Termination for Cause

Definition

The term termination for cause refers to an employer severing its relationship with an employee for a specific reason.  Termination for cause typically applies to executives that have an employment contract.

Explanation

The vast majority of employees working for a company are "employed at will," which allows both the employee and employer to terminate this relationship at any time and without explanation.  That being said, an employer cannot terminate an at-will employee for an unlawful or discriminatory reason.

Executives and the owners of a business may have an employment contract, which normally contains language indicating they are not terminable at-will.  Instead, the contract will state the employer can only terminate the executive "for cause."  The contract will be very specific in outlining the "for cause" reasons, which may include:

  • Being convicted of a crime
  • Disclosing confidential company information or a trade secret
  • Failing a drug or alcohol test
  • Falsifying company records
  • Stealing, lying or embezzling money
  • Purposefully violating a company policy or procedure
  • Willful misconduct or insubordination

Note:  Individuals that are terminated for cause may not be eligible to collect unemployment compensation and may not be entitled to severance pay.  They may also be subject to non-compete agreements following their termination.

Related Terms

other postemployment benefits, contractual termination benefits, one-time termination benefit, special termination benefit, constructive discharge, implied employment contract,pink slip, wrongful termination