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For executives, breaking an employment contract isn’t just about resigning — You would be leaving with no protection from your contract and possibly violating your contract. Before you leave, make sure that you have a “good reason” to leave stated in your contract.
At Gardner Employment Law, we can provide you with advice on resigning from your job and help you secure the protections you deserve. Read on to learn more about “good reason” clauses.
What Are the Consequences of Breaking an Employment Contract?
If you break the contract without following the process required in your contract, the employer can seek to enforce penalties against you or file suit against you for damages, attorney’s fees, and costs. Many executives have signed an employment agreement that includes strict procedures for ending the contract, such as notice periods, severance terms, and repayment obligations for bonuses or relocation assistance. Ignoring those contract provisions carries heavy legal consequences.
Even in at-will employment states like Texas, executives are bound by their employment contract and its exit terms. Because the stakes are high, executives should carefully review their employment agreements and consult an experienced employment attorney before making any moves.
Executives who breach a contract face severe financial and legal consequences. Employers may demand compensation for lost revenue, operational disruptions, or recruitment costs. Some employment agreements also contain penalties for early termination, such as requiring repayment of signing bonuses, stock options, or relocation benefits.
Beyond financial liability, your employment relationships can suffer. The executive job market is small, and a poorly handled departure can damage one’s reputation. Future employers may hesitate to hire someone who has faced legal action or contractual disputes.
Sometimes the employer materially breaches the contract — such as failing to provide agreed-upon compensation or making significant changes to job duties. In that instance, you may have the right to recover penalties from the employer, but only if you have a “good reason” clause in your contract, as discussed below. You should always document any breach by the employer to prove your contractual rights to recover damages.
How Can You Resign Without Legal Risk?
Always follow the words in your contract and take the required steps before leaving. You may be able to leave a position without liability if you follow the proper resignation process.
The primary requirement is proper notice to the employer. Sometimes the executive may have an obligation to repay a “loan,” often given at the time of hire to entice the executive to take the offer. However, if you have such a loan, it must be repaid if you do not remain employed for a stated period of time.
If you want to resign, start by reviewing your employment contract to understand the terms and what they require you to do, including notice periods and financial obligations. Most agreements require written notice 30 to 90 days in advance, sometimes 6 months, delivered in a specific format.
To ensure a smooth transition while avoiding legal action, you should:
- Review the contract to understand your obligations and potential risks.
- Provide proper notice in writing, following the required format.
- Discuss the transition with the employer to maintain professionalism.
- Document any employer breaches if using a good reason clause to resign, explained below.
- Seek legal advice from an experienced employment attorney before making a final decision.
By following the proper steps and understanding employment laws, you can protect your financial interests and professional reputation while making a career move.
Do You Have a Good Reason Clause?
The best way to resign is to make sure you have a “good reason” clause in your contract. What is that, you ask? In the termination section of the contract, you want to have a provision defining “good reason” for you to leave. Typically, this is a list of actions that if taken by the employer will give you the right to end the contract plus receive compensation for the breach.
The “good reason” clause will require certain steps for you to take, such as providing the employer notice of the breach with an opportunity to “cure” or remedy the problem voluntarily. Sometimes a perceived breach turns out to be a misunderstanding or even a mistake in the accounts payable department, for example, that can be fixed. After you follow the required steps but the employer refuses to make changes, you can leave and file suit to collect damages.
Once we had an executive come into our office after the oil company had breached his contract. The contract provided several million dollars for the breach.
The executive announced that he wanted “$12 million.” We were able to get him $9 million plus recovery of all his attorney’s fees and costs. Not a bad day in court.
Contact Us
At Gardner Employment Law, we are well-versed in contract law and negotiation strategies. We dedicate ourselves to the pursuit of our client’s job security and benefits. If you need job protection strategies, give us a call today.