Handling Termination for Cause: Examples & Best Practices
Learn all about termination for cause, including common ground, real-world examples, legal considerations, and best practices to protect your organization while enforcing accountability.
As a rule, termination for cause is potentially the highest level of conflict an employee could derive. Conflict is typically associated with cases of serious misconduct or serious breach of trust. Termination for cause is what employers refer to when there is credible evidence that an employee refers to serious policy infractions, jeopardizing the well-being of others, damaging the organization, or engaging in a pattern of behaviour that is clearly unfixable.
Also, most employers will steer clear of this type of termination for cause as much as possible. The implications are lengthy. Termination for cause comes with the penalties of not being paid severance to not being employable in the future, to even losing a position, and facing legal action, as... as not to mention that the whole situation becomes even more complex for the employers. It is a very high-risk situation for them as well.
In this guide, we will address what is most typically accepted as a cause, provide workplace cause examples, address the absence of this cause and the possible implications that this may result in, and address possible reasons for the absence of this cause in organizations. We will also discuss what organizations have tried to do in order to sustain a modicum of balance and propriety in the execution of this task.
Understanding Termination for Cause
Severe misconduct, policy violations, and unsatisfactory performance over time can all be reasons for termination for cause, which is termination by an employer of an employee's position. Layoffs and employment restructuring are not factors in this. It concerns only actions that destroy the employer-employee relationship because the employee's actions become so detrimental to the firm that the employee can no longer be employed.
Most commonly, an employee in a workplace is terminated for cause if the worker:
Engages in theft, fraud, and/or document falsification
Disregards a company policy, including safety measures
Harassment or threats are directed at coworkers
Uncorrected poor performance is the case
There is a lack of obedience to reasonable direction
Confidentiality and other contractual obligations are breached
The company does not require severance, nor is not given prior to the termination, because the lack of due process is equal to the cause of termination.
Common Grounds & Scenarios That Justify Termination for Cause
For cause termination is usually explained by the employer because one or more of several factors.
1. Termination for Gross Misconduct or Sabotage
Stealing, cheating, embezzling, offending, or misappropriating the company's funds or any other assets
Knowing the company's policies, employee manuals, and company information, then intentionally providing false or misleading information or engaging in actions designed to sabotage the company
Any abusive behaviour, or the offer or threats of abuse or violence to one or more coworkers or customers, destroys workplace trust and/or safety.
Confidentiality breaches, or if security or other essential confidentiality provisions are violated
2. Unlawful Behaviour or Other Illegal Acts
Criminal behaviour is committed, on or off duty, in positions of significant trust or responsibility (i.e. fraud, drunk driving, or the use of illegal drugs or alcohol in violation of company policy) and is not otherwise protected by law.
Misconduct that undermines the reputation of the employer or otherwise compromises the safety of other employees.
3. Chronic Incompetence and Poor Performance (when documented)
Failure to meet job standards on a regular basis after being given adequate training and multiple administrative warnings
Continuous failure to carry out the requirements of the job; frequent tardiness; frequent absenteeism; failure to comply with legal instructions (i.e. insubordination)
4. Undermining Trust or Situations Contravening the Contractual Obligations
Completes a set of false documents (i.e. timesheets, documents for absences, performance documents, documents relating to clients)
Consistent and/or serious breach of the provisions of the employment contract (such as the breach of confidentiality provisions, breach of safety provisions, breach of non-disclosure or non-disparagement agreements)
Why It Is Important: Risks and Consequences
Dealing with a 'for cause' termination is a difficult situation for both the employer and the employee.
Employers: They stand the risk of being sued for wrongful termination with no justification or legal cause for the termination.
Employees: Employees run the risk of termination with cause, losing severance benefits, being denied their right to unemployment benefits, and suffering future consequences for their employability.
Both Employers and Employees: Mistakes can expose the company to wrongful termination disputes, lawsuits, and reputational harm if the termination is perceived to be random, arbitrary or if the termination is undocumented or poorly documented.
Best Practices for Employers: How to Handle Termination for Cause the Right Way
When a corporation decides to terminate for cause, there are legal ramifications and impact to the corporation's reputation that have to be taken into account. Recommended practices can be utilized to minimize this, such as those provided below, which are grounded on advice from HR attorneys and industry publications:
Clarifying policies upfront: have a company code of conduct or employee handbook in place, which clearly states the behaviour or performance issues that may lead to termination of employment for cause. This eliminates ambiguity.
Make sure to document everything that is of concern: keep a record of incidents, written warnings, performance improvement plans, any investigations, and all communicating. The documentation should be objective, and should be thorough and durable, and should not just be verbal.
Maintain equity and consistency: hold the same line across employees. If a person is not similarly situated, there will be claims that the termination is random or perhaps discriminatory.
Use clear, unambiguous language in termination letters: Wanting to take disciplinary action could lead to an absence of clarity in communication or an unclear rationale behind some of these decisions, especially in reference to an ambiguous "violation of general employee misconduct" with no employee misconduct.
Balance confidentiality with communication: Limit communicating details to only those to whom you must communicate details, protect the employee's privacy, and prevent embarrassment, further harm to reputation, and harm to the employee's organizational morale.
Respect applicable labor and employment: Legal standards in the area in which you are located. Jurisdictions may be more protective of employee rights and restrict what constitutes "just cause" termination.
Common Challenges & Grey Areas
Even with good policy, some situations can be tricky.
Minor error, serious misconduct: The single low-level error may by itself be insufficient. Usually, a more serious breach of divergence from expectations, and especially repeated, is required.
No documentation of a record: With a low record (i.e. warning, performance reviews, misconduct record), an employer may be unable to defend having cause in a termination and become the subject of a legal challenge.
Subjective: Performance reviews, "attitude" and/or fit may be subjective, which, if challenged, could lead to concerns of discrimination if the process is not both clear and consistent.
Cultural and legal differences across jurisdictions: standards surrounding cause, required notice, severance rights, at will, and other doctrines can vary greatly depending on the statute, case law, or employment contract.
Practical Recommendations for Employers
Have unequivocally clear organizational policies on specific unacceptable behaviour, performance benchmarks, disciplinary progression, and disciplinary procedures and outcomes.
Utilize documented cautioning, performance improvement plans, or progressive discipline unless the behaviour is so extreme that instant termination is warranted.
In the case of severe misconduct, conduct a proper and impartial investigation involving termination, including collecting evidence, interviewing witnesses, and maintaining documentation.
In regard to termination letters, provide an unequivocal statement of the specific reasons and cite the portions of policy that are in violation and the specific contractual terms, and ensure that local labor legislation is adhered to.
The same principles should be applied to all employees for identical behaviour. This lessens the perception of inequity and the likelihood of a legal challenge.
If the situation is high risk, for example, there are allegations of misconduct, discrimination, or safety violations, a legal review or consultation should be considered.
Why This Matters (And Common Misconceptions)
There is a common misconception that termination for cause is simply firing an employee for bad behaviour. The truth is, there is a need for serious or repeated misconduct, substantial documentation, and a fair process to be in place, rather than it being a random decision.
Some people believe that employers can terminate an employee for cause at any point in time. This is entirely dependent on both the legal situation and the employment contract, as cause-based termination has to satisfy legal requirements in a lot of jurisdictions.
The assumption that termination for cause, by definition, always involves misconduct is also common. However, documented and proper management of poor performance, ongoing and consistent under-performance or incompetence due to lack of improvement after sufficient warning and the use of improvement plans is also acceptable grounds.
Pros and Cons of Using Termination for Cause
Pros
1. Protects the organization
When an employee engages in misconduct, fraud, or breaches policy, an organization is better off financially, and in some cases even better off reputation-wise, when that employee is removed quickly.
2. Reinforces accountability
When employees see what happens to people who engage in misconduct, and how serious violations result in termination without severance, employees recognize that action is taken, and this supports a culture of safe and responsible engagement.
3. Avoids unnecessary severance costs
When termination is for cause and tied to an employee's actions, employers do not typically have to provide severance, extended notice, or any other compensation that is required of employers when employees are laid off for other reasons.
4. Reduces risk to clients and partners
When an employee is terminated for cause, that reduces the risk that the employee will continue to work for the organization and the harm such an employee could do to the organization’s customers or the contracts the organization is required to comply with.
5. Supports compliance
Most heavily regulated industries, such as finance, healthcare, and security, as well as data privacy, are industries that require immediate action when breaches occur. Termination for cause assists in meeting those compliance demands.
Cons
1. High legal risk if not documented properly
The most prevalent issue arising from the lack of facts surrounding a situation that supports termination for cause is the employee filing a wrongful termination suit against the employer.
2. Requires thorough investigation
Cause-based termination is not without a few complexities of its own. Facts need to be gathered, potential witnesses interviewed, and records need to be reviewed before any actions can be taken.
3. Impacts Employee Morale
When terminating an individual employee and/or an entire team, if their termination is perceived as being done in an unfair and unreasonable manner, it is likely to lead to fear, uncertainty, and distrust of an organization and its management.
4. Possibility of Misunderstanding
Certain behaviour might appear as though there is a violation of a policy of misconduct; however, those actions, behaviour, or policy violations might not be linked to misconduct, but rather, to health issues, to health-protected rights, disabilities, relayed communication issues, vague communication, or unclear expectations, or a lack of them. Being preemptive could lead to worsening the situation.
5. Wider Scope of Law in These Areas
Different regions of the world have more refined categorizations of what is considered to be a reasonable cause. If those criteria are not met, it is likely that the termination of the contract can be voided, it can lead to punitive damages, or that termination could be financially punitive in nature.
Real-World Examples of Termination for Cause
Example 1: Forgery of time documents
An employee clocked in remotely and stated that they were working, but there were videos showing that they were not working. This is an example of fraud and time-stealing.
Platforms that track time, such as OpenTimeClock, are often used as evidence during these cases.
Example 2: Persisted complaints of harassment
Even though there had been inappropriate comments in the past, the manager continued to make them and received no training. HR recorded every complaint and every training attempt.
The pattern, along with the complaints and warnings, led to the conclusion of termination.
Example 3: Violations of safety
An operator of a piece of equipment created a risk for other people by not following latch/tag procedures after being told multiple times. Safety violations of this magnitude are often classified as gross misconduct.
Example 4: Disclosing confidential information
An employee disclosed information about a customer to a third party. Even if this were to be an accident, it is grounds for termination because of the risk related to regulations and contracts.
Example 5: Excessive absenteeism
An employee had missed work on multiple occasions, and this was without an explanation, documentation, or HR threats.
Termination related to attendance is a frequent occurrence when it is monitored in an automated way.
Conclusions
Termination for cause is a serious action that requires clear documentation, consistent application of policies, and fair process. By following established procedures, communicating expectations, and maintaining thorough records, employers can minimize risk while ensuring decisions are legally defensible and respectful to all parties involved.
FAQs:
1. What does “termination for cause” mean?
It refers to ending employment due to serious misconduct or policy violations.
2. Do employers need documentation to terminate for cause?
Yes. Detailed records help justify the decision and reduce legal risk.
3. Can an employee be terminated for cause without warnings?
Yes, if the misconduct is severe (e.g., fraud, violence).
4. Should employers conduct an investigation first?
Absolutely. A fair, objective investigation is a best practice.
5. Can terminated employees receive severance?
Usually no, but it depends on company policy or contract terms.
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