Breaking Employment Contracts

Hoogers's picture
Rank: Baboon | 149

If a job comes with a one year contract and I take it, what will happen if I find something better within the one year and want to leave?

Leaving My Job Before My Contract Is Up

Most employment in the United States is employment at will which means that either party can terminate at any time. The video below explains in further detail.

That being said, if you leave your job within the first year, you may activate a breaking clause that requires some reparations such as paying back a signing bonus.

User @abedneg06, a private equity managing director, shared a detailed response:

abedneg06 - Private Equity Managing Director:

There should be an out or breakup clause that stipulates the penalty. If there's no penalty, perhaps you hand over a pro rata % of your signing bonus to avoid burning bridges. Generally employment contracts are longer than a year so I doubt the firm would give much trouble although HR might get upset. A one year contract also should exclude hefty provisions such as a non-compete, but if it is in there then you would have to carefully structure the scope & even region of your alternative positions.

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Comments (7)

Feb 27, 2013

Depends on the details of the contract and your firm relationship. There should be an out or breakup clause that stipulates the penalty. If there's no penalty, perhaps you hand over a pro rata % of your signing bonus to avoid burning bridges. Generally employment contracts are longer than a year so I doubt the firm would give much trouble although HR might get upset. A one year contract also should exclude hefty provisions such as a non-compete, but if it is in there then you would have to carefully structure the scope & even region of your alternative positions. If you're based in CA, it is easier to break employment agreements as it is a labor-friendly state.

Feb 27, 2013

Generally speaking nothing. The only thing that could happen from a legal standpoint is if there was some stipulated damages clause, which would basically mean a forfeit of your bonus -- it is highly unlikely that your agreement has any claw back provisions.

I agree with what the poster above said. Of course read the employment agreement, but what you'd want to be more concerned with is the potential reputational damage -- all that means is make sure you leave on a good note with your superiors and co-workers...don't worry about HR.

Feb 27, 2013

You can break any type of contract. The question that follows is, "how much will you have to pay?"

Feb 27, 2013

Non-competes are nearly impossible to enforce, especially at the junior level as they would have to show you are somehow using their proprietary information to gain the new employer a competitive advantage and then try to show damages.

You may have to give back part of your bonus etc, just read the contract.

Feb 27, 2013

Generally, most employment in the United States is "at will", meaning that either party can break the contract at any time for any reason (or no reason at all). It's likely that if you break your contract abnormally early (within the first year of employment), you'll have to repay some or all of your signing bonus.

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Feb 27, 2013

Alright thanks guys, I'm still going through the stages of the interview process but if I receive the offer I'll just take a close look at the contract. I was just wondering in case I accepted the offer and a month down the road I was offered something at a better company, as I'm still going through a bunch of interviews.

Feb 27, 2013
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