An employment contract can be terminated on the discretion of both parties to the contract i.e., employer or employee. The contract can be terminated if either party is not fulfilling its responsibilities under the contract or continuation of contract is not possible due to unfavourable circumstances. For example, the employer is downsizing due to a recession or the employee has received a better job opportunity elsewhere.
Whether by employer or employee, if the contract is to be terminated it should be done by giving the other party written notice as mentioned in the employment contract. If the employer wants to dismiss the employee without any notice period, they should pay the employee the compensation for instant dismissal. If the employee is resigning without completing the notice period, he pays the employer a penalty for that breach of contract.
Terms and conditions of the contract
The employment contract can be terminated by taking into consideration the terms and conditions of the employment contract which may include the wrongdoings of the employee or incompetence at work and any other reasons resulting in non-compliance with the terms and conditions of the employment contract. These breaches in the terms and conditions must be mentioned in the letter of termination to avoid any grievance between the parties. The employee should be fully informed of the reasons of the termination of their contract to avoid wrongful claims against the employer.
Legitimate reasons for termination
Fred Steingold and Ralph Warner in their book, "Legal Guide For Starting and Running A Small Business," state that even if the employer is an at-will employer, they can't fire the employee for an illegal reason. The reasons for the termination must be legitimate such as poor performance, engaging in criminal activity, violating company laws, tardiness, violent or inappropriate behaviour at work, etc. and are mentioned explicitly in the termination contract.
If the employer has issues with the employee and intends to fire them, the employer should document the events to prove the employee's misconduct. Record the date and time of the events and names of witnesses or people who reported the misconduct. This builds a strong case favouring the employer and leads to a smoother termination process.
The employer and the employee can mutually agree to terminate a contract which will avert any charges or claim by either party. If the circumstances are such that the employment contract cannot be continued, both parties can negotiate the terms on which to terminate the contract.
An employer who is dismissing staff due to downsizing should consider the following procedures to make the termination process fair and conflict-free. Provide the employee with professional services and appropriate references or recommendations to find another job. Employees should be given prior warnings and a grace period before the layoff. Employer should also consider offering any alternative employment available to the employee before the layoff. A complete criteria of selection of the employees for layoff must be prepared and. the employees should be given benefit payments as a gesture of goodwill from the company.