Get out of an Employment Contract

An employment contract lays out the details pertinent to an employer-employee relationship. This legally binding document is usually beneficial to both parties. An employment contract clarifies each party’s responsibilities and provides stability to both parties. However, the stability that an employment contract provides also can be problematic if the employee wants to end the employer-employee relationship. It is essential to keep in mind that the other party potentially may sue you for financial compensation if you wrongfully terminate the contract prematurely.

Steps

Determining Your Legal Obligations Under the Contract

  1. Determine if you have an employment contract. While you may have a written employment contract in some cases, contracts can be implied in some states. For instance, if your employer has an employee handbook, it may impliedly create a contract by which you are bound, under some states' laws[1]
    • If you don't have an employment contract, you are an employee at will. This means that you can be fired for any reason or no reason, so long as that reason is not illegal. For instance, an illegal reason for firing an at-will employee could be racial discrimination.
  2. Read your employment contract. You might not have read your contract fully at the time you signed it, but when you are thinking of ending your employment contract, you should definitely read it. Read the entire thing, but pay close attention to the clauses that discuss termination, cancellation, or any other section that deals with the ending of the employer-employee relationship.
  3. Determine whether there are any circumstances listed in the contract that allow one party to end the contract. If the party wishing to end the contract early does not have a legally valid ground for terminating the contract, then the other party can sue him or her. A lawsuit can result in one party being ordered to pay the other damages, or compensation for breaking the contract.[2]
    • Some contracts might have a termination clause if the employee becomes disabled or otherwise physically incapable of performing the acts set forth in the employment contract.
    • There also may be provisions in the contract that void the contract if one party does not perform as agreed. For instance, if the employer agrees to pay the employee $500.00 when a certain act is completed, and the employer doesn't pay him, then the employee may have valid grounds to terminate the contract.
    • There may be a chance of early termination of the contract if the employee gives a certain amount of notice to the employer, or if he or she pays the employer a predetermined amount of money. While you might need to pay a financial penalty for early termination, paying the full amount promised in the contract may prevent the employer from suing the employee for breaking the contract.
  4. Decide if there are any penalties or repercussions for ending the contract early. For example, an employment contract might require that the party who breaks the contract pay certain fees or damages. Another common provision in employment contracts is that if the contract ends prematurely, the employee might not be able to engage in the same type of business in the local area for a certain period of time. Based on the contract provisions, you will have to determine whether it is worth it—legally, financially, and professionally—to bear those repercussions.
  5. Review the term of the contract. Some contracts contain a provision stating the effective date and termination date of the contract. If you have been working with the other party for a long time, the contract might have expired. In this case, you will no longer be bound by the terms of the contract and are free to move on..

Evaluating Your Legal Grounds for Terminating the Contract

  1. Determine if the negotiations leading up to the contract make it void. There are certain situations in which you may be able to prove that your employment contract is void, or not enforceable. If some specific factors existed that caused you to sign the contract, then you may have grounds to legally terminate it. For instance, if your employer promised you certain benefits and then later refuses to provide you with these benefits, you may have grounds to terminate the contract.[3]
    • If fraud by the other party caused you to enter into the contract, you may have legal grounds for ending the contract without penalties. Fraud in negotiations makes the contract void. For example, if an employer lies to a prospective employee in order to get him or her to sign the contract, then the contract is void. If your employer told you that you would be paid $20 per hour, and, after signing the contract, he only paid you $10 per hour, then you most likely have grounds to terminate the contract.
    • If the parties made a mutual mistake about information that is central to the contract, then the contract is also void. Mistake might occur, for instance, if you thought you were signing an employment contract to work at a certain location, but your employer assumed that you would be working primarily from another, more remote location.
    • Undue influence might occur if one party is in a superior position over the other when they are negotiating a contract. This is another factor that might void the contract. This is a common occurrence when an employee is negotiating with an employer, as the employer often has a far superior bargaining position than the employee.
    • A contract may contain provisions that are so unreasonable that it is automatically void. This occurs when a contract is so one-sided or unfair that the agreement is void. For instance, if an employment contract requires an employee to work an unpaid one-month probationary period, the contract very well may be void.
  2. Consider whether there is a legally valid reason to end the contract or that makes the contract void. Some states require that contracts be in writing and be set for a definite term in order to be enforceable. A contract without these elements would be void. Furthermore, even if there is no applicable provision in the contract that allows you to terminate it, there may be other reasons that you can legally break the contract. For example, if the terms of the employment contract are overly vague or illegal in some way, then you may have grounds to legally terminate the contract.[3]
    • For example, contracts that are impossible to perform can be terminated. In order to be “impossible,” fulfilling the contract must not be simply difficult. The terms of the contract must be impossible to accomplish. For example, suppose that an employer contracts with an employee to work for employer’s car wash, and the car wash goes out of business. In this situation, it is impossible for an employee to work at the car wash, so the employment contract would terminate.
    • A breach of the employment contract may excuse one party’s performance under the contract. A breach occurs when either party fails to perform his or her duties under the contract. A typical breach in employment contract cases occurs when an employer fails to pay the employee at the time or in the amount that is stated in the contract. This type of breach not only allows the employee out of the contract, but may also give the employee cause to sue the employer for damages.
    • Entering into an employment contract requires both parties to treat one another fairly. This is commonly referred to as the “covenant of good faith and fair dealing.” If one party acts unfairly toward another, then he or she very well may have violated this legal duty, which can be grounds for terminating the contract. For example, if the parties have agreed that an employee should start working as a manager for a store on January 1st, but the store ultimately does not open until nine months later, the employee has a valid reason to terminate the contract. To expect the employee to go nine months without work or pay would be unfair.[4]
  3. Consult an attorney. If you are unsure about whether you will owe the other party money, or are liable to be sued for ending the contract, you should speak with an attorney. A qualified and experienced employment attorney is the best person to give and employer advice about the consequences of breaking your employment agreement. He or she also can help you determine if there is any way for you to avoid these repercussions and still get out of the contract.

Negotiating and Terminating Your Contract

  1. Consider whether the other party will agree to end the contract. If you are unhappy in your current employment situation, consider that the other party to the contract may be unhappy as well. If both parties agree, they can rescind the contract and let each other out of the agreement. A mutual agreement to terminate the contract early is often the best-case scenario for getting out of an employment contract.
  2. Determine how much notice you owe, if any. Once again, you will need to go back to your contract to determine how much notice, if at all, you owe the other party before abandoning the contract. A typical timeframe is two weeks, but the required notice can vary from contract to contract. Take into account any accrued vacation time into your calculation, if applicable. Failure to give the required notice can lead to you being financially liable to the other party for breaking the contract.
  3. Negotiate the terms of the contract. If your employer is not as eager to end the contract as you are, you may be able to negotiate terms of the contract in order to persuade the other party to allow you to end it early without negative consequences. For instance, you could agree to give your employer time to find a replacement, you could offer to stay on in order to train a new employee, or you could offer an employee a severance package. These sorts of negotiations may help end the contract on good terms for both parties.
  4. Use a mediator to negotiate. Sometimes, the assistance of a mediator or another neutral third party can help you negotiate the terms of ending the contract. This is much less expensive alternative to going to court and litigating your dispute. Plus, it can help you reach a mutually agreeable settlement that will end the contract in a way that you both can live with.
    • Most state bar associations maintain a list of mediators who are certified by the laws of that state. Contact your state bar association for more information.

Sources and Citations

  1. ↑ http://www.bls.gov/opub/mlr/2001/01/art1full.pdf
  2. ↑ http://corporate.findlaw.com/human-resources/what-goes-into-an-employment-contract-and-why.html
  3. ↑ 3.0 3.1 http://www.legalmatch.com/law-library/article/defenses-to-breach-of-employment-contract.html
  4. ↑ http://www.nolo.com/legal-encyclopedia/written-employment-contracts-pros-cons-30193.html
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