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What Happens When an Employment Contract Is Breached?

Leet Law June 22, 2022

Terms of Employment ContractYou’ve spent years establishing your business and getting it to where it is today. You need to ensure it stays protected. Even though you do everything you can to keep it stable and running, it’s not immune to cracks. When these fissures do happen, you need to act fast. A breach of contract from an employee has the potential to jeopardize your hard work and threaten not only your bottom line but also the integrity of your business. 

If you’re looking for a business attorney in the San Jose, California area, contact us at Leet Law today. We’re able to help clients throughout the Bay Area including San Francisco, Oakland, and Palo Alto.

What Is an Employment Contract?

When a worker takes on a new job, they’ll likely have to agree to an employment contract. This contract outlines the basic terms of the employment that both the employer and the employee must adhere to. This is usually a signed document, but a contract may also be oral or implied (such as when terms are laid out for all employees in a handbook). Once the contract is signed or agreed to, both parties are legally obligated to uphold their commitments and if either party does not, it’s known as a breach of contract. 

Common Breaches

Breaches can happen by the employer or the employee, and depending on the extent of the breach, different actions may take place and damages may have to be paid to cover any financial harm. Some of the most common breaches occur on the employee side when they either find a job somewhere else before their employment agreement has expired, or if they share classified information with a competitor and violate a non-disclosure agreement (NDA). Examples of an employer breaching a contract may be terminating an employee without just cause or failing to pay them the agreed-upon salary and benefits. 

What Constitutes a Breach?

Addressing a breach of contract can be complicated since all employment agreements are different. To constitute a breach, there must be a legally enforceable contract in place that has not been modified (or if it has, both parties have agreed to the changes) and you must be able to prove the breach took place. You will also need to determine whether the breach was “material” to the contract, meaning there is a substantial difference in the service that was provided versus the service that was agreed upon. If the breach was minor, you may not be able to seek damages.

Possible Damages

If either party suffers a financial loss due to the breach, it’s likely you can sue for damages. However, the amount that’s owed will be highly dependent on the specifics of your case. In general, the damages must be directly connected to the breach. For example, if an employer fires an employee before their contract is up and the employee hasn’t violated any of its provisions, they may sue for the remaining salary they would have received had they remained on the job. This is called “expectation damages.” Employees also have the responsibility to mitigate these damages by seeking new work. Or, if an employee breaches their contract, the employer may be able to sue for the costs of hiring and training a replacement. If the employee shared trade secrets with another company, their employer can sue for the damages caused by this breach.

Legal Advocacy You Can Trust

If you’re in the San Jose, California, area and would like to speak to a business attorney about a possible breach of contract, call us at Leet Law today. For over 15 years, we’ve been committed to the success of each one of our clients, and we’ll work tirelessly to defend you.