Everything You Need To Know About Firing An Employee In California

Firing an employee can be a moment of deep stress and of even greater legal danger. In California, small business owners every day run into problems because of how, why, or under what conditions they let go of one or more employees. This article is your guide to firing or “terminating” employees in California while reducing your employee lawsuit risk, including:

• Valid and invalid reasons for firing an employee in California. 
• The option of severance pay to Reduce Potential Risk. 
• Avoiding waiting time penalties after you let someone go in California. 
• How to protect yourself from wrongful termination claims. 

For What Reasons Am I Allowed To Fire An Employee In California?

The technical answer is that you are allowed to fire an employee…for any reason that is not otherwise illegal. Unfortunately, given the complexity of California labor laws, knowing what is illegal is not simple. 

It requires knowledge of all the detailed laws and all the ways they can be broken when firing an employee.

As a general rule of thumb, though, if you have a “legitimate business” reason for terminating an employee, then you should have a defense to most claims of discrimination, retaliation, and wrongful termination. However, you need to be able to prove the legitimate business reason.

That’s where documentation, such as employee performance evaluations, writeups, emails, records of absences and tardiness, and other such business records, come into play.

The problems arise, unfortunately, when there may be facts pointing to an unlawful reason, even when there is also a legitimate business reason. In that case, if you are not careful, the decision of whether you acted lawfully or not could come down to the verdict of a jury. 

Is There A Legal Requirement To Provide Severance Pay After Firing Someone?

There is no obligation under California law to offer a severance. If you wish to do so, you should know that payment of a severance package can be used to impose certain conditions upon the former employee and potentially reduce lawsuit risk. 

In order to obtain the severance payment, you can require the employee to sign a severance (or separation) agreement that includes:

• A general release of all claims, 
• A promise not to sue, 
• Strict confidentiality about the severance payment and its amount
• Confidentiality about the circumstances of the separation, with limited exceptions relating to facts and circumstances relating to sexual misconduct, including sexual harassment.

If a severance agreement is used, under California law, it must include a provision that tells the severed employee they have up to five business days to seek the advice of an attorney. They obviously do not have to take all five days; the agreement just has to contain that specific provision to be enforceable.

The potential downside of using a severance agreement is it might cause the employee to seek advice of counsel. Then it can have the opposite of the intended effect. Thus, carefully evaluate the use of severance agreements and use in appropriate cases to reduce legal risk

What Is A Waiting Time Penalty In California, And What Defenses Are Plausible For Employers?

A waiting time penalty builds up if you delay in paying someone their final wages upon termination. Labor Code section 203 says that if you fail to pay final wages on time, one day’s wage accrues as a penalty until the final wages are paid, up to a maximum of 30 days. At $15.50/hour, that’s a maximum penalty of $3,720.

For employee terminations, California law requires final wages to be paid immediately. Immediately means today is your last day, here’s your final check. Do not forget this rule when terminating employees. For voluntary departures, if the employee gives less than 72 hours of notice, final wages are due within 72 hours, and if the employee gives more than 72 hours of notice, then final wages are due on the last day they worked for you.

Waiting time penalties can come up in unexpected (but very common) ways. If an employee files a claim alleging any wages (including minimum wage or overtime) are due, or even for a failure to provide rest or meal periods, and prevails, they are entitled to waiting time penalties. Given that, by the time the claim is adjudicated, 30 days have long since gone by, you will be looking at the maximum 30 days’ wages as an additional penalty.

The above applies when the failure to pay is “willful,” but this will be found to be the case in the vast majority of cases, even if you had no idea it was required. Ignorance of the law is no excuse. If you have a “good faith” defense to the underlying wage claim, then you might also have a reasonable defense to waiting time penalties. 

That is going to be very rare, however. Better to know the deadlines for the final payment of wages and comply fully.

How Can Business Owners And Managers Protect Themselves From Wrongful Termination Claims?

Protecting yourself from wrongful termination claims requires extensive understanding and careful application of all the various employment and labor laws in California. Unfortunately, that is just not physically or mentally possible for most small business owners. 

Barring that, having a knowledgeable and experienced employment lawyer in their back pocket to guide you in disciplinary and termination decisions and procedures can be just as good and a lot cheaper than the alternative. For more information on Firing Employees In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (855) 534-1490 today.