In this post, we will go over the termination of employment contract guidelines for employers. We will look at the various types of employment contracts, termination of employment reasons, and legal requirements for employers. We will also go over checklists and tips for dismissing an employee the right way and avoiding wrongful termination.
A termination is any conclusion to a contract of employment, voluntary or otherwise. An employee’s rights to notice, pay, and other considerations depend on the terms of their contract of employment. In addition, the policies and procedures in your company also have an influence. The illegal firing of an employee can be costly, so it is important to ensure you are up to date with federal and state laws regulating dismissal from work
Employment contracts are negotiated between the employer and the selected candidate at the point of employment. The three most important things to negotiate in an employment contract are job duties, salary, and details of employment termination. This can sometimes include a severance package and termination notice requirements. Executive employment agreements, for senior members of staff, also tend to include a well-defined resignation notice clause and higher levels of severance pay in lieu of notice.
Common reasons for termination of employment contract include:
The termination notice period is the time between the communication of dismissal or resignation and the end of the last working day. In the UK, the legal minimum notice period (for employer or employee) is one week, providing the employee has been employed for at least one month. Termination without notice is only permitted if there is evidence of gross misconduct.
The employee termination laws in the U.S. are different for notice periods as most contracts are “at-will” and at will employment laws are far less restrictive. At will employment states that both the employer and employee have the right to terminate employment at any time and for any reason. Although this means that no notice period is required by law, most companies tend to follow the two-week rule.
An employment termination or separation letter is a formal written notice of termination of employment. It is usually communicated further to a termination meeting where the employee is verbally advised of the situation.
To ensure compliance with labor laws, an employment separation letter should include the following information:
An employment contract is an agreement between employer and employee. These contracts set forth the terms of employment, including salary, position, duties, and hours. An employment contract will also detail any notice requirements and severance clauses if applicable. Contracts can be fixed-term, temporary or permanent.
There are three main types of employment contract that can be terminated by an employer:
Wrongful dismissal, also known as wrongful termination, unlawful termination, termination without cause, and wrongful discharge, is a claim of a breach of the terms of an employment contract, or of a statutory provision or rule in employment law.
In the UK, there is a distinction between unfair dismissal, which is a statutory right under the Employment Rights Act 1996, and wrongful discharge, which relies solely on the terms of the employment contract. In order to file a wrongful dismissal claim, the employee must establish that they were dismissed in breach of the employment contract or with less than the statutory minimum notice period. They must also prove that they suffered a loss as a result (i.e. lost wages).
However, in the United States, there is no single “wrongful termination” law. Instead, employees are protected by state and federal labor laws. Also, as most employees are “at-will”, they can be fired any time and for any reason, so long as the reason is not discriminatory, retaliatory or otherwise illegal. In the event of the latter, employees can sue for wrongful termination. This includes wrongful termination at will and wrongful termination during probation.
Common examples of wrongful termination include:
Severance or termination pay is often granted to employees upon termination of employment. Although there is no legal requirement enforced by the Fair Labor Standards Act (FLSA), many employers include a severance agreement in the terms of the employment contract, especially in the case of senior employees and directors. This is typically one to two weeks for every year worked but can be more.
Aside from termination pay, employers also need to consider the implications of insurance coverage and pensions plans. Clear policies and procedures need to be created for this purpose so that employees are aware of their rights in the event of contract termination. We’ve included a checklist below so that you are aware of all matters that need to be taken into consideration.
Below is a handy checklist to help you cover all bases once you have decided to fire an employee. This will help you avoid wrongful termination claims and lawsuits which can be time-consuming and costly for your company.
Written by Cat Symonds
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