Termination for cause: Examples and how to handle termination

It’s never an enjoyable experience to fire an employee, but it’s important to know how to do it right to protect your business. That includes learning about “cause for termination,” or “termination for cause.”

In most states, employment law dictates that employees work “at will” and can be fired for any reason that does not violate state or federal law. But employment at will doesn’t mean you can do whatever you want. 

There are many reasons you might fire someone, including business considerations like layoffs or downsizing or performance issues (poor performance). You may also fire someone for reasons that violate the law or company policy, like embezzlement, insubordination, or discrimination.

Whatever the reason, after being fired, your employee can apply for unemployment. Because you’re responsible for the decision to fire them, in most cases, you’ll need a reason for terminating someone.

If you have an employee who is part of a union, for example, they would likely have a contract preventing you from legally firing them without proving cause for termination. This means your team member’s behavior must be so severe or harmful to your business that you can no longer keep them employed.

Furthermore, if you fire someone for cause and the state unemployment commission accepts the evidence, you won’t be on the hook for unemployment benefits. 

However, if you fire someone and the unemployment commission decides it’s not for just cause (wrongful dismissal), you’ll be the one responsible for paying them benefits.

As you see, there are a lot of things you need to think about when it comes to the firing process. To help you out, we wrote this article in which we’ll walk you through everything you need to know about termination for cause. So, without further ado, let’s jump right in!

What is termination for cause? 

Termination for cause refers to the firing of an employee for valid, legally classified reasons. In order for termination for cause to be justifiable, the reason for the termination must be serious and legitimate. 

For example, if employee workplace behavior causes such a concern that the employment relationship needs to be terminated, in some cases, immediately (without advance notice), then termination for cause would be legitimate.

This type of behavior is known as “gross misconduct” and is defined differently depending on what state you operate in. 

However, the federal Department of Labor defines gross misconduct as “an intentional or controllable act or failure to take action, which shows a deliberate disregard of the employer’s interests.”

Employees can portray this intolerable behavior through actions in the workplace, interactions with colleagues or managers, or even how they treat customers. 

What are examples of termination for cause? 

When terminating an employee, you can prove termination for cause in most states under circumstances including:

  • Drugs and alcohol: Showing up to work intoxicated or failing a required drug and alcohol test
  • Criminal behavior: Engaging in criminal behavior relating to the job, including assaulting a colleague, driving under the influence of drugs and alcohol, etc. 
  • Theft: Stealing trade secrets, funds, or other company property, or stealing from colleagues
  • Safety violations: Intentionally violating safety rules 
  • Excessive absences: Repeatedly failing to show up for work without an excuse 
  • Policy violations: Intentionally violating the business’s code of conduct or ethics 

Note: Different states have different definitions of “gross misconduct”, so double-check what your state defines as such.

This is not an exhaustive list of reasons you can fire someone for cause, but it gives you an idea of what is considered “just cause” in most states

And as a general rule, as long as you can prove that you needed to terminate the employment agreement because the team member’s behavior was detrimental to your business, you’ll most likely have a good case. 

Just make sure you document the termination process well, including evidence of the misconduct. Write a letter of termination listing the behavior and reason for firing, and save a copy for your records. This will serve as valuable evidence if you need to prove it later on.

Termination for cause and union contracts 

There are several types of employee contracts that prevent you from legally terminating them without cause for termination. 

One of the most common ones is a collective bargaining agreement (CBA), which is a contract that a union and employer negotiate regarding wages, hours, and terms and conditions of employment. This contract typically includes a clause that says you can only fire them for a cause.

If there is a cause for termination in play, document the evidence and reason for termination. This will protect you from any wrongful termination lawsuits that could arise from firing the union member.

Termination for cause and severance agreements

Severance agreements are another type of contract that you should be aware of when terminating an employee. 

Severance agreements are contracts between an employer and employees that spell out the terms of an employee’s departure.

Typically, these agreements are used by businesses to protect themselves legally if an employee files a wrongful termination lawsuit.

The language in the agreement will determine if an employer has to give a reasonable notice period or severance pay when terminating an employee.

If an employee is in breach of the employment agreement, the employer can give proper notice or pay in lieu of notice, but they are not required to do so. A severance agreement is separate from an employment contract, so there is no clause in the employment agreement that can prevent you from firing for cause.

How termination for cause impacts unemployment benefits

If you lay off an employee, they are always eligible to file an unemployment claim and receive the benefits. They can also receive benefits if you get rid of the position or deem them unfit for the job. 

However, if the government determines they were fired for cause, their claim will be rejected. As a result, your insurance rate will not increase. 

The state unemployment commission will notify you when an employee files a claim. They will request details from you about the employee to determine benefit eligibility in a separation report. 

If you have cause for termination and believe the employee should not receive the benefits, request a hearing. This is where your documented evidence comes in—if you have a strong case backed with evidence of gross misconduct, you’ll likely win. 

Again, be sure to check with your state’s unemployment benefits office to learn more about what is specifically considered gross misconduct in your area. And if you have any questions, it’s best to contact an employment lawyer. 

Have more questions about terminations?

Homebase can also help. With HR Pro you’ll get access to certified HR experts who can answer any questions about specific employee situations, review your existing termination policies, and even help you create new ones. 


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