Termination of Employment Contract: A Quick Guide to Legal and Personal Aspects

A Guide to Employment Contracts

Employment contracts are written agreements between an employee and their employer. A signed contract defines the employee’s duties, rights and obligations and is legally binding.
It also serves to protect the employer, ensuring that they have legal recourse if an employee does not fulfil the requirements of their role.
Contracts are important documents. It is therefore crucial that they are revisited prior to you taking action, to avoid future conflict. Understanding the ins and outs of a contract before it is signed is also beneficial, potentially saving employers on legal fees if a dispute over your role later occurs.
However, should you be unhappy with your position and feel that your contract is unfair , you may be able to break the document with little legal consequence to you. Nevertheless, you will still need to ensure that you notify your employer according to the guidelines stated in your contract.
Although many employment contracts that you may be exposed to, such as offer letters, correspondences regarding your working days and hours, handbooks, policies and procedures, and confidentiality and privacy agreements, do not define all of your duties, responsibilities, and rights, the following is a typical list of contractual stipulations:
• Notice period
• Employee policies, processes and procedures
• Employer and employee roles
• Conditions regarding bonus payments

Legal Aspects of Breaking a Contract

The legal consequences of breaking a job contract or agreement are largely determined by the content of the contract itself. Most employers use some kind of at-will employment contract. This means that, unless otherwise specified, they can terminate your position without cause when they choose (and you can also leave your position at any time). However, if you have broken specific terms of your contract, the company may be able to take legal action.
If your contract includes a non-compete clause, for example, you may be facing legal action if you informed clients about your resignation with the intention of starting your own company. Depending on its wording, your contract might even prohibit you from starting your own company of any kind.
In most cases, an employer that wishes to pursue legal action will try to obtain damages for breach of contract through a lawsuit. This may be based around the financial damage that is caused to the business by the contract violation. If an employer is attempting to claim undue financial damages, or that the damage was disproportionate to the severity of the breach, it may be beneficial for you to consult with a lawyer regarding the law in your area.

Fair Reasons for Contract Termination

The following are some of the more legitimate reasons for terminating a job contract. It is advisable to ascertain whether your reason is legally defensible because it can affect your rights to a severance benefit.
Unsafe Work Conditions
If your employer has not provided a safe place to work, or the specific position to which you were assigned is dangerous or unfit for human occupation, then you may be entitled to terminate the contract if a reasonable attempt to convince your employer to remedy the problem failed. The same goes for your employer asking an employee to carry out tasks that are dangerous.
If your employer’s actions have resulted in injury to you, or if your health has suffered as a result of your employer’s conduct, your case for an early termination of the contract is strengthened. If the injury or sickness has been due to your work, your case becomes more substantial.
Breach of Contract by Employer
If your employer is in breach of the contract in some significant manner, giving rise to a claim for damages, then you may have a right to terminate the contract and sue the employer for damages. Examples of significant breaches include the following:
• Your employer changes your position to one that you disapprove of and gives you no choice.
• Your employer changes certain working conditions that you agreed on in the contract, such as time of work, place of work, reporting structure, duties and responsibilities, or pay.
• Your employer does not pay wages – includes failure to pay overtime, bonus, commissions, medical expenses, payment for unused vacation, etc.
Some conduct of an employer amounts to just cause for termination entitling the employee to claim resignation with compensation. It is necessary to establish a reasonable period of warnings prior to termination of a contract to very serious misconduct attributable to the employee.
Matters Personal to the Employee
This reason for discontinuing employment should not be perceived as something that is clearly personal to you that your employer would have known nothing about. It should concern matters of a general nature that compel you to leave the job, but that could not be anticipated by your employer.
Examples include; being called for military duty, pursuing studies, pregnancy, a job opportunity in another city, or needing to relocate on a family basis.

How to End a Contract the Friendly Way

While you may be breaking a contract, a dismissal doesn’t always have to be an antagonistic experience. In fact, the best way to break a job contract is by giving ample notice and having an open conversation with your employer about your decision to leave. The longer you work for a company and the more notice you give them, the more they will understand that you are not trying to sabotage them, and that you are leaving for honest reasons. During the conversation about your reason for departure, be truthful while maintaining a level of tact and professionalism. If you don’t like your job for any other reason other than you need to take care of an emergency or the job is a mismatch for your skill set, be very careful with how you present your concerns to your employer. When you do talk to your boss about your decision to depart, let them know how much you appreciate their guidance and support throughout your employment. Keeping your explanation brief is really the best policy in this situation. A quick, "You know, I appreciate the opportunity to work here . I’ve learned so much from everyone, but I must move on to take advantage of a great opportunity," is usually enough to get the point across. No matter how amicable you believe your relationship with your employer to be, it’s always best to complete every step by the book. If you haven’t already, you should find out what’s required to terminate your employment correctly. Find the employee handbook and review your contract for any contractual obligations you may have. When you are termination your employment, you should know every requirement and be sure to fulfill every obligation. This includes returning all company property, providing any necessary post-departure documents, and maintaining your manners when speaking with your employer. Once you’ve officially broken your employment contract, your non-compete and confidentiality agreements will still not apply. As a best practice, however, if you plan to find another job in the same industry, you should keep in mind that any tips or information you pick up along the way may come into play with your non-competitive agreement later on down the road.

Safeguarding Your Career and Reputation

As you may know, one important reason to consult with an attorney before breaking your contract is because, in some cases, the consequences can be severe enough that it will essentially prohibit you from finding a new position. If, for example, you are a licensed realtors, the Texas Real Estate Commission’s general advice is that if violating the terms of the contract might get your license suspended or revoked, you should never break your contract with the brokerage. If you are a licensed professional under another regulatory entity, special rules may apply that you need to be aware of. For example, in Texas, the Board of Nurse Examiners has a code of ethics for nurses, which provides that a nurse who engages in unprofessional conduct related to patient abandonment shall be reported to the Board, generally meaning that discipline will be taken against the nurse.
In many situations, however, breaking a contract does not automatically harm your ability to find new work, pursue your chosen profession, or maintain your reputation, following the break. But mistakes can affect your future. for a surprisingly long time. So this is an area where it pays to proceed carefully.
First, consider the relationships you have with colleagues. Relationships are a two-way street, and if you break your contract in a way that is not well-received, those relationships can suffer. Even the best "goodbyes" don’t necessarily stop all the gossip about you (or the decision you made), even where there should be no ground for it. Add to that your home stack of a few adverse references, or worse, and the risk of unflattering news about you being spread amongst your peers increases significantly.
The greatest protection against the acts of others is a strong network of relationships. Relationships with both your future co-workers, and the kinds of people who will provide you references. Relationships with your own mentors, and especially those who will serve as references when you need them. That’s one of the reasons this is such an important area to get right from the start, when you are first entering the functional roles for which you are making a name for yourself. It’s a lot harder to build that name when everyone you know is talking bad things about you.

Engaging a Lawyer

Before breaking a contract or employment agreement, it is very important to talk to a lawyer, because there can be unforeseen legal risks and complexities of which you may not be aware. Of course, not everyone can afford to see a lawyer, and you may not even know what your legal issues are, and therefore may not know to see a lawyer, so I will write more about the legal risks involved in just a moment.
Even if you do not need legal help to get out of the contract, you still need legal help to end the contract if the other side is not agreeable or cooperative. A lawyer can write you a letter and carry on negotiations with the other side, or use other means if that fails.
For example, let’s say that you want to break your contract or the contract is ending anyway. You’ve had a bad experience at work and you want to get out of there. But the company has made some claims, why not make them settle their claims against you? There are a number of ways that this may happen, depending on a number of things .
But what if the company does not agree to anything? You have a bad experience at work, but you have built up some goodwill from clients, and the company is claiming rights to that too. And, importantly, your mere resignation (or walking out) may not help – if nothing else, the company may make a lawsuit about it, and you will have to go to court to explain your reason for leaving your job.
There are legal risks to this. You could be sued, and the counterclaim the company may file at that time could be worth a lot of money. But most importantly, you cannot get away from the court’s jurisdiction – if the company does not just let it go, if you do not settle out of court, they can always sue you as a further response to your bad behaviour, and you have no choice but to show up in court with no good excuse.
With all that in mind, if you are not getting along with your employer, if you want to leave and cannot figure out a way to get out of it, you should speak with a lawyer. The lawyer will want to know the story, will be much better at negotiating with them, and can even turn that into a more amicable experience for you, which is good for your career and your reputation.