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What should we do? A contract refers to both ‘termination for cause’ and ‘at-will’ employment

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in Employee Benefits Program,Employment Law,Human Resources

Q. We need to fire an employee who has an employment contract that limits termination without notice to “for cause” events. Must we abide by this provision if another provision in the contract clearly indicates that his employment is “at will” only?

A. For private employers in North Carolina, in the absence of an employment contract, the default employment relationship is defined as one “at will.” That means that either the employer or the employee may terminate the employment relationship at any time for any reason (other than an unlawful one) with or without notice.

An employment contract like the one you describe, however, can change that default relationship.

Any court reviewing the contract will carefully scrutinize the express terms of the employment contract and then enforce those terms. Therefore, if termination is limited to “for cause” events, a termination without cause could lead to liability. This may be true even if the employment is elsewhere defined as “at will.”

This contradiction or ambiguity would most likely be construed against you, the employer, as the presumed drafter of the contract.

Q. If we do choose to terminate the employee without cause and without notice, what liabilities do we face?

A. That depends on the language in the contract. If, for example, the contract allows for termination without cause upon a 90-day notice, the principal liability could be anywhere from 90 days of wages all the way to wages through the date of a lawsuit.

Other factors might include the value of employee benefits, such as retirement contributions and health insurance. You’ll have to consider the possibility of paying cash in lieu of those benefits as an adequate alternative.

Finally, failure to pay wages through the 90-day-notice period may amount to a violation of the North Carolina Wage and Hour Act, which allows for double damages and the recovery of attorneys’ fees.

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