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Employment agreements: for-cause termination provisions versus at-will employment

In Spacesaver Systems Inc. v. Adam, the Maryland Court of Appeals, held that a for-cause termination provision in an employment agreement made the agreement “continuous for-cause” and subject to termination only per the for-cause termination provision in the agreement.  The agreement contained no reference to at-will employment, but made reference to a term, which was undefined.  The resulting caution is that an at-will employment contract which also contains a for-cause termination, is likely no longer one for at-will employment.

In reaching its decision, the Court did not modify Maryland law which presumes at-will employment.  "This judgment in no way erodes that doctrine, as the presumption for at-will employment persists and is only defeated when the parties explicitly negotiate and provide for a definite term of employment or a clear for-cause provision." p. 26.

Similarly, no change was made in the legal prerequisites to a finding of a life-time employment contract.  In order for a lifetime contract to be found, there must be:

1, “proof that there was definite authority, by by-law, action by the board of directors, or otherwise, to make such a contract.”;

2. "consideration beyond that incident to accepting the position"; and

3. stipuated " “terms as to work and salary” in order to be enforceable".

 

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