Letting someone go is never easy. But if you’re a business owner in California, navigating California employee termination laws can feel like a legal minefield, no matter how justified the decision. Termination mistakes can lead to expensive lawsuits, damage to your company’s reputation, and potential penalties from state agencies. California employee termination laws are strict, and it’s your job to follow them carefully.

Whether you're downsizing, addressing misconduct, or parting ways after a performance issue, you need to understand how to terminate employment legally, fairly, and in compliance with state law.

Know the Legal Basics of At-Will Employment—And Its Limits

California is an at-will employment state. That means you can generally terminate an employee with or without notice and for any reason, or no reason at all—as long as that reason isn’t illegal. But don’t be fooled by the term at-will. It doesn’t give you free rein to fire someone without thinking it through.

Here are key legal limits to be aware of:

• Discrimination: You cannot terminate someone based on race, gender, sexual orientation, age (40+), religion, disability, or any other protected class under federal or California law.
• Retaliation: It’s illegal to fire someone for reporting harassment, wage violations, safety concerns, or other protected activities.
• Public policy violations: Terminating someone for taking legally protected leave—like FMLA, CFRA, or jury duty—can result in legal action.

Even if the employee is underperforming, firing them without clear documentation or after they’ve filed a complaint can raise red flags. Courts will often look beyond what you say the reason was and examine the timing, consistency, and supporting records.

Pro tip: Always ask yourself, “Could this employee claim discrimination or retaliation based on the timing or circumstances of their termination?” If the answer is yes, pause and get legal guidance before moving forward.

Final Paycheck and Notice Rules Under California Employee Termination Laws

One of the biggest compliance mistakes businesses make is messing up the final paycheck. California employee termination laws are crystal clear here: when and how you deliver the final paycheck matters.

Here’s what you need to know:

• Immediate payment: If you fire an employee on the spot, you must provide their final paycheck at the time of termination. That includes all wages earned, unused vacation or PTO (if your policy allows it to accrue), and any commissions due.
• Quitting with notice: If the employee quits and gives at least 72 hours’ notice, you must provide the final paycheck on their last day.
• Quitting without notice: If no notice is given, you have 72 hours to deliver the final paycheck to the employee, not just to make it available for them to pick up.

Late payments can trigger penalties under California law—up to 30 days’ worth of the employee’s daily wage. That adds up fast.

In addition to the paycheck, you’re required to provide:

• COBRA or Cal-COBRA benefits notice if the employee had health insurance
• EDD Unemployment Insurance pamphlet
• EDD Paid Family Leave and Disability Insurance pamphlets, if applicable

Failing to provide these documents can result in further penalties and liability. Many employers get tripped up on what to provide. If you have questions, don’t guess or just wing it.

Document Everything and Consider a Separation Agreement

If your goal is to avoid wrongful termination claims, documentation is your best defense. Even if you believe the termination is justified, a court or agency might see it differently if you can’t prove it, and the longer the employee was with you, the more important documentation becomes.

Here’s what proper documentation looks like:

• Clear performance reviews: Include specific examples, goals, and any coaching efforts.
• Written warnings: Always note the date, issue, and any action plans discussed. Have the employee sign or acknowledge receipt.
• Policy violations: Attach relevant handbook policies and note how the employee’s actions violated them.
• Consistent treatment: If other employees have done similar things without being terminated, expect questions.

For higher-risk terminations—like those involving older employees, recent complaints, or potential retaliation—it may be wise to offer a severance and release agreement. This is a contract where the employee agrees not to sue you in exchange for some form of consideration, like additional pay or benefits.

Just make sure:

• You don’t pressure them to sign immediately
• The agreement is written in clear, understandable language
• You comply with any specific requirements for employees over 40 (such as giving them 21 days to review under the Older Workers Benefit Protection Act and 7 days to change their mind and revoke the agreement)
• The agreement does not contain unlawful terms, such as non-compete clauses

And don’t reuse a random template you found online. A poorly drafted separation agreement can do more harm than good—especially if it tries to waive rights that legally can’t be waived under California law.

Don’t Risk a Lawsuit—Get Help from a California Employment Attorney

California employee termination laws are some of the toughest in the country. And even unintentional mistakes can lead to claims for back pay, penalties, or emotional distress. If you're planning to let someone go—or already have—make sure you're on solid legal ground.

At JDS Law, Inc., we help California employers navigate the legal requirements for firing employees while minimizing risk. We’ll review your documentation, evaluate potential red flags, and provide guidance every step of the way. Contact us today to protect your business and your peace of mind.