I've heard this story many times, but I've always wondered, weren't the cast locked into a contract from the beginning? I thought I remember PS mentioning this in the past how it was a contract, but he didn't expect the show to be picked up, so he wouldn't be in LA for nearly as long as the contract had stated. Would Gates have received some sort of payout for the termination of her contract?
Based on recent interviews from the TNG cast, all the actors signed 6 year contracts.
Actors contracts are different than your standard employment contracts (I worked in the entertainment industry for some time). When an actor joins a TV show they generally sign a multi-year deal (the industry standard used to be 5 years but are generally higher now). This locks their salary and raises in so a studio can better forecast projected costs because as a show goes on it gets more expensive to make.
Generally, an actor's contract is ironclad which means they cannot leave on their own accord though they can attempt to negotiate their way out of the contract with their show's producers but doesn't happen often. However there's ALWAYS a clause in the contract that states the studio must 'pickup or renew' the actor's contract between seasons. Usually on Star Trek shows this is just a formality and an actors contract is always picked up between seasons, however, in Gates McFadden's case between season 1 and 2 the studio didn't pick her contract up which null and voided it. This is why you see a lot of shows kill off or write out main characters either right at the end of a season or in the first few in the new season.
And no, she wouldn't have gotten any payout unless her agent had negotiated a clause that said if the contract was terminated before it's conclusion she would receive X amount of money...but that's very very rare in Hollywood.