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Early termination of a fixed-term contract

Employers and employees in California who sign a fixed-term contract should understand what it means and the consequences associated with early termination. There are a number of reasons why a contract may be used, and it often lays out salary and benefits, confidentiality provisions, employment term and the consequences of ending the contract early.

According to FindLaw, either the employer or employee can end the employment for any reason. Typical reasons contracts are ceased early include:

  • Firing by the employer, either for or without cause
  • Employee resignation
  • Disability
  • Death

While it is possible to end a contract, there are consequences for both parties. For employers, the biggest effect is financial. In the majority of cases, they are still responsible for paying the employee for the term of the contract, even if the employee is no longer working there. It may also take them awhile to find a replacement, which can affect productivity.

Employees also feel the effects of early termination. According to the Chronicle, workers may also be hurt financially because often the case needs to go through legal channels, which can take months. Finding another job may be affected because employers look at early termination, even if there was no negative reason, as a red flag. Their tarnished reputation can affect future employment for good period of time, and low morale is often a consequence. Whether an employer ended the contract, or there is a general disrespect, the employee can be influenced for a long time. In order to avoid getting into a shady contract, workers should do their due diligence to make sure they avoid companies that have uncertain hiring practices. 

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