Differences Between Termination for Cause and Without Cause

Termination with cause and without cause are the two basic types of involuntary termination in a workplace. To fire an employee with cause, the action must result from either policy or ethics code misconduct or significantly poor performance. In the absence of these reasons, a firing is generally regarded as termination without cause. Understanding the implications of each is important to your business.

Companies normally lay out standards of behavior for employees in a policy manual. A separate code of conduct may outline specific misconduct causes for termination. While company policies vary, common misconduct causes for firing someone include violence, drug and alcohol abuse, misuse of company computers and equipment, theft of property and sexual harassment. In some cases, first offenses result in automatic termination. With lighter violations, you might spell out a sequence of offenses where the result is termination.

Termination resulting from poor performance is sometimes considered "without" cause, although the cause is the lack of production or poor performance. To fire someone for this reason, it is generally best to document the performance compared to goals. You also want to communicate to the employee, especially in formal evaluations, that her performance requires improvement. Documented instances of weak performance and effective communication protect you against wrongful termination lawsuits.

The expression "termination without cause" is a bit misleading because you have a reason to fire the employee. The real meaning behind this type of dismissal is that the employee's actions or performance didn't prompt the move. Budget problems, operational restructuring and downsizing are common reasons for termination without cause. An private employer has the right to fire someone without cause based on work at-will laws present in some form in all 50 states, unless such a move violates state or federal employment laws.

Title VII of the 1964 Civil Rights Act, the Americans with Disabilities Act and Age Discrimination Act are among laws that protect certain individuals from termination based on personal traits, such as age, race, gender, national origin and disability. To avoid potential discrimination lawsuits, it is important to ensure that these traits aren't a factor in layoff or termination without cause decisions. You also face potential wrongful termination suits if you don't communicate reasons for termination to employees. Some states require severance pay for employees terminated without cause, and employees may file unemployment claims.