What is “good cause” for termination?

One of the advantages for employees of entering into an employment contract is that the employee can require the employer to have “good cause” before firing the employee. But what is “good cause? What are the types of employee conduct that justify being fired? What are the types of employee conduct that do not justify being fired?

Under Texas law, good cause is the employee’s failure to perform the duties that a person of ordinary prudence in the industry would perform under similar circumstances. However, because this definition is vague, parties should specifically state what constitutes good cause in their employment agreement. However, generally, good cause is not dissatisfaction with the employee’s work or an economic reduction in force.

Good cause may be an act of insubordination or failure to follow a clear and reasonable order of the employer, failure to follow the reasonable rules of the employer, dishonesty on the job, obtaining the job under false pretenses, conduct toward fellow employees that interfered with the employer’s business, failure to perform the duties of employment in a competent manner despite adequate training. For example, an employee who lied on his job application about workers’ compensation history can be terminated for good cause. Similarly, an employee who, without permission, temporarily removes company property from company premises for personal use can be terminated for good cause.

Other examples of good cause include fraud or embezzlement, violation of federal, state, or local law, harassment of employees or customers, use of alcohol or drugs in the workplace, carrying weapons in the workplace, or failure to comply with safety rules or regulations. Because there is no one definition of what exactly constitutes good cause, it is very important that parties set out in their agreement what actions or conduct can justify firing the employee.

Termination for good cause puts the employee in a much better position than he would be under the Texas default rule of employment at-will. The parties can expressly state in the contract that the employer must have good cause to fire the employee or it can be implied from the agreement. For example, a definite-term contract that does not mention good cause will usually be interpreted to allow discharge for good cause.

An employee at-will can be terminated for any reason, with or without notice. While at-will termination has few limitations, termination for good cause requires the employer to show much more before he can fire an employee. The good cause standard provides the maximum job security for a Texas employee, and the employer bears the burden of establishing that he had good cause to fire the employee.