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Terminating an employee for cause isn’t something to take lightly. It carries real consequences—not just for the person being let go but for your organization’s legal standing, financial liability, and the morale of your remaining team. There's a lot at stake, especially if the reasons for termination aren't well documented or the process doesn't align with local labor laws.
While some dismissals happen because of obvious infractions, others fall into gray areas that require careful handling. When things go wrong, disputes over unemployment eligibility or wrongful termination claims can drag on. That’s why it’s important to understand what qualifies as termination for cause, how it differs from other types of dismissal, and what steps to take to protect your business.
In this guide, we’ll tell you what you need to know.
What is termination for cause?
When someone's employment is terminated for cause, it means their employment ends due to misconduct or serious performance issues—something significant enough that the termination of employment becomes necessary. Common termination for cause examples include theft, insubordination, breaches of confidentiality, safety violations, or ongoing underperformance despite repeated warnings. Employers often use progressive discipline—such as verbal warnings, written notices, and performance improvement plans (PIPs)—to address performance issues before considering termination.
A team member may be fired for cause without advance notice—but only if the issue is well-documented and serious enough to warrant immediate dismissal. A letter of termination should clearly state the reason for dismissal and reference company policy or terms of the employment contract.
For team members working under union agreements or fixed-term employment contracts, termination typically requires more than general dissatisfaction. Employers must back it with specific, documented conduct that can withstand legal or contractual scrutiny, not just employer discretion. Unlike at-will arrangements, these terminations require clear justification. When done correctly, termination for cause limits the employer’s liability. When handled poorly, however, it can lead to legal disputes and reputational damage.
Differences with termination without cause
Not every dismissal stems from misconduct. When an employee is let go for reasons unrelated to performance or behavior, like budget cuts, restructuring, or role redundancy, it’s considered termination without cause. These decisions still need to be lawful, but they don’t require the same level of documentation or justification as termination for cause.
The key difference lies in the employer’s obligations. In many countries, termination for cause may relieve the employer of providing severance, notice, or continued benefits, depending on local employment law. But termination without cause often requires employers to give advance notice or provide payment in lieu of it. Severance packages are also more common in these cases, whether mandated by law, outlined in company policy, or offered to reduce legal risk.
Procedurally, terminating someone without cause tends to be more structured and proactive, allowing time to plan the transition and hand over responsibilities. Conversely, termination for cause usually happens quickly and in response to serious misconduct. If the employer mishandles the process or can't justify the decision, it can lead to unfair dismissal claims.
6 reasons for termination for cause
Termination for cause typically results from a serious breakdown in conduct, trust, or performance. Whether you're addressing misconduct or persistent poor performance, the reasons must be specific, documented, and justifiable. Here are some of the most widely recognized causes:
1. Gross misconduct
This refers to deliberate behavior that undermines workplace safety, integrity, or trust, such as harassment or intentionally disregarding workplace rules. In some cases, it shows blatant disregard for the employer's interests and makes continued employment untenable.
2. Criminal behavior
Crimes like theft, assault, or driving under the influence while on the job cross a line that makes it hard to keep the person on. Even pending charges may justify dismissal if they interfere with the role or violate company policy.
3. Safety violations
Safety rules exist for a reason, and employers count on employees to follow them to protect both themselves and the team. Skipping checks or using equipment without clearance puts people in danger and can lead to immediate termination.
4. Excessive absences
Repeated no-shows or unexplained absences—without valid medical or legal reasons—can disrupt operations and strain teams. Most companies outline clear attendance expectations in their policies, and violations can become grounds for dismissal.
5. Alcohol or drug misuse
Showing up to work under the influence or failing a drug test can raise serious safety, performance, and liability issues. Many organizations have zero-tolerance policies that allow for swift termination in these cases.
6. Policy violations
Disclosing confidential information, abusing company resources, or violating anti-harassment rules can all warrant termination—especially when the breach is intentional, repeated, or clearly against written policy.
Employer considerations in termination for cause
Terminating someone for cause often involves a series of legal and contractual responsibilities. Employers need to manage every step carefully—how they enforce contracts, handle benefits, and issue final pay—to avoid legal missteps and costly disputes.
Among the many considerations, these tend to have the greatest impact:
Union contracts
Employers can’t dismiss employees covered by a collective bargaining agreement (CBA) without cause. Most CBAs require the employer to present documented evidence that the employee violated specific contract terms, such as safety protocols or behavioral standards. If the union believes the termination was retaliatory or procedurally flawed, it can result in a grievance process or legal challenge.
Severance agreements
Employers typically provide severance pay in terminations without cause, but in cases of misconduct, severance usually doesn’t apply. The terms of a severance agreement often vary—if one exists, it outlines whether the worker will receive compensation, notice, or other post-employment benefits.
Unemployment benefits
In many jurisdictions, termination for cause makes an employee ineligible for unemployment benefits. State agencies often deny claims if they find that the dismissal was justified—typically based on evidence of misconduct or policy violations. But if documentation is weak or the termination appears retaliatory, they may approve the claim.
Final pay and legal obligations
Regardless of the reason for termination, employers must still meet legal obligations related to final compensation. This can include owed wages, unused vacation time, and other entitlements. Because rules vary by location, following final paycheck laws is key to avoiding compliance issues or penalties.
Stay compliant with Oyster
Termination for cause is a legal event with real consequences, especially across borders. What qualifies as justified in one country may be unlawful in another. Without specialized support, it’s easy to make costly mistakes.
With Oyster, you can offboard confidently and compliantly, in line with local labor laws and cultural norms. Oyster’s experts understand region-specific rules and guide you through every step, helping you avoid fines, legal disputes, and reputational damage.
From employment agreements to offboarding workflows, Oyster simplifies compliance in every jurisdiction where your team operates. And with Oyster’s Global Compliance, you can stay aligned with local laws at every stage of employment, from onboarding and daily operations to a compliant, well-managed exit.
Book a demo to see how it works.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
