This article has been written by Md. Mosiur Rahman pursuing a Crack California Bar Examination – Test Prep Course from LawSikho and edited by Shashwat Kaushik.

This article has been published by Shashwat Kaushik.

Introduction 

Employment laws are governed by both federal and state laws to protect the employee’s rights and ensure the employer’s obligations. The terms and conditions of employment for an employee are administered by the employment contracts. The termination of an employee should be specifically described in the employment contract. It should describe the circumstances under which an employee will be terminated, whether for cause or without cause. This article delves into an insight into the termination of employment considering the California Labour Code (Cal. Lab. Code) guidelines regarding “termination for cause” and “termination without cause.” It outlines the situations that are to be considered “terminations” with cause and those that may justify a termination without cause. 

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Termination of employment

An employer can set out specific reasons for the termination of an employee, taking into account the employee’s service. The termination of an employee can occur for various reasons, such as breach, fraud, incapacity, etc. However, Section 2920 of the California Labour Code (Cal. Lab. Code) outlines that every employment contract can be terminated for any of the following reasons, as discussed in the subsequent subparagraphs. The termination provisions are brief, but the consequences are broad, making it tough to list all the specific reasons that cover the guidelines. 

Expiration of its appointed term

If an employee’s employment period ends before the full term specified in the employment contract, they may be fired. Each and every employment contract must specify exactly how long the agreement will last. When such duration expires, it will be automatically terminated, and the employee will get his benefits as per the terms and conditions for such employment. However, there are a few procedures and formalities involved in terminating an employee. Without these procedures, the employee’s continuation of service cannot be stopped. Hence, this is also termed termination of employment upon fulfilment of the contract period.

Extinction of its subject

When the subject matter of employment is discontinued for a particular reason and cannot be continued any further, “the employment” can be terminated. This gives a wide range of scope to consider in what circumstances a subject matter is declared extinct. Employment is created for some specific jobs to achieve desired outcomes based on the subject matter of business. When the purpose of the business is complete and there is no further need for employment, it may be terminated.

Death of the employee

It goes without saying that a worker’s death will have an impact on their ability to perform their duties. Hence, it will bring an automatic termination of employment. However, a lot of responsibilities are created when an employee passes away. All rights and other relevant factors will be applied in accordance with the benefit terms that the employer policy grants to an employee. Legally, it is considered a termination of employment.

The employee’s legal incapacity to act as such

Although there are many potential causes of incapacity, we only take legal incapacity into consideration here. An employee may be fired if he is no longer legally able to carry out the terms and conditions of his employment. However, legal incapacity stipulates a broader viewpoint and brings a more comprehensive explanation of options for many of the underlying causes. Specifically, when an employee is not legally capable of holding his appointment or continuing to serve for his employer, it is required to bring a termination. 

Termination with cause

The employer has the legitimate right to terminate an employee at any time. However, they must comply with the rules and regulations relating to such termination. In this regard, Section 2924 of the California Labour Code directs that the employer may terminate an employee for the employee’s willful breach of duty in the course of his employment, for the habitual neglect of his duty, or for continued incapacity to perform his duty. Based on these guidelines, termination for cause may be outlined in an employment contract, covering all the specific areas that constitute a breach of the terms and conditions. Both employers and employees need to be settled on their rights, responsibilities, and obligations in a prescribed manner to maintain a fair and lawful working environment. It is the concern of the employer to meticulously describe the terms and conditions of employment in the employment contract.

Grounds for termination with cause

Employers must thoroughly maintain the documents for termination and follow accurate procedures, including giving warnings, corrective measures, and opportunities for improvement, to ensure compliance with employment laws and avoid potential legal disputes. However, Section 2925 of the California Labour Code states that if an employee is employed for a specified term, he may be terminated at any time by the employee in case of any willful or permanent breach of the obligations of his employer. Here, the law also allows the employee to quit the job for some specific reason. On the part of the employer, numerous causes can be considered vital reasons that most employers consider for termination with cause. Some of the causes are enumerated here as general guidelines.

Breach of confidentiality

Information is vital for every organisation. It is important for every company not to share client’s information with outsiders. If any employee shares the information against the interests of the company, it shall be treated as a breach of confidentiality. The legal provisions empower employers to terminate the employee in the case of breach with just cause.   

Bankruptcy

Most companies require that employees, especially those working with finances, maintain themselves as financially stable. So that the impact of being bankrupt cannot deteriorate the company’s financial stability. Therefore, companies should have a legal policy that outlines the grounds for the termination of an employee for the cause of bankruptcy.

Bribery

Bribery is a serious offence that can lead to termination without cause. The handling of a service or good in return for a bribe is known as bribery, and it is a crime. Accepting gifts from clients can have a negative effect on the entire workplace if done by any employee.

Conviction for any criminal offence

If an employee is involved in any criminal offence, it will result in termination of employment due to a breach of trust in the employer-employee relationship. Thus, the employment contracts can be made clear that convictions of criminal offences shall lead to termination.

Insubordination

If you are disrespectful to your colleagues or refuse to follow your boss’s instructions, you may be in breach of the company’s terms and conditions. This is important because it helps to create a positive work environment. This could be considered a serious offence and may result in termination.

Incompetency

Setting goals and targets is an important part of any organization and these goals and targets shall be fulfilled by the employees within a specific time period. If an employee is unable to achieve the target and remains indifferent or generally puts no effort into improving performance, it can lead to termination with cause.

Drug addiction

There are lots of companies that have zero tolerance for drug addiction. Drugs may impair a person’s mental stability and affect the work environment; they are also dangerous for clients as well as other concerned people. This could be a strong reason for termination, as specified in the employment contract.

Sexual harassment

In most jurisdictions, there are separate legal provisions that specifically prohibit sexual harassment in the workplace. To maintain a sound and healthy working environment, all employees should be protected from sexual harassment. So, companies should include this clause in the employment contract as a condition for termination.

Inappropriate relations

Having professional relationships is required in the workplace. Any other kind of romantic relationship in the workplace may lead to sexual harassment and damage the reputation of any organisation. If any relationship is deemed inappropriate or is not treated as professional, it may lead to termination.

Other related causes

Numerous reasons can be set out, such as fraud in the workplace, persistent dishonesty, neglect of duty, excessive absence or lateness, or harassing or abusive language towards other employees, clients, or customers. So, there are no strict constraints that would restrict the underlying reasons, but the legal provision widens the areas that may be suitable for the specific organisation.

Termination without cause

The term is itself controversial, as there is no sense of termination without cause. Termination of employment without cause is not defined specifically in any legal framework. It is evident that when any termination occurs, there are implied reasons. Termination without cause usually occurs when the employee’s service is no longer required by the employer. In such situations, the termination is not necessarily due to the employee’s fault. For example, if an employee is going to downsize his organisation, the employer may terminate his employees without stating any reason for such termination. Termination without cause also occurs when an industry closes down or shuts down a project. However, if an employee is fired without cause, they typically have the right to be notified of their termination and to be paid during that time. However, termination without cause cannot be challenged if it is not contrary to the terms and conditions of the employment contract and the processes outlined by the statutes.

What is notice period

The employer is required to give 30 day’s notice, as outlined in Section 2929 of the California Labour Code, so that the employee can make plans for transitioning to another job, etc. Every employment contract must include a specific notice period. The employer is not bound by 30 day’s notice; it may be more than that but not less than 30 days. While outlining the notice period, other related issues may encompass considering the provision of related laws and regulations. Section 2929 clause(b) of the California Labour Code states that a provision of employment that provides an employee with less protection than is provided by this subdivision is treated as against public policy and hence void.

Difference between with cause and without cause

The significant difference is that termination with cause has a reason to terminate the employee. If the employer terminates with cause, the employee is not entitled to get notice or pay for the notice period. On the other hand, when any employer terminates an employee without cause, the employee is usually entitled to have notice of his termination and be paid during the period. The obligations to pay the benefits will be ensured considering the terms and conditions set out for employee benefits. However, there are other related issues also taken into consideration, such as breach of either side or solely on the part of the employee or the employer who committed any breach.

When termination without cause becomes wrongful

A termination that is not done lawfully will be termed a wrongful termination. This can happen if the employee is terminated without proper notice, is not paid for the notice period or if the employer claims termination with cause but does not have just cause. In cases of wrongful termination, the employee is entitled to get paid and is entitled to the benefits the employee would have earned. But if it happens due to not putting a “termination without cause” clause in the employment contract, the employee will get benefits according to the various legal provisions that may apply appropriately and widely. So, to handle the employment issues and termination in a sound manner, the employment contract should have a “termination without cause” clause. Certainly, that will be beneficial for both parties involved in the employment contract.

Conclusion

An employment contract can be terminated with cause or without cause. In both cases, there are legal requirements that should be followed by the employer when terminating an employee. Termination with cause occurs when there are valid reasons on the part of the employer that the employee breaches the obligations that are contrary to the employment contract. But termination without cause may happen through either party with the delivery of notice and the employee has the right to get benefits for the notice period. Thus, the terms and conditions should be outlined in an employment contract that fulfils the legal requirements and consequences of the employment laws and regulations.

References

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