To let an employee go lawfully in California, make sure the reason is legitimate and documented, apply your policies consistently, pay all final wages (including accrued vacation) at the time of termination, and hand over the required separation notices. Severance is not required by California law, but if you offer it in exchange for a release of claims, the agreement must meet specific California and federal requirements to be effective.
Few management tasks are harder than terminating someone. Even when the decision is clearly right for the business, a rushed or inconsistent termination can turn into a wage claim, a discrimination charge or a wrongful termination lawsuit. Most of that risk is preventable with planning. Here is what to do, and what not to do.
Start With the Basics: At-Will Employment and Its Limits
Most California employment is “at will” under Labor Code Section 2922, meaning either the employer or the employee can end the relationship at any time, with or without cause. At-will status is not unlimited, however. An employer may not terminate an employee for an unlawful reason, including:
- Discrimination based on a protected characteristic under the California Fair Employment and Housing Act (FEHA) or federal law, such as race, sex, gender identity, religion, disability, medical condition, age (40 and over) or pregnancy.
- Retaliation for complaining about harassment or discrimination, reporting suspected legal violations (Labor Code Section 1102.5), filing a wage claim, taking protected leave or requesting an accommodation.
- Violations of public policy, such as firing someone for refusing to break the law or for serving on a jury.
- Breach of contract, where an offer letter, employment agreement or handbook promises termination only for cause or a particular process.
Before acting, review the employee’s offer letter and any employment agreement, and ask whether the timing could look retaliatory, for example a termination shortly after a complaint, a leave request or a disclosed medical condition.
Do: Document Performance and Conduct Issues
Documentation is the single most useful tool an employer has if a termination is later challenged. Keep contemporaneous, factual records of:
- Performance expectations tied to the employee’s actual job duties
- Specific problems, with dates and examples, rather than general impressions
- Warnings or performance improvement plans, and the employee’s acknowledgment of them
- Any policy violations and how similar violations by other employees were handled
Where the issue is performance rather than misconduct, a record of goals, feedback and progress matters even more. Honest written reviews help; glowing reviews followed by a sudden termination invite the argument that the stated reason is a pretext.
Do: Have a Policy and Apply It Consistently
A written discipline and termination policy, acknowledged by employees when they are hired, sets expectations. Equally important is applying it the same way to everyone. Treating similar situations differently is one of the most common sources of discrimination claims. If you plan to deviate from your usual process, understand why and document the reason.
Do: Plan the Termination Meeting
Keep the conversation short, respectful and factual. Have a second manager or HR representative present, explain the decision briefly, and avoid debating it or offering reasons that differ from your documentation. Arrange in advance to collect company devices and badges and to cut off system access at the right moment. Do not make comments about age, health, family plans or other protected characteristics.
Do: Pay Final Wages on Time
California’s final pay rules are strict. When an employer terminates an employee, all earned wages are due immediately at the time of termination (Labor Code Section 201). That includes accrued, unused vacation or paid time off under a vacation or PTO policy (Labor Code Section 227.3). If final wages are paid late, the employer can owe “waiting time” penalties of up to 30 days of the employee’s daily wages under Labor Code Section 203.
Final pay is owed whether or not the employee signs a severance agreement. An employer cannot withhold earned wages to pressure someone into signing a release, and generally cannot deduct the value of unreturned equipment from a final paycheck. Employees who are not paid properly can pursue claims with the Labor Commissioner, as explained in our guide on how to file a California wage claim.
Do: Provide Required Notices
At or around termination, California employers generally must provide:
- Written notice of the change in employment status, including the effective date
- The EDD pamphlet “For Your Benefit” about unemployment insurance
- Information about continuing health coverage under federal COBRA (generally employers with 20 or more employees) or California’s Cal-COBRA (smaller insured plans)
- Any notices required by your benefit plans and equity documents, such as option exercise deadlines
Larger layoffs raise additional obligations. A covered California establishment laying off 50 or more employees may need 60 days’ notice under the California WARN Act, which reaches smaller employers than the federal version. See our article on planning a reduction in force in California.
Do: Use Severance and a Release Carefully
California does not require severance. Many employers offer it anyway in exchange for a release of claims, which can bring finality. To be enforceable, a release must be supported by something of value beyond what the employee is already owed, such as final wages. Well-drafted agreements typically address:
- A Civil Code Section 1542 waiver, so the release covers unknown claims.
- Government Code Section 12964.5 requirements: non-disparagement and confidentiality terms must include language preserving the employee’s right to discuss information about unlawful acts in the workplace, and the employee must be told of the right to consult an attorney and given at least five business days to consider the agreement.
- Age discrimination rules: for employees 40 or older, the Older Workers Benefit Protection Act requires at least 21 days to consider the agreement (45 days in a group termination, with additional disclosures) and seven days to revoke after signing.
- Claims that cannot be released, such as certain wage claims, unemployment and workers’ compensation benefits, and vested benefits.
Do not include a non-compete. Employee non-competes are void in California under Business and Professions Code Section 16600, and recent amendments make it unlawful to require or attempt to enforce one. Learn more in our posts on severance terms and California’s non-compete rules.
Don’t: Common Termination Mistakes
- Don’t treat similar employees differently without a documented, legitimate reason.
- Don’t give a reason in the meeting that differs from your records.
- Don’t delay final pay or condition it on signing anything.
- Don’t terminate in apparent response to a complaint, leave request or injury without careful review.
- Don’t forget to protect confidential information: collect devices, revoke access and remind the employee of ongoing confidentiality obligations.
The Takeaway
A lawful termination in California rests on a legitimate, documented reason, consistent treatment, timely final pay and the right paperwork. Severance can help close the chapter, but only if the agreement follows the specific California and federal rules.
Frequently Asked Questions
Do I have to give a reason when I fire an employee in California?
Generally no. Most California employment is at will, so no reason is legally required unless a contract or policy says otherwise. Even so, you should have a legitimate, documented reason, because if the termination is challenged you will need to show it was not discriminatory or retaliatory.
When is a terminated employee’s final paycheck due in California?
When the employer ends the employment, all earned wages, including accrued unused vacation or PTO, are due immediately at the time of termination. Late payment can trigger waiting time penalties of up to 30 days of wages.
Is severance pay required in California?
No. California law does not require severance. Employers often offer it in exchange for a release of claims, and the agreement must meet California and federal requirements, including special rules for employees 40 and older.
Can I require a fired employee to sign a non-compete?
No. Employee non-competes are void in California, and requiring one can itself expose the employer to liability. Confidentiality obligations and trade secret protections remain enforceable.
How Sutter Law Can Help
Sutter Law advises California employers on terminations, separation agreements and reductions in force as part of our employment law and compliance practice. We can help you review the risks before a termination, prepare compliant severance agreements and update your policies. Contact us for a free consultation.
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.
