Employee Terminations in California

Most leaders find the process of terminating someone’s employment the least favorite part of their job. Even if your employee has struggled with performance issues and policy violations, it can still be difficult and emotional to deliver the bad news. In California, the process carries extra complexity—employers must ensure the process is legally compliant by providing all required paperwork and issuing the final paycheck in a timely manner.

Below are key considerations when ending employment in California.

Is Termination the Right Decision?

In California, most employees are at-will, meaning the employer may terminate employment for any lawful reason, with or without advance notice. However, certain employees may have rights to progressive discipline and/or due process, such as those under contract, in a collective bargaining agreement, or if they are a public-sector employee.

One of the first things the employer should consider is whether the termination could be perceived as unlawful. For example, you may not retaliate by terminating an employee because they filed a harassment complaint, reported a safety violation, or requested a protected leave or reasonable accommodation. These reasons would be considered against public policy and/or in violation of existing statutes prohibiting employment discrimination and retaliation, and could ultimately lead to a lawsuit.

Next, CEA recommends that employers always review the employee’s personnel file, performance reviews, and disciplinary records, prior to making the decision to end their employment. A strong record and history of performance issues and/or policy violations may help demonstrate that the termination is based on a lawful reason. On the other hand, a lack of documentation supporting the termination decision may make defending the decision more difficult in the event a claim is filed.

Optics Matter

What if you have an employee who is having performance issues, but you’ve just found out they are pregnant and have provided a medical certification for leave?  While every situation is unique, this is one of those circumstances when you should consider holding off on termination. While your decision may be related to the performance issues, the timing of termination after finding out your employee is pregnant (a protected status) may make it appear unlawful. It is best for employers to understand their legal risks and make an informed decision either way.

Finally, evaluate your past practices. Did you allow other employees to “slide” with similar violations and/or performance problems in the past? Can you show that you are enforcing your policies on a consistent basis to help avoid claims of discrimination or retaliation?

Do You Have the Correct Termination Paperwork?

Luckily, in California, there is far less paperwork at the time of termination than at onboarding. Employers must generally provide the following paperwork when ending employment:

• Change in Status Notice
• EDD’s Form DE 2320: For Your Benefit
• Form DHCS 9061: Notice to Terminating Employees—Health Insurance Premium Payment (HIPP) Program
• Certain COBRA/Cal-COBRA Notices (For employees who had healthcare coverage. Many carriers handle this for the employer upon notification that employment has ended.)

CEA members have access to these forms in the Termination Toolkit on the HR Forms page.

Process the Final Paycheck Correctly

It is critical to provide the final paycheck in a timely manner, including all wages earned to date, as well as any accrued but unused vacation or PTO. If the paycheck is late or does not include everything owed, it can result in waiting time penalties. (A day’s worth of wages for each day the final check is deficient, up to 30 calendar days.)

Anytime the employer is ending the employment relationship, final pay is due on the last day of employment. The place of the final wage payment for terminated employees is the place of termination.

Also, according to the Labor Commissioner, any previously authorized direct deposit agreement is immediately terminated when an employee quits or is discharged. To pay the final paycheck via direct deposit, the employee should authorize a new agreement for the final check, and the employer must still ensure compliance with the Labor Code’s timing requirements. Based on Labor Commissioner guidance, it is not recommended to mail the final paycheck for terminations.

Additional questions, including how to handle resignations? CEA members may call us at 800.399.5331 for HR guidance.