E. Employment Contracts

If a contract exists, always review the employee's contract before firing that person. Examine whether notice of termination (e.g., 30 days) is required. If so, the failure to send timely notice, or sending no notice, may place the company in breach of contract. Never give employees more rights than necessary in written agreements.

A failure to give timely notice as required by a contract, or failure to follow the requirements of notice as set forth in the contract, may expose a company to a breach of contract claim. In some instances, it can even cause the agreement to be extended for an additional period.

For example, many companies have written employment contracts with their executives. Some of these agreements run for a period of one year and state that if timely notice of termination is not given at least 30 days prior to the expiration of the one-year term, the contract will automatically be extended and renewed under the same terms and conditions for an additional year. If the company fires the executive two weeks before the end of the year, or forgets to send timely written notice via certified mail (as called for by the contract), the employee could have a legal basis to insist on working for an additional year. He/she would at least have a stronger basis to negotiate for additional severance before filing a lawsuit.

TIP: Be sure you know what your contract says about notice and other requirements. By precisely following the contract's requirements, you can eliminate some of an employee's potential claims and legal causes of action after discharge.