Best Practices for Employee Terminations in California

Posted on May 8, 2025

Terminating an employee is arguably one of the most sensitive and challenging aspects of managing a business. For employers in California, the process is more complex due to the state’s stringent labor laws and regulations. Mishandling terminations can lead to legal disputes, disrupt workplace morale, and damage a company’s reputation.

This guide provides HR professionals and California employers with actionable best practices for navigating employee terminations while remaining compliant, respectful, and lawful.

Understanding California Employment Law

California stands out as one of the most employee-friendly states in the U.S., boasting some of the nation’s most comprehensive labor laws. Employers must fully understand these regulations to ensure termination processes comply with state and federal mandates. Here are some essential pieces of employment law to consider:

At-Will Employment: California follows the at-will employment doctrine, meaning employers have the right to terminate an employee for any reason or no reason at all. However, this does not mean that employers can fire employees for illegal purposes, such as discrimination or retaliation. Additionally, there are exceptions to at-will employment, such as when an employee has an implied or express contract that guarantees job security. Employers should consult with legal counsel before terminating an employee to ensure compliance with at-will laws.

Protected Classes: California prohibits discrimination based on various protected characteristics, including race, religion, gender identity, sexual orientation, and more. Employers must be careful not to terminate employees

At-Will Employment and Exceptions

California is an “at-will” employment state, meaning employers can terminate employees at any time, with or without cause, as long as the reason is not illegal. However, there are significant exceptions that limit this principle: anti-discrimination laws, public policy exceptions, and implied contracts.

Anti-Discrimination Laws: California prohibits discrimination based on various protected classes, including race, religion, gender identity, sexual orientation, and more. Employers must be careful not to terminate employees for reasons related to these protected characteristics or risk facing a discrimination lawsuit.

Discrimination: Under California’s Fair Employment and Housing Act (FEHA), terminating an employee on the basis of race, gender, religion, national origin, disability, age, or other protected characteristics is illegal.

Retaliation: Terminating an employee in retaliation for exercising their rights, such as filing a workers’ compensation claim or reporting unsafe working conditions, is unlawful.

Implied Contracts: Even without a written agreement, verbal assurances, employee handbook policies, or implied promises of job security can limit the at-will doctrine.

Public Policy Exceptions: There are certain public policy exceptions that limit an employer’s ability to terminate employees at-will. For example, if an employee is terminated for refusing to engage in illegal activities or exercising their legal rights (such as taking family or medical leave), it could be considered wrongful termination.

Implied Contracts: In some cases, employees may argue

California WARN Act Requirements

The California WARN Act applies to employers with 75 or more full-time or part-time employees who have worked at least 6 of the last 12 months. It mandates that these employers provide a written 60-day advance notice to affected employees, local governments, and relevant unions before conducting mass layoffs, plant closures, or relocations. A mass layoff is 50 or more employees during any 30 days at a single location. The purpose of the WARN Act is to provide employees with time to prepare for the transition, seek alternative employment, or pursue necessary retraining. Employers who fail to comply with the California WARN Act may face serious legal consequences, including back pay, damages for affected employees, and civil penalties.

Federal WARN Act Requirements

The federal WARN Act, which stands for the Worker Adjustment and Retraining Notification Act, operates similarly to the California WARN Act but applies nationally. Enacted in 1988, the federal WARN Act mandates that employers with 100 or more full-time employees must provide a minimum of 60 days’ advance notice before implementing mass layoffs or plant closures. To qualify as a mass layoff under the federal WARN Act, the action must affect at least 50 employees at a single employment site when this number constitutes one-third of the workforce, or 500 or more employees, regardless of the percentage. Like its California counterpart, the federal WARN Act protects workers by allowing them adequate time to adjust to employment transitions and consider future opportunities. Noncompliance with the federal WARN Act can result in penalties, such as back pay, benefits for up to 60 days, and additional fines.

Federal vs. California WARN Act

While the California WARN Act shares similarities with the federal WARN Act, there are notable differences that employers must understand to remain compliant. The federal WARN Act applies to companies with 100 or more employees, whereas the California WARN Act covers employers with 75 or more employees. Additionally, the California statute has stricter requirements, including providing notice for layoffs involving as few as 50 employees, regardless of whether the layoffs constitute a complete closure. Conversely, the federal WARN Act requires at least 50 employees to be laid off, but only when this represents one-third of the workforce at a single location or involves 500 or more employees.

Another key distinction is that the California WARN Act does not include exceptions for “unforeseeable business circumstances” or “faltering company” defenses available under federal law. This means California employers face heightened responsibilities and reduced flexibility in managing workforce reductions. Understanding these differences is critical for businesses operating in California to avoid costly penalties and legal ramifications.

One important aspect of the California WARN Act is its requirement that employers provide advance notice to employees and certain government entities prior to implementing a mass layoff or plant closure. This notice must be provided 60 days in advance and must include specific information such as the reasons for the reduction, expected date of separation, and any benefits that will be offered to affected employees.

In addition to these notice requirements, the California WARN Act also has strict penalties for non-compliance. Employers who fail to provide proper notice may be subject to back pay, benefits, and civil damages for affected employees. Other consequences can include civil penalties up to $500 per day for each day without proper notice.

California Final Paycheck Laws

California imposes strict rules regarding final paychecks:

Employees who are terminated must receive their final paycheck, including unpaid wages and accrued vacation, on their last day of work.

For employees who voluntarily resign, final paychecks must be issued within 72 hours, unless they have provided at least 72 hours’ notice, in which case the paycheck is due on their final day.

Employees who quit without giving at least 72 hours’ notice must receive their final paycheck within 72 hours of quitting.

If an employee gives more than 72 hours’ notice, the final paycheck is due on the last day of work.

Failure to comply with these rules can result in penalties for the employer.

Recordkeeping Requirements

In addition to following the proper guidelines for providing notices and paychecks, employers must also maintain accurate records related to employment and wages. This includes keeping track of time worked, breaks taken, and any deductions made from employee paychecks.

Employers are required to keep payroll records for at least three years, while personnel files must be kept for at least one year after an employee’s termination. These records must be readily available for inspection by the Department of Labor or other government agencies.

Proper recordkeeping not only ensures compliance with laws and regulations, but also protects employers in case of any disputes or legal claims made by employees. Employers should regularly review and update their recordkeeping procedures to ensure they are in line with current laws and requirements.

Conclusion

In conclusion, it is crucial for employers to understand and adhere to the rules and regulations set forth by federal and state governments when it comes to providing notices and paychecks to employees. Failure to comply with these rules can not only result in penalties for the employer, but can also lead to

Preparing for Termination

Preparation is critical to managing a termination effectively and lawfully. A poorly planned termination can lead to misunderstandings, legal risks, and unnecessary conflict. Follow these steps to prepare:

Documentation

Please make sure to maintain detailed records of any performance issues, disciplinary actions, and internal policies. This ensures:

A transparent and defensible justification for termination.

Clear evidence of non-discriminatory practices.

Examples of valuable documentation include:

Performance reviews.

Warning letters or corrective action plans.

Attendance records and relevant communications.

Seek Legal Counsel

Consulting with legal professionals who specialize in California employment law can help you:

Verify compliance with all applicable labor laws.

Understand potential risks related to the termination.

Develop strategies to avoid potential claims or lawsuits.

Understand the specific regulations and procedures for terminating employees in California.

Ensure that all company policies and procedures align with state laws.

It is always recommended to seek legal counsel before making any significant decisions regarding employee termination to minimize the risk of potential lawsuits or legal action. Additionally, having a lawyer review any documentation related to the employee’s performance and termination can help protect your company from liability.

Consider Alternative Options

Termination should always be considered a last resort after exhausting all other options. In some cases, working with an underperforming employee to improve their performance or providing additional training may be a more suitable solution. Other alternatives could include:

Offering a voluntary resignation package. This can benefit both the employee and the company by avoiding a potentially contentious termination process.

Implementing a performance improvement plan (PIP) to clearly outline expectations for improvement and provide an opportunity for the employee to meet those expectations.

Transferring the employee to a different role within the company that better utilizes their skills and strengths.

Having alternative options in place not only shows that your company values its employees, but it also demonstrates fairness and mitigates any potential legal issues that may arise from a termination.

Communicate Effectively

Communication is key when it comes to terminating an employee. It’s essential to be transparent and honest while maintaining professionalism and respect. Some tips for effective communication during a termination include:

Clearly stating the reason for termination: This can help the employee understand the situation and provide closure.

Being empathetic and compassionate: Losing a job can be a difficult experience, so it’s important to show understanding and support.

Setting up a private meeting: Termination should always be done in person and confidentially to respect the employee’s privacy.

Offering resources and assistance: Providing information on outplacement services, severance pay, or other forms of assistance can help ease the transition for the employee.

Plan the Termination Meeting

Scheduling the termination meeting thoughtfully can minimize disruptions and preserve the employee’s dignity:

Choose a private, neutral location.

Determine who will attend (e.g., the employee’s manager and an HR representative).

Prepare a script to ensure the conversation is respectful and to the point.

Best Practices for the Meeting

Start with the Purpose: Communicate the reason for the termination and reference specific facts or documentation to avoid ambiguity.

Keep It Respectful: Use a neutral and professional tone. Avoid blaming language or emotional arguments.

Avoid Surprises: Ideally, the employee should already be aware of performance issues or concerns through prior discussions.

Provide Necessary Information: Outline the following steps, such as delivering the final paycheck, continuing benefits, and returning company property.

What to Avoid

Lengthy Explanations: To avoid unnecessary disputes or escalation, keep the conversation succinct.

Subjective Comments: Stick to objective facts and avoid personal opinions or criticisms.

Overpromising: Avoid making commitments or assurances that could be misinterpreted as legally binding.

Post-Termination Procedures

After the termination meeting, there are essential steps to ensure compliance with California’s labor laws and facilitate a smooth transition for both the employee and the company.

Deliver the Final Paycheck

As noted earlier, ensure compliance with final paycheck laws. Include all owed wages, unused vacation time, and any other agreed-upon payments. The final paycheck should also include any deductions for loans or other financial obligations.

Return of Company Property

Clearly communicate what company property needs to be returned before or on the last day of work. This could include keys, equipment, technology devices, documents, and any other items belonging to the company. Provide a detailed list and instructions for returning these.

Benefits and Continuation

Retirement Accounts: Provide information about handling any retirement accounts, such as 401(k) plans. The employee may be able to roll their contributions into another retirement account or request a distribution.

Health Insurance: Explain the options for continuing health insurance coverage through COBRA or other programs. Ensure that the employee receives all necessary documentation and enrollment deadlines.

Other Benefits: If the employee had additional benefits, such as life insurance or disability coverage, outline how those will be handled during the transition period.

COBRA Compliance: Inform employees about their rights to continue health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

What is COBRA? Consolidated Omnibus Budget Reconciliation Act allows eligible employees and their families to maintain their group health insurance coverage for a limited period following specific qualifying events, such as job loss, reduced work hours, or other life changes. This federal law ensures that individuals can continue to access their healthcare benefits even when their employment circumstances change, as long as they pay the required premiums. COBRA applies to employers with 20 or more employees, and it plays a crucial role in bridging the gap during transitions, offering extended security for health coverage. Businesses need to understand their obligations under COBRA to remain compliant and provide adequate communication to affected employees.

The purpose of COBRA is to provide individuals with a safety net during times of transition, such as job loss, reduction in work hours, or other qualifying events that result in a loss of healthcare benefits. While it can be costly for employers and employees, COBRA provides temporary relief until new insurance coverage can be obtained.

Under COBRA, eligible employees must be allowed to continue their current health insurance plan for a limited period, usually 18-36 months. This includes medical, dental, and vision coverage provided by the employer.

Employees must understand their rights under COBRA and carefully consider their options when facing a loss of healthcare benefits. While COBRA can be expensive, it may be more affordable than purchasing insurance on the individual market or going without coverage.

Additionally, certain circumstances allow individuals to qualify for extended COBRA coverage beyond the standard timeframe. These include disabilities, second qualifying events during the initial COBRA period, and eligibility for Medicare.

To mitigate risks and ensure a compliant termination process, steer clear of these common pitfalls:

Insufficient Documentation: Failing to document performance issues or termination discussions can weaken your case in a legal dispute.

Discriminatory Practices: Avoid terminating employees in ways that could suggest discrimination or bias.

Unclear Communication: Providing vague or insensitive explanations during the termination meeting can lead to misunderstandings and feelings of resentment.

Failing to Issue a Final Paycheck Promptly: Even minor delays in delivering the final paycheck can violate California labor laws and result in penalties.

Ignoring WARN Requirements for Layoffs: Ensure you understand and adhere to WARN Act regulations when conducting mass layoffs.

Resources and Support

For additional guidance on handling employee terminations in California, the following resources can provide valuable support:

https://www.dir.ca.gov/dlse/FinalPay.pdf: Official labor laws and regulations updates.

[Society for Human Resource Management (SHRM)](https://www.shrm.org): Best practices and HR-related tools.

Legal counsel specializing in California employment law.

HR Consultants – eqHR Solutions

If you need personalized assistance for employee terminations or implementing a performance improvement plan (PIP), contact the human resources advisors at EQHR Solutions, 855-461-8808, www.eqhrsolutions.com. EQHR Solutions is an established Human Resources & Payroll consulting firm that has provided expert guidance on all aspects of HR and employment law compliance for ten years. Their team of experienced professionals can help you navigate sensitive issues related to workplace culture and ensure your business fully complies with relevant laws and regulations. Don’t hesitate to reach out for support if needed, as it is always better to be proactive and address potential issues before they become major problems. Remember, creating a positive and inclusive workplace culture starts with proper education and understanding of legal requirements. EQHR Solutions can provide valuable resources and training to help you achieve this goal.