Termination of the Employment Contract

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When an employment relationship ends, sometimes it takes more than a short resignation letter to inform your supervisor of your last day. Employees working under a contract of employment must carefully review the agreement they have with the employer and follow the guidelines for terminating the employment contract.

Employment Contracts

  • Two basic types of employment contracts include a collective bargaining agreement between members of a labor union and an employer, and an employment contract that’s usually a mutual agreement between an executive or high-level employee and employer. Individual employees cannot terminate their agreement with the company under a collective bargaining agreement, nor can an employer simply terminate a collective bargaining agreement -- that type of termination involves significant time, expense and expertise of labor negotiators, lawyers and management representatives. Terminating an executive employment contract can, however, be terminated by the individual employee or the employer, provided they follow the guidelines for termination.

Basis for Termination

  • Employment contracts usually contain provisions under which the parties may terminate the agreement. Either party could decide to end the working relationship for a number of reasons. The employer may feel the employee fails to meet the terms of the agreement related to performance or behavior, or that the employee violated contractual agreements related to moral turpitude or financial representation. Likewise, the employee may believe the company violated terms and conditions related to compensation, providing resources the employee needs to perform the job, or failed to live up to promises concerning executive perks and other benefits.

Timing of Notice

  • Generally, you cannot terminate employment contracts overnight, except in extreme circumstances. The terms and conditions of the agreement dictate when and how the contract may be terminated. Standard business contracts require at least a 30-day notice for termination; depending on the type of services an employee renders, the notice period may be up to 60 days. Termination of an employment contract must always be in writing, as is standard for most agreements. In addition, employees who work under an employment agreement typically meet with their superiors or the board of directors in the case of executives who terminate their contracts.

Considerations

  • You should take a number of considerations into account when deciding to end an employment relationship. Generally speaking, when an executive employment agreement terminates, the executive may be entitled to compensation called a "golden parachute." A golden parachute is a monetary incentive that enables a soft landing for an executive who's suddenly out of a job. Terminations of high-profile executives are subject to speculation and reported in the media. Employers who want to avoid publicity surrounding executive departures use confidentiality clauses in their employment agreements; however, this tactic may not always be effective in publicly traded companies. Publicly traded firms must demonstrate transparency in their business dealings.

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