything over that is not reasonable. Sometimes, I’ll see a contract with 180 days or even a year without-cause termination notice. You don’t want that for a couple of reasons. First, once you notice that you’re leaving, relationships can change, and it can sometimes be awkward. Sometimes, it cannot be very hospitable. 

To shorten that period where it’s uncomfortable is just better for the professional. So, you want a shorter without-cause termination. And then there also needs to be language in the contract that states if the professional gives notice. Still, the employer decides, you know what, you’re leaving, leave tomorrow. The professional should get paid for whatever the notice period was. If it was a 60-day without-cause termination notice period, the employer says, we don’t want you to be here long term. We don’t want you here at all. 

Notice Period & Termination

The professional should get paid for those 60 days. I mean, think of it the opposite way. The employer requires a 60-day notice so they can make plans to transition, replace you, or whatever. They want the professional in that, so they’re not losing out on profit for 60 days. Well, the same thing should go for the professional. If they’re required to give notice, they should get paid for that amount even if the employer does not want them to continue working. So, yes, you can terminate the contract without-cause. 

It absolutely should be in every employment agreement. It is a huge red flag if there isn’t. I think, or at least I find, that if there is a contract without any ability to terminate without-cause, there are usually reasons behind it. And it’s usually because the employer is either poorly managed or bad at business or mistreats their employees. It could also be that they have had a continuous string of people leaving early. And so, they want to prevent that, but you do not want to get into a situation like that.

Other Blogs of Interest

• Can an Employer Just Terminate Your Contract?
• Contract Termination Letter: Can You Write an Email to Terminate a Contract?
• What Should be in a Termination Agreement Letter?

Can an Employee Terminate a Contract at Any Time?

The short answer is probably. However, it’s going to depend upon the language in the contract. There are ways that an employee can terminate an agreement: one, if there’s a fixed term, meaning a one-year, two-year, or three-year contract, and there’s no language that states the employment contract automatically renews, then at the end of that fixed term, if neither party is going to go or decided to sign another arrangement, the contract terminates, both parties can move on. That’s it. That’s one way on the agreement that can end a contract. Two, through mutual agreement. Maybe it’s not working out, and both parties are like, you know what? Let’s move on. You can mutually agree to terminate the agreement. Three, for the cause. In any employment contract, there will be a section called termination. In that section, it’s going to state how both parties can terminate the agreement.

Employee Contract Termination Without Cause

Without-cause termination is going to be. If one party breaches the contract somehow, how can the other party terminate the contract for the breach? And in most of the for-cause termination clauses, it’s going to state if one party believes the other party is in breach, they must give them written notice. And then that party usually has a period to fix the breach. We called that a cure period. Usually, it would be somewhere between 15 to 30 days. 

Maybe the employee wasn’t getting paid a bonus that the employer said they would. The employee lets the employer know: you’re in breach of the employment contract, you have 15 days to pay me my bonus, or I can terminate the agreement immediately. The employer can no longer terminate for-cause if the employer does pay the bonus. And then they could go to the last way of ending the contract without-cause.

Termination Notice Period

In every employment contract, this is very important. There should be a without-cause termination. It means either party can legally terminate the agreement at any point, for any reason, with a certain amount of notice to the other party. Usually, that notice period will be between 30 to 90 days. Why is this important? Suppose an employee takes a job and maybe they were lied to by the employer. In that case, if they’re on a production-based compensation from collections, commission, percentage, encounters, and healthcare RVUs, it does not matter.

 But suppose an employee agreed to the contract and the employer gives no guaranteed base, daily rate, or guarantees. In that case, the volume is not nearly what they expected it to be or what the employer said it would be. They don’t have a way to get out of a contract without-cause. The workers won’t have an exit in that job for whatever the length of the term is. That’s not something you want. You always want the ability to get out of the employment contract with a certain amount of notice in the scenario where the job isn’t what you expected. 

Maybe your boss is a terrible manager, or they’re placing you in a territory or location you don’t want to be assigned. I mean, hopefully, the employee could check on those in advance of signing the employment agreement. Sometimes, they’re not. Sometimes the employer just straight-up lies to the employee and says, oh yes, all these things are going to be there, and they’re not. Without the Without-cause, employees can insulate themselves from being stuck in a terrible situation for a long time without recourse.

Safety When You Need to Terminate an Employment Contract

So, can an employee terminate a contract at any time? If they have without-cause termination, remember that they must work the entire notice period. Like I said before, if it’s 30 days, give notice, work 30 days, and leave. Suppose you were to go before the end of the notice period. In that case, the employer could theoretically have damages and sue you for lost profits, recruiting, or replacement. So, if you have a notice requirement in your employment contract, you want to ensure that you give the proper amount of notice, work it out, and then move on and find a new job.

Can an Employee Terminate an Employment Contract?

The short answer is, obviously, yes. However, it will be determined based on the terms of the contract. In any employment contract, there will be a section that deals with the times, the employment contract’s length, and then termination, so how that contract ends. Let’s first talk about the terms of the agreement.

Most employment contracts will have a date, meaning it’s a year-long, two-year, or three-year contract. Then if the agreement does not terminate, it will state a language. It will automatically renew for successive one-year terms. In that case, if a contract isn’t closed in another way after the initial period ends, it’ll just continue forever until terminated.

I would say there is a rarely fixed term with no language about automatic termination. If it’s just a two-year fixed term with no automatic renewal, it would just end at the end of two years, and that would be it. The parties can go their ways. 

What Are the Reasons for Contract Termination?

Now, regarding terminating the contract, the first part is that if there is no renewal, it ends, and the employment contract ends. Second, by mutual agreement. Suppose the employer and the employee agree that the relationship isn’t working. In that case, they can always, by contract, decide to move on, and then that’s it, you can move on. Next would be with-cause termination. In this case, if someone breaches the employment contract, there’ll be language that states why the employer can fire the employee. If you need a license to perform the activity and lose your license, or if insurance is required and you’re uninsurable. There are, I guess, vague behavioral clauses. 

If you’re disabled, you die, I mean, ordinary things, but there should also be a part called a cure. And so, in that case, if one of the parties believes the other party is in breach of an employment contract, the most common reason is just payment concerns. Either someone is unpaid, they were promised an amount in the associate employment agreement, or maybe the timing. Also, the bonus payment is involved, and there is disagreement over the professional owed amount. That’s always a big, I guess, the reasons why there would be an allegation of breach of contract. 

What Happens if Breach of Contract Is Committed?

If you believe the employer breached an employment contract, you’d have to provide them with written notice. And then the cure period means the employer would have a period to fix whatever the breach of associate contract is. Typically, that’s somewhere between 15 to 30 days. And the same can go for an employee. 

If the employer thinks the employee is in breach of contract, they give them written notice, and then the employee has 15 to 30 days to fix the breach. If the breach is unfixed, the other party still believes the other party is in breach. Usually, that party has the option to terminate the dental associate agreements immediately. The last and most common way in most employment contracts is without-cause termination. There’ll be language that states that either party can terminate the employment agreement at any time, for any reason, with a certain amount of notice to the other party.

Typically, it would be somewhere between 30 to 90 days. Suppose the professional is unhappy and wants to move on. In that case, they give written notice saying I’m utilizing the without-cause termination notice in the employment contract. Then they must work out for 30, 60, or 90 days. Then at the end of that period, they can move on without any concerns regarding terminating the employment contract. Yes, an employee can terminate an employment contract, but they must follow the terms of the agreement. 

Employment Contract Termination and Non-Compete Law

Just because an employee terminates the contract does not mean it necessarily ultimately ends at that point. They could be required of the employee if they terminate the contract. Many times, if given a signing bonus or relocation assistance, The employee would have to pay back a prorated portion of that if they left within the initial term of the employment agreement. Others could have non-compete associated with it.

So, just because an employee terminates the contract does not mean that the non-compete does not apply. It does, or at least it does in most circumstances if you’re in a state where non-competes are enforceable. How long will that last if there is a geographic restriction and then some temporary condition? That will continue even if the employee terminates the contract. If some malpractice insurance is involved and tail insurance is needed, it will say who must pay for that in the contract. Employees may also be responsible for that if they terminate the agreement. Although the employee can terminate the employment agreement, it doesn’t mean that there aren’t at least some strings attached. 

One of the highest priority things I look at in the contract when I’m going over it with a professional. How do you get out of the agreement? And then what do you have to do if it ends within a certain period? In that way, the employee can know that I need to set aside this amount of money if I must pay for tail insurance or if I must pay back the signing bonus. So, they’re essential discussions and things employees could negotiate before signing any employment agreement. Hopefully, that was helpful—kind of an overview of termination of an employment contract. 

How You Can Terminate an Agreement

You probably shouldn’t, and your employment contract probably prohibits it. In any agreement, it’s going to state how you can terminate an agreement. It could be for-cause, without-cause, mutual termination, or maybe the initial term ends. But in most cases, I mean most contracts are terminated without-cause termination. Without-cause termination, either party can terminate the contract with a certain amount of notice to the other. Typically, around 30 to 90 days is a standard amount for most employment agreements. Suppose you are an employee, and for whatever reason, you don’t want to work for the employer anymore. In that case, you must follow those terms written on the without-cause termination notice.

And it always needs to be written. It’s going to state that you must write a letter. And then, it will also say if it’s a 60-day without-cause termination. The employee has to provide it 60 days prior, work it out, and after the 60 days are over. The employees are free to go once the contract terminates, and the employees are free to move on. They want to go where they want to go after that—considering if there’s a non-compete or a non-solicit. Still, we’re not going to get into that today. 

How Do Employees Communicate a Notice?

The most crucial part as far as this goes is that it will be called “notice” or “notices.” It’s toward the back of the employment agreement initially provided by the company. And this will state who, then how you need to provide notice if there is communication. An employee could provide in writing a certified letter or overnight hand delivery of whatever termination notice you’re going to provide. And that would then be considered adequate notice. Very few contracts allow email as an effective notice medium. If you gave, let’s say, you wrote an email telling your employer.

 I’m giving you without-cause termination notice, and I have 60 days. X will be my last day of work. I appreciate the opportunity. Well, if the email is not an effective communication medium within that notice section, that’s not considered effective notice. And then, the employer could make you work for another 60 days until you provide adequate notice. So, that’s the essential part. You need to look in the notices section and determine if the proper way to terminate the employment agreement includes email. 

I can tell you if I review a hundred employment contracts, 98 of them will not include email or fax. And you certainly can’t just verbally tell your employer you’re leaving. It must be in writing. And most often, it has to be sent either by certified mail or hand-delivered. It depends on whether you work for a small practice or a vast conglomerate with locations in every state. It’ll be impossible to hand-deliver the notice if you must provide notice to the headquarters, and that’s halfway across the country. 

The Consequence of Notice Not Received

To be safe for the most part, you need to write a letter. You’ll have to print it out and send it via certified mail that the employer is using. Usually, it’s one or two. You must send it to the owner if it’s a smaller practice. If it’s a big conglomerate, you have to send it to probably your boss plus the legal apartment of the company as well. If you look through, how much notice do I have to provide? And then how do I have to provide effective notice? You’ll be safe. 

I have a couple of scenarios, and people have called me after the fact. And they’ll say I sent a letter to my employer’s email. I told them I was going to terminate the employment contract, and they didn’t say anything. I assumed that my contract would end on a specific date. The employer was mad about the employee leaving the company. The employer ticked off that they were leaving. So, what they did was they just sat on it for 45 days. And then, 15 days before the physician thought he was going to leave, they said, you didn’t provide us with effective notice. Email isn’t an effective form of communication to provide notice. You owe us another 60 days until you give us adequate notice, meaning a written letter sent via certified mail. 

And so, the physician had already lined up another job, he had a start date in mind, and then he had to return to the new employer. He would say, I apologize; I will have to delay my start date by almost two months. That was a tough pill to swallow for the physician. If you follow the terms of the notice section, then you should be okay.

How Do You Terminate an Employment Contract? | Contract Termination

How do you terminate an employment contract? There are several ways of doing it. If there is a fixed term, let’s say it’s an initial two-year term, and then there’s no language where it automatically renews. If no one decides to renew the contract, it ends in two years. It will terminate the agreement and both parties can move on. It doesn’t happen very often in that scenario. There’s almost always going to be language that has automatic renewal. Suppose they have an initial two-year term to the contract. In that case, it’ll just state that if neither party terminates the agreement, it’ll automatically renew for successive one-year periods.

Fixed term, Mutual Agreement and For-Cause Termination

In that scenario, when there are automatic renewals, there are three other ways of terminating a contract. One is mutual termination. Both parties say, for whatever reason, this isn’t working out, we’ll terminate the agreement, and we can move on. The second way would be for-cause. In the employment contract, there’s to be a list of reasons a party can terminate the agreement. And then there’s also going to be language that states if that party thinks the other party is in breach of employment contract, they’re not fulfilling a term of the agreement. It’ll usually note that party then must send written notice to the other party saying you’re in breach of contract. And then, usually, there’d be a cure period. And that means the party has a certain amount of time to fix whatever the breach is, usually between 15 to 30 days.

Example of Scenarios for a For Cause Termination

And so, if that party fixes the breach, the other party cannot terminate the contract for-cause. Some reasons you can terminate a contract for-cause are compensation. Maybe the employer isn’t paying as much as they stated they would. Or they’re not paying on time. There’s a miscalculation of a bonus. In that scenario, the employee would say, hey, you told me you would pay me this much. You’re not paying me this much. You are in breach of contract. You have a short period to make it right regarding payment. And if you don’t, I will terminate the employment contract for-cause. 

And in that scenario, usually, that would mean the party could terminate it immediately after the cure period ends, and the other party didn’t fix the breach. In healthcare professions, if a physician or the healthcare provider loses their license, they’re not insurable. They can’t be given malpractice insurance, be included on some exclusionary lists, and get a felony. In those scenarios, there’s no chance that they can continue working as a physician. And then, the employer would have the opportunity to terminate them immediately for-cause. Those are some scenarios for-cause termination. 

Without-Cause Termination

And then, the last way to end an agreement and probably the way that’s utilized 95% of the time would be called without-cause termination. In that scenario, it simply states that either party can terminate the agreement for any reason, with a certain amount of notice to the other party. Usually, somewhere between 30 to 90 days, depending upon the profession. Healthcare professions tend to be a little bit more. After all, there is continuity of care issues with patients. In contrast, maybe some executive sales, that type of thing, it’s much less because there’s not as big of an ethical or, I guess, medical problems with transitioning patients.

They don’t have to worry about that. Let’s say someone has a 30-day without-cause termination. That party just provided written notice to the other party. Hey, I’m going to terminate the agreement. According to the contract, I’ll work out my 30 days, and in the end, I’m moving on. That’s how to terminate most contracts without-cause. 

Things to Consider for a Without Cause Termination

Now, some things to think about if it is terminated without cause are. There should be language that states how the professional will be paid after the contract terminates. Maybe they have a yearly, quarterly, or monthly bonus. Are they still paid that bonus if the contract is terminated? If not, then some strategy needs to be utilized by the professional. They shouldn’t give notice until after they’ve received whatever the last bonus is to make sure there are not some shenanigans on the employer’s part. In most scenarios, if a provider or professional gives without cause termination notice, there’s also language that states the employer can say, you must go home.

It would be best if you didn’t work here anymore. However, they do have to pay out whatever that notice period was. So, if it were 30 days, the professional would still be paid whatever their base was for those 30 days. But when there are bonuses involved, it gets a little bit trickier. And so, you want to ensure that there’s a language that protects the professional and ensures they get their bonus. Some ways of doing that would be putting language that states that the compensation, if earned, will be prorated based on where they are in the contract year. So, let’s say someone has end of a year bonus, they’ve earned it through six months, they give notice so that bonus will then be prorated to what the kind of yearly bonus would be to those six months, something like that.

Summary

So, those are the ways that a contract can be terminated. The term ends, mutual termination by the parties, breach of contract, and for-cause termination of someone isn’t fulfilling the terms of the contract. Unlike without cause termination, either party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other.

Breach of Employment Contract Examples | Employment Agreement

What are some examples of breaches of employment contracts? First, you need to think that any employment contract will have a termination section. And then, that section will state the reasons for the contract to be terminated. There are four common reasons. If it’s just for a set amount of time and doesn’t automatically renew, say a one-year contract ends, neither party renews it, and the contract can terminate that way. It can be terminated by mutual agreement. It can generally terminate without cause, meaning either party can terminate the agreement for any reason at any time with a certain amount of notice to the other. And then lastly, and this is what we’re going to talk about, a contract can be terminated for-cause. If someone is terminated for-cause, it means that one of the parties has breached the contract and failed to fix the breach.

Cure Period for an Employment Agreement Breach

If a party is in breach of contract, the contract will likely state that you must provide written notice to the other party that they’re in breach. And then, normally, there would be a cure period. Somewhere between 15 to 30 days is standard. Let’s say you’re an employee, and the contract states you will be given a quarterly bonus.

You earn the bonus based upon whatever the language is in the contract, and then the employer doesn’t pay it out either in time or at all. Well, you could write them a letter stating you’re in breach of contract. You were required to do this; you didn’t do it. And then they have the cure period so they can fix the breach. Let’s say it’s 15 days here. Then they would have 15 days to fix the breach of contract and pay the bonus. The employee’s right to terminate the agreement immediately for-cause if they don’t. 

Examples of an Employee Breach of Employment Agreement

Breach of contract can go both ways. The employer can breach the contract, and then the employee can breach the contract as well. If you’re an employee, the things you can do to breach the contract are plentiful and are usually spelled out specifically in the agreement. Let’s say you’re a healthcare provider, you lose your medical license and DEA registration, you’re uninsurable, and you, most of the time, get a felony.

Things that can prevent, let’s say it’s a physician, from completing the task that they have to do. In that scenario, it’s usually an automatic and immediate cause for termination. If you can’t practice as a doctor, you can’t fill the terms of an employment contract. Those are some examples of breaches. 

Others could be that maybe you’re scheduled to take a certain number of calls, and you refuse to do it. Or you’re only coming into the office half the time scheduled, or you refuse to work in some specific locations agreed to in the contract. Those are reasons that an employer could fire employees. 

How Can an Employer Breach a Contract?

Now, what are some things that the employer can do to breach the contract? As I said, if they’re just not paying compensation on time, or maybe they’re not doing it correctly. I guess staffing has been a big issue recently, kind of inability to properly staff. So, in the contract, it will state the employer will provide proper equipment, office space, and staffing. 

For instance, I know the veterinarian industry is really a hard hit. And so, if there aren’t enough vet techs, front office staff, the veterinarian can’t be efficient in their time where they’re doing duties that they shouldn’t have to do. That could be why the employer is in breach of contract by just not providing enough administrative support, which would allow the professional to do their job effectively. Especially if the professional is on some productivity compensation, inadequate staffing or administrative support can directly affect how much the professional will make because they can’t be as productive, and they’re not generating as much net-collections. Therefore they’re just not going to make enough. 

So, those are the common examples of an employment contract breach. A ton more could happen, but I think those are the most common.