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Executive employment claims: Understanding termination without cause

| Mar 3, 2020 | Firm News |

When it’s time to terminate an employee, even an executive, an employer often has a reason. Whether the reason is poor performance or a specific incident of misconduct, there is often a cause for the dismissal.

Still, there are other situations where an executive’s tenure has passed. The company may have decided to go in a different direction or the company may, simply, be looking to reorganize and make changes. When there is no cause for the termination, it becomes likely that there will be an unemployment claim for the executive.

Here’s what to keep in mind when you’re considering terminating an executive.

Time to dig up the employment contract

An employment contract is key to hiring an executive. Because executives have decision-making power and access to company secrets, a disgruntled executive could cause irreparable damage to the company on the way out the door.

One of the key parts of the employment contract will be the section detailing what happens when an executive is terminated both with and without cause. The executive may be entitled to severance and/or unemployment pay depending on the language of the contract.

The inevitable unemployment claim

The job market can be a difficult place for executives. Between of the prestige of the position and the salary that came with it, upper level employees can have a hard time finding a new place to work.

Job scarcity can make termination especially nerve-racking for executives. Naturally, facing a sudden loss of income, many executives look at filing an unemployment claim. Some may still look to unemployment, even if there are favorable severance terms in the employment contract.

In Washington, any employee that is terminated without cause is potentially eligible for unemployment. Approved claims will trigger your company’s unemployment insurance. In addition to paying the claim, you can will likely have to pay unemployment taxes.

Should they stay or should they go?

Ultimately, you need to make the decision that is right for your business. As you determine whether to keep an executive, consider the costs and benefits of termination.