Settling when employment contracts are terminated

Many executive positions in Illinois involve a written employment contract. Once the parties sign those employment contracts, early termination requires imilar considerations as would be required in terminating any other contract. The terms of an early termination are often negotiated and may entitle the employee to receive some portion of the remainder of the contract terms.

For instance, an out-of-state director of schools was released from his contract. As part of that release, he and the board of education negotiated a "Release and Settlement Agreement," outlining what compensation and benefits the now-former employee is entitled to upon his termination. The BOE agreed to send him monthly checks in the same manner in which he was receiving them as an employee until June 30, 2014.

At that time, the balance of $78,000 is to be paid to the former Wilson County, Tennessee director. In addition, his insurance will be paid through June 30, 2015, which is the length of time COBRA coverage would be available; however, the coverage is only for him. Any additional insurance for his spouse or other family members would be his responsibility. This insurance coverage would be terminated prior to June 30, 2015 if he finds other employment -- whichever comes first. In exchange, the director agreed that neither he nor any of his heirs will ever file suit in connection with his employment and subsequent termination.

This is just one example of terms that may be negotiated when terminating employment contracts. Without some mutually agreed upon settlement regarding such a contract, the employee may take the employer to court -- depending on the terms of the original contract and the underlying facts and circumstances of the termination. Illinois employers that wish to avoid litigation may benefit from being prepared in order to terminate the contract without risking a costly court battle. In the alternative, provisions could be added to the employment contract up front to specifically address what will occur if the contract is terminated early.

Source:, BOE delays appointing interim director; agrees to let Setterlund out of his contract on Wilson Post, Amelia Morrison Hipps, Jan. 25, 2014

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