What is “Fired For Cause?” It’s Time to Check Your Contracts and Policies

“Fired for Cause” – what does that mean?  This question came up in an interesting article about the recent firing by Texas A&M of its head football coach Kevin Sumlin.  Arkansas Athletic Director Hunter Yurachek said, “To me, losing football games is being terminated with cause.”  He then went on to discuss whether protections coaches built into their contracts were appropriate.  He said, “I want to be a leader in this industry in how we write our coaches contracts moving forward so that there’s not 100 percent guaranteed protection for their contracts.”  You can read the full article here:  https://www.seccountry.com/arkansas/arkansas-ad-hunter-yurachek-critical-texas-kevin-sumlins-contract

The article raises a couple of interesting questions – what does “Fired For Cause” mean?  Furthermore, why is it important to my business and its documents?

What Does “Fired for Cause” Mean?

An employee or contractor can be fired either “for cause” or “without cause”.  Firing an employee for cause means the employee committed a serious violation against the company.  For example, violating the employment agreement, the employee manual, HR policies, or company procedures, are common grounds for firing for cause.  In addition, theft, sexual harassment, or lying are examples of common infractions set out in these documents as “for cause” grounds for termination.  By contrast, firing an employee without cause means the employee did not do anything wrong or to deserve firing.  For example, laying employees off due to a down-turn in business is an example.

What Does an Employee Do to be Fired for Cause?

Grounds for firing for cause are typically set out in the contract or the company’s policies and procedures.  The company’s contracts, policies, and procedures communicate to employees what actions and behaviors are not acceptable and will constitute grounds for termination.  If the act or behavior is not in the contract or policy, it may not qualify as ground to fire for cause.  Consequently, the quality of the company’s documents is critically important.

What Happens When an Employee is Fired for Cause?

Firing for cause carries significant legal implications.  For example, the business may not have to pay the employee a buy-out amount.  Or, the employee may forfeit pay and bonuses.  It could be that employee may not qualify for unemployment benefits, may not be eligible for re-hire, or incur other significant ramifications.  Consequently, contracts and policies should be written clearly and set out grounds, procedures, and consequences of firing for cause.

This issue underscores the importance of having well written, up-to-date contracts, policies, and procedures.  Using forms obtained online, drafted for someone else’s business, and addressing issues your business may not have will leave important gaps unprotected.  Consequently, if your documents are not well drafted, your business could be on the hook for benefits, pay, bonuses, and other amounts it did not expect to pay.  Furthermore, being forced to pay these amounts and benefits may send the wrong message to other employees, exposing the company to more cost and expense.  In addition, the company’s reputation with regulatory agencies, such as the Texas Workforce Commission, could be damaged.  Investing in good documents now will save significant cost, anxiety, and stress down the road.

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