The termination of an employee is always complicated, but it is even more complex when the employee has a high level position and an employment contract. When the employment agreement sets out the circumstances under which the employment may be terminated, a failure to follow it can have expensive consequences for the business. Employment agreements commonly require an employer to pay severance for termination without cause, so it is very important for the employer to follow all of the contract’s requirements when terminating for cause.
In EventMonitor, Inc. v. Leness, the plaintiff was a software company that had hired the defendant as its vice president for business affairs in 2001. Pursuant to the agreement, the company could terminate the defendant without cause with 30 days’ notice, but it had to pay severance of 12 months’ salary and benefits in the event of a no-cause termination. The contract required the company to pay unused vacation time, regardless of whether termination was for cause or without cause. There was also a non-disclosure provision that required the defendant to return any items with proprietary information, including any copies.
In 2007, the defendant presented a business proposal to the company president that would spin off the sales and support business into a new company, led by the defendant. The new company would take most of the revenue, which came from service and licensing agreements. The president thought that the defendant developed the plan out of his own self-interest and that it demonstrated a lack of loyalty to the company. The company notified the defendant of his termination.
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