Terms of employment are often governed by contract law. When an employee has an employment contract, chances are that the contract says something about how the employee can and can't be fired. Most employment contracts only allow an employee to be fired for "good cause," which can seriously limit an employer's ability to deal with a troublesome employee.
If the employee has an express written contract, then staying on the right side of the law is fairly simple -- just abide by the terms of the contract. Employment contracts come in many other flavors, however, and knowing whether you're complying with them or not can be difficult.
Oral Employment Contracts
Contracts don't have to be in writing to be valid under the law. If you promise an employee during the interview that you won't fire them "unless there's a good reason", you've probably established an oral employment contract. Even a casual conversation can be the basis for an oral employment contract, which means that employers have to be very careful what they say.
Courts are willing to uphold oral contracts, even ones based on limited conversations. For example:
Implied Employment Contracts
Implied contracts overlap with oral contracts, where a conversation can be the basis for an implied contract. Implied contracts, as their name suggests, aren't express contracts, but rather come about through implication and suggestion. For example:
Implied contracts without some sort of oral promise however, are less likely to be found by a court. As long as you don't promise your employees job security, it is unlikely a court will find an implied employment contract without some further effort on the employer's part.
Firing an Employee -- Good Cause, Good Faith and Fair Dealing
If an employee does have an employment contract, express, implied, oral or written, then generally you must have "good cause" to fire the employee. Good cause generally means that the reason for firing the employee is based on purely business needs. Here are some of the most common examples courts have found are "good cause":
In addition to good cause, employment contracts generally require the employer to act in good faith and deal fairly with the employee. This requirement is generally referred to as the covenant of good faith and fair dealing. To breach this covenant however, an employer generally has to be a pretty bad apple for a court to find a breach of the covenant. For example:
In other words, an employer has to be blatantly dishonest before courts will find a breach to the covenant of good faith and fair dealing.
There are many different reasons for firing a contract employee. Knowing what is legal and what is illegal under the law is vital. Speak to an experienced employment law attorney today to learn more.