Aside from a termination of the contract based on the term, there needs to be other ways your client can terminate it, ie. how can the employee be fired? Most employment contracts that I drafted for companies allowed for termination of the employee “for cause.” The contract drafter must carefully define “for cause.” For cause can be defined as many things, such as:
- Breach of the employment agreement
- Improper disclosure or misappropriation of the company’s confidential information
- Competing with the company
- Commission by employee of an act involving moral turpitude, dishonesty, theft, unethical business conduct, or conduct that impairs or injures the reputation of, or harms, the company
- Commission of any act of fraud, theft, dishonesty or falsification of any company documents
- Failure to perform assigned duties
- Failure to work exclusively for the company
- Failure to fully cooperate in any investigation by the company
A company may want to be able to terminate without cause as well. However, if that is the case, it is doubtful that an executive would sign the contract unless they are going to get a good severance if they are terminated under such circumstances.
Sample severance language could start out looking like this:
Severance. In the event that Employer, without cause, either terminates the Employment of Employee or fails to renew this Agreement upon expiration hereof, Employer shall pay to Employee severance compensation in the amount of one year’s base compensation, from the date of said termination or expiration, as applicable, at the rate most recently in effect pursuant to paragraph 3(a) hereof.
Likely details regarding the severance would need to be included, such as whether it is paid as a lump sum or in installments, will the company continue to cover benefits for a certain amount of time – how long, and is a release from liability going to be signed before receiving severance?