Employee Terminations in California

Posted on October 17, 2025

Employment Separation Rules

Ending an employment relationship in California can feel like walking through a legal minefield. Both employers and employees often have questions about their rights and obligations. Understanding employment separation’s core principles is crucial for ensuring a smooth, compliant, and fair process for everyone involved.

This guide breaks down the essential aspects of California’s employment separation regulations. We will explore the concept of at-will employment, clarify the role of probationary periods, and examine the strategic use of written employment contracts. By the end, you’ll have a clearer picture of how to navigate these complex rules.

The Foundation: At-Will Employment in California

At its core, California is an “at-will” employment state. This principle is outlined in California Labor Code Section 2922, which states that an employment relationship with no specified duration can be terminated by either the employer or the employee at any time, with or without cause, and with or without advance notice.

This means an employer can let an employee go for almost any reason—or no reason at all—as long as it is not illegal. Similarly, an employee can quit their job at any time for any reason without facing legal repercussions for the departure itself.

Common Misconceptions About At-Will Employment

The simplicity of the “at-will” definition often leads to significant misunderstandings. It is not an unlimited pass for employers to act without consequences.

Misconception 1: “At-will means I can be fired for any reason whatsoever.”

This is the most dangerous misunderstanding. While employers have broad discretion, they cannot terminate an employee for an unlawful reason. Federal and state laws protect employees from termination based on their membership in a protected class. These classes include race, color, religion, sex, gender identity, sexual orientation, national origin, ancestry, disability, medical condition, marital status, and age (40 and over).

For example, an employer cannot fire an employee for being pregnant or for requesting legally protected medical leave. Doing so would constitute wrongful termination and open the employer to significant legal liability.

Misconception 2: “If I’m not given a reason, the termination is illegal.”

Under the at-will doctrine, employers are not required to provide a reason for termination. Many choose not to avoid potential disputes over the validity of that reason. The absence of a stated reason does not automatically make the termination unlawful. The burden of proof would fall on the employee to demonstrate that the termination was motivated by an illegal factor, such as discrimination or retaliation.

Exceptions to the At-Will Rule

The at-will doctrine is not absolute. California courts and legislatures have carved out essential exceptions that limit an employer’s ability to terminate an employee.

• Public Policy Exception: An employer cannot fire an employee for exercising a legal right or fulfilling a legal obligation. For instance, you cannot be terminated for filing a workers’ compensation claim, reporting for jury duty, or reporting illegal activity by your employer (whistleblowing).

• Implied Contract Exception: An implied contract can be created through an employer’s actions, statements, or written policies. If an employee handbook outlines a specific disciplinary process that will be followed before termination (e.g., a series of verbal and written warnings), an employer who fails to follow those steps may have breached an implied contract. Vague promises of “long-term job security” can also sometimes contribute to creating an implied contract.

• Covenant of Good Faith and Fair Dealing: This exception is narrower in California than in other states but means neither party can act in bad faith to prevent the other from enjoying the benefits of the employment relationship. It is most often applied in cases where an employer terminates an employee to avoid paying earned commissions or bonuses.

What About Probationary or Introductory Periods?

Many California employers use a “probationary” or “introductory” period, typically lasting 30, 60, or 90 days. The common belief is that an employee can be terminated for any reason during this time with no legal risk. This is another area where employers must tread carefully.

From a legal standpoint in California, these periods offer very little extra protection. An at-will employee can be terminated on day one, day 91, or day 1001, as long as the reason is not illegal. Labeling the initial phase of employment as “probationary” does not suspend an employee’s rights under anti-discrimination and anti-retaliation laws.

For example, suppose an employee reveals they have a disability that requires a reasonable accommodation during their 90-day introductory period. In that case, the employer cannot fire them to avoid dealing with it. The employee is protected from discrimination from the moment they are hired.

So, what is the purpose of these periods? They serve primarily as an administrative tool. They are a formal checkpoint for managers to evaluate a new hire’s performance, skills, and cultural fit. It sets expectations that performance will be closely monitored and provides a structured timeline for a formal review before the employee is considered to be fully integrated.

The Role of Written Employment Contracts

While at-will is the default, employers and employees can modify the relationship with a written employment agreement. These contracts can provide clarity and security, but they also have advantages and disadvantages.

An employment contract is a legally binding document that defines the terms and conditions of the employment relationship. It can specify the duration of employment, job duties, compensation, benefits, and conditions for termination.

Advantages of Employment Contracts

For Employees:

• Job Security: Contracts for a fixed term (e.g., two years) prevent the employer from terminating the employee without “cause” as defined in the agreement.

• Clear Expectations: A contract clearly outlines salary, bonuses, benefits, and grounds for termination, reducing ambiguity.

• Severance Guarantees: Many contracts include a provision for a specific severance package if the employee is terminated without cause.

For Employers:

• Talent Retention: High-level executives or employees with unique skills may require a contract to leave their current position. It secures their commitment for a defined period.

• Protection of Business Interests: Contracts can include enforceable clauses regarding confidentiality, non-solicitation of clients or employees, and the protection of trade secrets.

• Defining “Cause”: A contract allows the employer to explicitly define what constitutes “cause” for termination, such as gross negligence, felony conviction, or breach of company policy.

Disadvantages and Challenges

For Employees:

• Reduced Flexibility: An employee who signs a two-year contract cannot simply quit without potentially breaching the agreement, which could lead to financial penalties.

• Limiting Future Opportunities: A poorly worded contract might restrict an employee’s ability to pursue other roles or even side projects.

For Employers:

• Loss of Flexibility: An employer loses the ability to terminate an employee without cause if business conditions change or if the employee is simply not a good fit but isn’t committing fireable offenses.

• Negotiation and Legal Costs: Drafting and negotiating contracts can be time-consuming and expensive, requiring legal counsel to ensure enforceability.

• Potential for Disputes: If an employer terminates an employee “for cause,” it can lead to a costly legal battle over whether the employer’s actions met the contract’s definition of cause.

Scenario: A tech startup hires a lead software engineer. They might use an employment contract to secure her for two years, preventing her from being poached by a competitor. The contract would define her salary, stock options, and what would happen if the company were acquired. This gives security to both parties. Conversely, a retail business hiring a cashier would likely rely on the at-will relationship, as the role does not typically require the same level of long-term commitment or protection of proprietary information.

Final Thoughts

Understanding California’s employment separation rules is a matter of knowing that at-will employment is the standard, but it has critical limits. Employers must ensure their termination decisions are free from discrimination and retaliation. Introductory periods are useful for performance management, but do not remove legal protections. Finally, written contracts can offer stability and protection but must be thoughtfully drafted and strategically used. By respecting these legal frameworks, employers and employees can manage separations fairly and compliantly.

EQHR Solutions – HR Compliance Guidance & Tools

Our solutions provide expert guidance and resources tailored specifically for small businesses in California. We understand the complexities of local labor laws and offer comprehensive support to help your business stay compliant.

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Our team of HR Advisors has extensive knowledge of California’s unique employment regulations and monitors any changes or updates. Contact us today – 855-461-8808.

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