From the point of view of the association, however, too narrow a definition of causes carries a considerable risk. In such a case, the board of directors, if it finds that it must remove the officer in the best interest of the organization, may be obliged to pay a significant severance package. In another common scenario, a board may attempt to stretch an ambiguous definition of causes to cover its reasons for terminating the executive`s employment. The dismissed executive then implements the board`s interpretation, and the organization is involved in a costly breach of action. The concept of dismissal for work reasons appears in employment contracts. That is where it should be — do not put it in other types of contracts. Carefully developed redundancy provisions in executive employment contracts can avoid such results. These provisions should improve the executive`s direction and emphasize both the clarity and maintenance of the association`s reputation and the long-term health of the association. None of these provisions would allow the employer to dismiss the executive on grounds of negligence or even negligence of its duties.

A stronger definition of the case would cover any termination based on non-compliance with defined performance objectives or objectives that were communicated to management, whether or not the error was made. Faced with these unpleasant options, some boards may decide to keep an executive until the end of the term of the contract, even if this may harm the association, as the organization cannot afford to pay both severance pay and the successor`s salary. Other chambers negotiate a compromise award to avoid litigation or public dispute. When a board of directors decides that it must terminate the employment of a CEO, the terms of the management`s employment contract determine whether the association should pay severance pay. Carefully designed definitions of "cause" are essential. Many "for reasons" sections in the contracts I see define "cause" to include employer discretion. For example, "behaviour that harms the company as determined by the employer alone." This language, which may grant discretion to the employer, can be very problematic because the employer, regardless of what the evidence proves, can argue that "at its sole discretion" there are grounds "for substantive reasons". I`ll spare you the stories about the legal battles that fight over "discretion" in "for reasons" employment contracts. The fact is that taking the discretion of any "cause" provision, or at least limit discretion as much as possible (i.e.

"appropriate discretion"). First, you need to understand how long your contract lasts and when you can be fired "for no reason." If your contract. B is very short term or if you can be terminated "for no reason" with a period of thirty days, it makes little sense to negotiate a strong party "for the cause".