Employers’s guide to dismissals in an employment contract
By Joanne Hue, Updated: 2023-01-12 (published on 2022-11-22)
When an employer terminates the employment contract with an employee, it is called a dismissal. There can be various reasons for dismissals; it could be due to budget cuts, low performance, or even due to differences within the team. No matter what the reason is, dismissals should be handled with care. Most of the time, the terms for dismissals are already mentioned in the employment agreement as a contingency plan and so things will go quite smoothly. But it can be a bitter experience for employees to get sacked or fired especially if they feel it is unjust or unreasonable. Hence it is important for employers to handle dismissals carefully and review the terms for it in the employment contract before taking any action.
What should the dismissal section in employment contracts cover?
While drafting an Employment Agreement, most companies will have already prepared for the dismissals by putting in the required clauses for it as it is an important topic of concern for any organization. The dismissal clauses should specify, reasons or situations under which the employer is allowed to dismiss the employee. It should also mention the procedures that need to be followed.
Details regarding pay are an important element in employment contracts and it is just as important to be specific about this with regard to dismissal as well. In case of dismissal, how will the final payment be settled? Will there be deductions made in certain situations or will the company compensate employees for sudden notices? Or, if the dismissal causes great loss to the employee, how will the damages for the same be paid? All of these must be penned down in clear words.
The notice period is another crucial element when it comes to dismissals in an employment contract. How far ahead does the employer have to provide notice before dismissal has to be disclosed here? These can at times depend on other factors and if so, such terms and conditions must be mentioned too.
Further, certain situations could automatically trigger dismissals, such as fraudulent behavior or trading of company secrets. The course of action to be taken in such situations need to be mentioned too.
Why it is important to clarify all the details in the employment contract itself?
It is crucial that these details be discussed and agreed upon before an employee takes on any responsibilities at a company so there is a clear understanding of what the future might hold. This will not make the employee feel blindsided in the future when the situation of dismissal arises. Additionally, if all the details are included in the employment contract itself, it will also provide employers with a strong ground to stand on and defend themselves if the employee decides to pursue charges of unfair dismissal.
Legalities associated with dismissals and employment contracts:
Employment contracts are legally binding and so, there are numerous legal affairs that can pop up when dismissal is being discussed. Some of them are:
- Confidential information: When an employee is onboarded, the company could reveal confidential information that is crucial for them to function on their job. However, these could be sensitive in nature and if so, they will often time be protected by NDAs along with the employment agreement. Certain clauses during dismissal would affect this confidential information and so, you have to have a good look at it first.
- Intellectual Property Rights: Always clarify that the right to inventions during the period of employment cannot be taken. Dismissals can lead to employees taking along their projects with them. However, as a company that has invested to make it happen, you want to ensure that you hold the IP rights to it. Non-Competes: these prohibit the employees from working with competitors even after their term with a company is over. However, dismissals can affect it differently and employers must be considerate. It is important that dismissals be fair, and that employees be treated reasonably and with dignity for it represents a company’s work environment.
- Non-Competes: these prohibit the employees from working with competitors even after their term with a company is over. However, dismissals can affect it differently and employers must be considerate. It is important that dismissals be fair, and that employees are treated reasonably and with dignity for it represents a company’s work environment.
So, dismissals can be sudden and oftentimes more disadvantageous to employees but legally, they weigh a lot heavier on employers. If not handled well, it can have damaging and expensive consequences and so employers should always ensure that they have valid reasons and follow a fair procedure by having all the relevant and required documents signed along with the employment contract before going ahead with the job.
You may also like:
- Assignment of Intellectual Property Rights Template
- Confidentiality Agreement (NDA) Template
- Non-Compete Agreement Template