What Is “Just Cause” Termination?
There are a lot of loose terms in the world of employment law. Terms such as “at-will”, “contract”, “progressive discipline” and other common terms have meaning that many of us think we know, but when pressed may get a little vague. A very common such term in the termination context is “just cause” termination.
Usually, “just cause” is a provision in an employment contract. It differentiates the basis for a termination from that of a reduction in force or simple exertion of at-will employment rights by requiring a reason for a termination. In a pure at-will employment situation, employers do not have to provide a reason for termination unless there is a request made by statute. In an employment contract with a just cause provision, the employer articulates the basis for the cause in order to terminate the contract without notice, and/or provide different, or reduced or no severance benefits.
The meaning of “just cause” in an employment contract should be distinguished from the meaning of “just cause” in a union setting. Most collective bargaining agreements require “just cause” for discipline and discharge. If a union files a grievance over the termination of a union member, the employer typically has the burden to show “just cause” existed for the termination during a labor arbitration hearing. In the union context, “just cause” is a term of art that labor lawyers and labor arbitrators understand has a certain meaning, which can be very different from the meaning of “just cause” in an employment contract.
In the employment context, “just cause” is protection for the employer (who can avoid severance in a severe misconduct situation) and for the employee (who obtains severance unless there is demonstrable just cause). More senior executives require this protection. Some contracts simply use the term in an undefined manner and apparently rely upon, one would say charitably, the “common opinion of mankind.” Good luck enforcing that one in court.
A well-drafted just cause provision in an employment contract lists the bases for termination in ways that are objectively definable. That’s easier said than done, of course. In extreme situations, such as conviction of a felony or misappropriation of funds, the definition can be set forth in a very straight-forward way. But in situations that sound in dissatisfaction with the employee’s performance, disputable subjective elements can creep in. That is why it is common to see in a just cause provision notice and opportunity to cure provisions that will allow the employer to spell out the reasons for the termination and demand reasonable cure and, thereby, create a clear and objective record. Of course, this may not work according to plan since the employee can dispute the reasons or only partially comply or other such complications. But the best advice is not to “go generic”, but to work with legal counsel in drafting just cause provisions that fit the specifics of a particular executive employment situation.
Takeaway: As Carl Sandberg said, “Be careful how you use strong words.” “Just cause” is a term that requires careful and specific articulation in the employment contract in order to have meaning and value in determining the employer’s rights and obligations in executive employment terminations. The best advice is to seek advice.