HR Manager Signing a Contract Agreement with Employee

What Happens When an Employment Contract Is Breached?

TheParzivandLaw Firm, PLLC Sept. 28, 2023

Running a business is hard work. You have to stay on top of every facet of your operations, and this includes all contracts, whether they be with suppliers, contractors, or clients. However, perhaps the most important legal agreement that you can make is an employment contract. These contracts must be well written and thoughtfully constructed to ensure both parties are informed about the employment agreement and that your interests are protected should a dispute arise.  

If you’re currently dealing with a breach of contract issue with an employee or you are in the beginning phases of a dispute and are trying to avoid legal trouble, call The Parzivand Law Firm, PLLC, serving those in Stafford, Texas, as well as Sugar Land and Fort Bend County.  

What Is an Employment Contract? 

An employment contract is one of the most basic legal agreements used in the business world and sets out the terms of service for an employer and an employee. This could be for a part-time, full-time, temporary, intern, or contract/freelance worker. These contracts should be written, though in some cases, a verbal employment contract may be made. 

Each employment contract should be tailored to the specific job and expectations and can include several components. Examples of these can include:

  • Non-disclosure agreements (NDAs) 

  • A detailed description of the job duties 

  • Non-compete clause 

  • Steps on how to resolve disputes 

  • Terms of termination or resignation 

  • Rules and regulations of the employer and the workplace 

  • Commencement date and duration of the employment contract 

  • Details about the compensation and benefit package 

Common Breaches 

When one party (and this can be the employer or the employee) violates a term of the contract, this is called a “breach”, and this can happen for a number of reasons:

  • An employer refusing to pay, withholding pay, or reducing pay from an employee without just cause 

  • An employer failing to follow the correct protocol for termination  

  • An employee quitting without giving proper notice 

  • An employee establishing another contract with a competitor that violates a non-compete clause 

  • An employee sharing trade secrets with a competitor 

  • A new employee turning down a job offer after they’ve officially accepted it and signed a contract 

  • An employee not meeting the basic terms of employment such as not working the specified hours that were agreed upon 

What Constitutes a Breach? 

Contract breaches typically start out as disputes and (hopefully) can be addressed and remedied without having to resort to legal action. All contracts should contain language that outlines the steps for resolving disputes. This typically includes meeting with a mediator or an arbitrator to come to an agreement on how to move forward. Even in the beginning stages, it's important to work with a qualified business attorney to ensure you’re staying on the right side of the law and protecting your interests.

Breaches can be categorized in a few ways, and each will need to be handled differently:

  • Material breach: These are typically the most serious breaches and will often result in some kind of harm to the other party. 

  • Non-material breach: This type of breach usually occurs when only a portion of an employment term is violated or not followed correctly.  

  • Anticipatory breach: In contrast to the previous two examples, an anticipatory breach occurs before the violation has actually happened. In these cases, one of the parties states or implies that they’ll be unable to fulfill a certain provision of the contract and steps are taken to address this.  

Because many breaches may be complicated or couched in legal terminology, it can be helpful to have an attorney who’s well-versed in employment law review the contract and analyze the available evidence before any steps are taken to address the breach with the employee.  

Possible Damages  

In any lawsuit, one party is suing the other for damages, and the specifics of these will depend on the nature of the contract and the breach. Some of these may be legal damages in which one party will pay the other for the harm done (called compensatory damages). An example of this would be expected wages that an employee or employer has missed out on due to quitting or being terminated without notice. 

In other cases, a judge may award an equitable remedy. In this type of situation, there would be no money changing hands, but the court may require the contract to be revised or updated with new terms, that an employee be reinstated who was fired without just cause, or the contract being canceled altogether with no monetary penalty. 

Don't Face This Alone 

Employment contract law can be extremely complicated, and the last thing you want as an employer is to be entangled in a messy legal battle with an employee. By working with The Parzivand Law Firm, PLLC in Stafford, Texas, you’ll get the focused attention of an attorney who’s committed to your case no matter where it goes.