Termination by the company for cause: Overview, definition, and example
What is termination by the company for cause?
Termination by the company for cause refers to the dismissal of an employee by the employer based on specific reasons or behaviors that justify the termination. These reasons, often referred to as "cause," typically involve serious misconduct, poor performance, violation of company policies, or failure to meet contractual obligations. Termination for cause is usually defined within the employment agreement or company policy and is distinct from termination without cause, which can occur for reasons not related to employee misconduct or performance.
Why is termination by the company for cause important?
Termination by the company for cause is important because it helps companies maintain discipline, uphold standards, and protect their interests. By clearly defining what constitutes "cause," companies can ensure that employees are held accountable for their actions and that company resources are used efficiently. For employees, the for cause clause sets clear expectations and behaviors that must be met to retain employment, reducing misunderstandings. In legal terms, termination for cause can have implications on severance, unemployment benefits, and other post-employment entitlements, making it a critical part of employment contracts.
Understanding termination by the company for cause through an example
Imagine an employee at a marketing firm is found to have repeatedly violated the company's confidentiality policy by disclosing sensitive client information to external parties. The company's termination for cause policy clearly outlines that violating confidentiality is grounds for immediate dismissal. Based on this violation, the company terminates the employee's contract for cause, meaning the employee loses any severance pay or benefits they might otherwise have been entitled to under a termination without cause.
In another example, a company has a policy that requires employees to meet specific performance targets. An employee consistently fails to meet the targets over an extended period, despite receiving performance improvement plans and additional training. The company decides to terminate the employee for cause due to poor performance, as it was clearly stated in the employment contract that failure to meet performance standards could result in termination.
An example of termination by the company for cause clause
Here’s how a termination by the company for cause clause might appear in an employment contract:
“The Company may terminate the Employee’s employment for cause, including but not limited to the following reasons: dishonesty, gross misconduct, violation of company policies, failure to perform duties as required, or breach of confidentiality. In the event of termination for cause, the Employee shall not be entitled to severance benefits or other compensation beyond the date of termination.”
Conclusion
Termination by the company for cause is a key provision in employment contracts that allows employers to end an employee’s employment for specific, justifiable reasons such as misconduct or performance issues. This clause helps protect the company’s interests, ensures accountability, and provides clarity for employees on what behaviors may lead to dismissal. Understanding what constitutes "cause" and the consequences of such a termination is essential for both employers and employees to avoid disputes and ensure fair treatment.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.