California’s employment laws are some of the most employee-friendly in the United States, which means employers need to tread carefully when terminating an employee.
Navigating employee terminations in California requires a solid understanding of both state and federal regulations. Failing to comply with these laws can expose businesses to significant financial and reputational risks. Wrongful termination lawsuits can be costly, and mishandled firings can damage workplace morale.
This guide provides an overview of key aspects of employee termination in California. We’ll cover the legal considerations you need to know, best practices for ensuring compliance, and an outline of employee rights. We’ll also explore the legal implications of wrongful termination, required termination documents, and practical steps to minimize the risk of lawsuits. Finally, we’ll explain the difference between getting fired, being laid off, and resigning from a job in California.
Understanding at-will employment in California
California is an “at-will” employment state. This means employers can fire employees for just about any reason, as long as it’s legal.
Both employers and employees can end the relationship whenever they want, with or without notice.
Exceptions to the at-will doctrine
There are some exceptions. Employers can’t fire employees for reasons that violate state or federal law. For example, you can’t be fired for discriminatory reasons, in retaliation for whistleblowing, or for taking legally protected leave.
Unlawful termination includes firing someone based on discrimination, retaliation, breach of contract, or violation of public policy.
Why it’s important to understand the exceptions
Even though California is an at-will employment state, employers have to be careful to avoid wrongful termination. Understanding the exceptions is crucial for employers who want to avoid legal problems and lawsuits.
Firing vs. Layoffs vs. Resignations: What’s the Difference?
It can be confusing to sort out whether you’ve been fired, laid off, or have resigned from your job. Here’s a quick look at the differences:
Firing (Termination for Cause or Performance)
Firing happens when your employer terminates your employment because of your job performance, misconduct, or because you violated company policy.
In California, you can be fired for any legal reason, but it’s important that your employer avoids what’s known as “wrongful termination.”
If you’re fired, your employer should be able to show documentation of your performance issues, any disciplinary actions they took, and any warnings you received. It’s also important that your employer has clear and consistent policies and procedures.
Layoffs (Reduction in Force)
A layoff happens when you’re terminated because of economic reasons, restructuring, or downsizing at the company.
Under both the federal Worker Adjustment and Retraining Notification (WARN) Act and California’s mini-WARN Act, you may be entitled to advance notice of a layoff.
The WARN Act requires employers with 75 or more employees to give 60 days’ notice of mass layoffs or plant closings. The WARN Act is triggered when a plant closes, affecting 50 or more employees, or when there are mass layoffs affecting 50 to 499 employees (if those employees make up at least 33% of the workforce), or when 500 or more employees are laid off.
Resignations (Voluntary Separation)
Resignation happens when you voluntarily leave your job.
However, sometimes what looks like a resignation is actually a “constructive dismissal.” That’s when you’re forced to resign because the working conditions have become so intolerable that you can’t continue working there. Constructive dismissal can be grounds for a wrongful termination lawsuit.
What Constitutes Wrongful Termination in California?
You may have been wrongfully terminated if you were fired for an illegal reason. Under California law, that could include discrimination, retaliation, breach of contract, or violation of public policy.
It’s usually up to the employee to prove that the termination was wrongful.
Types of Wrongful Termination Claims
- Discrimination: It is illegal to fire someone because of their race, religion, gender, age, disability, or other protected characteristic. The California Fair Employment and Housing Act (FEHA) makes discrimination in the workplace illegal.
- Retaliation: You can’t be fired for reporting illegal activity, filing a complaint, or for any other protected activity. Retaliation claims make up a large portion of employment-related claims.
- Breach of Contract: If your termination violated the terms of an employment contract, that’s considered wrongful termination.
- Violation of Public Policy: You can’t be fired for refusing to break the law or for reporting illegal activities.
Recent Statistics on Employment Claims
In 2024, California’s Department of Fair Employment and Housing (DFEH) reported over 26,000 complaints of employment discrimination. Retaliation claims made up approximately 55% of all complaints filed with the Equal Employment Opportunity Commission (EEOC) in California.
Legal Considerations and Compliance
Firing an employee is never easy, and it’s especially tricky in California, where employment laws tend to favor the employee. Here are some key legal considerations to keep in mind.
Key California Labor Codes
- California Labor Code Section 201: When you fire someone, you have to pay them their final wages right away. That includes any wages they’re owed, plus any vacation time they’ve accrued. If you don’t, you could be penalized up to 30 days of back pay.
- California Labor Code Section 2802: If your employees have business expenses, you have to reimburse them.
- California Labor Code Section 2922: This section lays out the “at-will” employment doctrine, but it also acknowledges that there are exceptions to the rule.
Federal Laws
Federal laws also come into play when you’re firing someone:
- Title VII of the Civil Rights Act of 1964: You can’t discriminate against people based on their race, color, religion, sex, or national origin.
- Age Discrimination in Employment Act (ADEA): You can’t discriminate against people who are 40 or older because of their age.
- Americans with Disabilities Act (ADA): You can’t discriminate against people with disabilities who are otherwise qualified for the job.
Importance of Compliance
California employers have to follow both state and federal laws. Any employment agreements or company policies have to align with California law. Having clear and consistent policies is key to lowering your risk of being sued.
Preparing for and Conducting a Respectful Termination
Firing someone is never easy, but following a structured process can help ensure the termination is handled legally and respectfully. Here’s a breakdown of the key steps:
Pre-Termination Planning
- Review the employee’s file: Scrutinize performance reviews and any documentation related to performance issues.
- Consult with HR and legal counsel: This is crucial to ensure you’re complying with all applicable laws. Understand the roles and responsibilities of everyone involved – HR, managers, and legal counsel.
- Prepare all necessary documents: This includes the termination letter, final paycheck, and information about benefits continuation (like COBRA).
Conducting the Termination Meeting
- Schedule a private and respectful meeting: Choose a time and place that allows for a confidential conversation.
- Clearly communicate the reasons for termination: Focus on objective facts and avoid emotional language or personal attacks. Be direct and to the point.
- Provide information about final pay, benefits, and available resources: Clearly explain how and when the final paycheck will be issued, and provide details about benefits continuation (COBRA), unemployment benefits, and any other relevant resources.
- Allow the employee to ask questions: Give them an opportunity to clarify any points or raise concerns.
- Have HR representation present: This ensures consistency and provides an objective witness to the conversation.
Post-Termination Procedures
- Process final paycheck and benefits: California law mandates the timely payment of final wages and benefits. Make sure this is handled promptly and accurately.
- Conduct an exit interview: Use this opportunity to gather feedback about the employee’s experience and identify any areas for improvement within the company.
- Provide outplacement services: Offering support to the departing employee through career counseling or resume assistance can ease the transition.
Your last paycheck in California
California law says you must receive your final paycheck immediately when you are fired. This includes any vacation time you haven’t used. According to California Labor Code Section 201, your employer must pay all wages earned, including vacation, on your last day.
If your employer doesn’t pay you on time, they may have to pay what are called “waiting time penalties.” These penalties can amount to 30 days of back pay.
Your final check must include:
- All wages you’ve earned, including overtime and commissions.
- Any unused vacation time.
- Any other pay you are owed.
Your employer must follow all wage and hour laws.
Mass Layoffs and the California WARN Act
The California WARN Act protects employees from getting fired without notice when companies conduct mass layoffs. It requires most employers to give employees a heads-up when a large layoff, relocation, or closure is coming.
If your company has 75 or more employees, the WARN Act says you’re entitled to receive a written notice at least 60 days before your termination date. The notice should include:
- The date you’ll be terminated
- The reason for the layoff
- Other details, such as whether the layoff is temporary or permanent
If companies don’t follow the WARN Act, they could face penalties and lawsuits. The California Labor Commissioner’s Office makes sure employers comply with the WARN Act and can fine them if they don’t.
Additional Rights for Terminated Employees in California
If you’ve been fired in California, you have some specific rights you should know about.
Expense Reimbursement
California employers have to pay you back for any money you spent on business expenses. According to Section 2802 of the California Labor Code, your employer has to cover these costs.
Continued Health Coverage
When you’re terminated, you may be able to continue your health coverage through COBRA or Cal-COBRA.
COBRA (the Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows you to continue your health insurance for a while after you’ve been let go.
Cal-COBRA is California’s version of COBRA and may offer even more coverage options.
Unemployment Insurance Benefits
If you’re terminated, you’re generally eligible for unemployment benefits, as long as you meet certain requirements. Your eligibility will depend on why you were terminated and your work history.
You can apply for unemployment benefits through the California Employment Development Department (EDD).
Non-Disclosure Agreements (NDAs)
California doesn’t allow employers to use NDAs to keep employees silent about harassment or discrimination. Your employer can’t prevent you from reporting or talking about illegal behavior.
How can California employers reduce the risk of lawsuits?
Firing an employee is always risky, so California employers should take steps to reduce the chance of a lawsuit. Here are some best practices:
- Create clear policies and stick to them. Regularly review and update your employment agreements and employee handbooks.
- Thoroughly document performance issues and disciplinary actions. Documentation is critical if you have to defend against a wrongful termination claim.
- Train your managers. Make sure supervisors know the proper way to fire someone.
- Consider offering outplacement services. Helping departing employees find a new job can reduce the chance that they’ll sue you.
- Get Employment Practices Liability Insurance (EPLI). This can protect you if you face a lawsuit.
Wrapping Up
Navigating employee terminations in California requires careful consideration. This article has highlighted some key aspects of California’s complex employment laws.
Remember, employers must comply with both California and federal laws to avoid legal issues. This includes everything from documenting performance issues to providing final paychecks in a timely manner.
Finally, how you handle a termination can significantly impact workplace morale and your company’s reputation. Strive for a respectful and ethical process. Clear communication, fair treatment, and adherence to legal requirements are crucial for a smooth transition and to protect both the employer and the employee. When in doubt, consult with an employment law professional.