LegalHuman Capital
For-Cause Termination
Also known as: Cause termination, termination for cause, cause trigger, employment kill switch
A subjective termination trigger in the founder's post-close employment agreement. Connected to forfeiture of equity, acceleration of non-competes, and loss of information access — making it a financial weapon, not just a personnel action.
WHY IT MATTERS
In PE employment agreements, 'cause' is typically defined to include material breach of company policy, conduct detrimental to the company's interests, and failure to meet performance objectives as determined by the board. Each standard is subjective and determined by the buyer. Unlike traditional employment agreements that require dishonesty, criminal conduct, or gross negligence, PE for-cause definitions require only a judgment call by the employer. For-cause termination cascades across the deal: unvested EIP allocations forfeit, the non-compete accelerates to maximum duration, and the founder loses access to financials needed to contest earnout calculations, escrow claims, and seller note payments. The employment agreement becomes the enforcement mechanism for the purchase agreement.