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Forums For Adjudicating Employment Disputes

Most employment related claims are adjudicated through California’s civil court system or the federal court system. However, employment-related disputes may also be resolved by binding arbitration if such claims are subject to an enforceable arbitration provision. Moreover, there are specialized forums for on-the-job injuries under the workers’ compensation system. Workers’ compensation provides the “exclusive remedy” for job-related injuries unless those injuries are the result of particular intentional conduct or negligence far outside of the scope of employment, or the injuries are the result of acts that are made unlawful by anti-discrimination/harassment/retaliation laws. In addition, challenges to awards of statutory benefits, such as unemployment insurance and state disability insurance, must be adjudicated before the California Employment Development Department. Finally, there are specialized administrative agencies, like the Department of Industrial Relations, for wage and working conditions disputes. These agencies have the power to order payment of back wages and penalties. Employees may choose to file claims before the administrative agency or may file claims directly with the courts. Employees claiming violations of California or federal anti-discrimination/harassment/retaliation laws must first file those claims with the California Department of Fair Employment and Housing or federal Equal Employment Opportunity Commission before commencing a court action.

The Main Sources Of Employment Law

The main sources of employment law in California are codified in the California Labor Code, California Government Code, California Civil Code, and California Unemployment Insurance Code. However, there are often statutes contained in other codes that impact California employers. Laws governing wages, working conditions, and workplace injuries are generally codified in the California Labor Code. Laws governing anti-discrimination/harassment/retaliation are generally codified in the California Government Code. In addition to the statutes, administrative agencies are charged with creating regulations to provide guidance regarding the implementation and interpretation of the statutes. Often the administrative agencies also provide opinion letters and other interpretive guidance regarding various employment laws. While the guidance is not binding, it provides employers with useful insight into how a statute or regulation may be interpreted when challenged.

California employers must also comply with all applicable federal laws governing the employer-employee relationship. The employer-employee relationship may also be governed by non-codified laws, collective bargaining agreements and individual contracts.

National Law And Employees Working For Foreign Companies

As noted above, in addition to California law, there are several federal statutes and regulations governing the employer-employee relationship for workers in the United States. Both California and federal law apply to workers who work within California regardless of the employee or the employer’s nationality.

National Law And Employees Of National Companies Working In Another Jurisdiction

If a national employee is providing services outside of California, federal law and the law of the state in which the employee is working will apply.

Data privacy

The California Consumer Privacy Act (“CCPA”) imposes various requirements on certain employers related to the collection and processing of personal data of California employees. If an employer is covered by the CCPA, the employer must disclose to employees, before or at the point of collection, the categories of personal information to be collected and the purposes for which the information will be used. Additionally, under the California Civil Code, employers that own or license computerized data must disclose data breaches involving certain personal information. Further, California employees enjoy an inalienable right to privacy under the California Constitution, including informational privacy and medical privacy. Various other state laws govern the types of information that can be collected from employees, how such information must be maintained, and whether and how such information may or must be disclosed to employees or third parties.

Legal Requirements As To The Form Of Agreement

Under California law, a written employment agreement is not required, nor are there any requirements as to the form of any employment agreement.

Mandatory Requirements
  • Trial Period
  • There is no legal obligation to provide an employee with a trial period, often called “probationary” or “introductory” period. Employment in California is presumed to be “at-will” meaning that the employer or the employee can terminate the employment relationship at any time, with or without notice, and with or without cause. However, the “at-will” status can be altered by agreement, employer policies or practices and representations by the employer. The use of a trial period may impact the “at-will” status of employees.

  • Hours Of Work
  • There are no mandatory requirements regarding when employees may be required to work. Employees working under California Wage Orders 4, 8, and 13 cannot be required to work more than 72 hours per “workweek”. Employees are to receive at least one (1) day of rest per “workweek.” The laws governing hours of work and compensation for those hours depend heavily on whether the employee is an exempt or non-exempt employee. Both California and federal laws contain complex and detailed standards for determining whether an employee is an exempt employee.

    Generally, if an employee is “exempt,” he or she is exempt from overtime payments and is paid a salary, regardless of the number of hours worked each day. If an employee is “non-exempt” he or she may only work more than eight (8) hours in any workday, more than 40 hours in a workweek or more than six (6) days in any workweek if the non-exempt employee is paid overtime. Unlike federal law, which only requires employers to pay overtime for those hours worked in excess of 40 hours in one work week, California law requires employers pay overtime for all hours worked in excess of 40 in one workweek and in excess of eight (8) hours in a single workday. Another unique aspect of California law is that the amount of overtime depends on how many hours the employee works in a workday and/or in a workweek, and whether the employee works a seventh consecutive day in a given workweek. For example, a non-exempt employee is entitled to a rate of one and one-half times his or her regular rate of pay for those hours worked in excess of eight (8) hours in any workday and a rate of two-times his or her regular rate of pay for those hours worked in excess of 12 hours in a workday. An employer must pay one and a-half times the employee’s regular rate of pay for the first eight (8) hours worked on the seventh consecutive day of work in a workweek, and double the regular rate of pay for hours worked in excess of eight (8). “Workday” is a consecutive 24 hour period, and “workweek” is a consecutive seven-day period, although employers may define “workday” and “workweek.”

    Certain local ordinances impose additional scheduling restrictions for employees in certain industries.

  • Special Rules For Part-time Work
  • There are no special rules that apply to part-time workers. However, employers may limit eligibility for certain discretionary benefits based on part-time status. Certain local ordinances impose working obligations related to the retention and staffing of part-time workers.

  • Earnings
  • Non-exempt employees must be paid at least minimum wage for all hours worked. Employers are not permitted to apply a “tip credit” or similar offsets to wages. There are rare circumstances in which an employee may be paid less than the minimum wage, which are inapplicable to most California employers. Exempt employees must be paid the amount required to meet the minimum compensation requirements contained in the exemption standards. Employers must also be aware of obligations to pay non-exempt employees split shift premiums, call-in pay, and on-call/stand-by pay.

  • Holidays/Rest Periods
  • Employers are not required to provide paid days off for holiday. If employers choose to offer paid vacation or paid time off, the employees must accrue the amount incrementally and must be paid for all time accrued but unused at the time the employment ends. In addition employers may not have a “use-it-or-lose-it” policy with regard to accrued vacation or paid time off, but may institute a “reasonable cap” on accrual. Floating holidays and sabbaticals may be treated as vacation if the time off can be used for any purpose and is not tied to a specific event.

    Employers must authorize and permit non-exempt employees to take a paid 10-minute rest period near the middle of each work period of four (4) hours or major fraction thereof (two (2) or more hours). However, employers do not need to provide a rest period if the employee works less than three and one-half hours in a workday.

    Employees must also provide employees with an unpaid 30-minute meal period if the employee works more than five (5) hours in a workday. The meal period must be provided no later than the end of the fifth hour of work, and an employee must be relieved of all duty during the meal period. However, if the employee does not work more than six (6) hours, the employee and employer may mutually consent to waive the meal period. Employees working more than 10 hours in a workday are entitled to a second unpaid 30-minute meal period before the end of the 10th hour of work. However, if the employee does not work more than 12 hours, the employee may choose to waive the second meal period if the employee has not waived the first meal period.

  • Minimum/Maximum Age
  • Any employers employing children under the age of 18 must comply with California’s child labor laws and obtain all necessary work permits. In many circumstances employers may not employ workers younger than 16. California does not have a maximum working age.

  • Illness/Disability
  • California employers are required to provide employees paid sick leave at a minimum rate of one (1) hour for every 30 hours worked, subject to certain eligibility, use and accrual limitations. Instead of using an accrual basis, employers may also front-load a lump sum award of at least 24 hours or three (3) days (whichever is greater). All employees, including full-time, part-time, temporary and seasonal, are entitled to paid sick leave if they work in California for the same employer for at least 30 days.. Although employees begin to accrue sick leave from their date of hire, employers can require 90 days of employment before an employee may use accrued sick leave. Employers must display a poster on paid sick leave, provide new employees written notice of their right to paid sick leave at the time of hire, show how many days of sick leave an employee has available on the employee’s pay stub, and keep records of how many hours have been earned and used for a period of three (3) years. Certain cities and counties in California have enacted local ordinances that provide for even greater paid sick leave benefits. Employers in these local jurisdictions are required to comply with their local ordinance, as applicable, and California law.

    Both California and federal law prohibit discriminating against an employee on the basis of a disability and there are several laws which apply to these types of issues. Notably, an employer must engage in an interactive process and provide reasonable accommodation to an employee with a known mental or physical disability who needs an accommodation to perform the essential functions of their job.

    In addition, employees who are unable to work because they are disabled by pregnancy or pregnancy-related conditions may be entitled to up to four (4) months (17.33 weeks) of unpaid leave under California’s Pregnancy Disability Leave Law (“PDL”). In such circumstances, the employer is obligated to hold open the employees’ job unless the employer can show that the job would have been eliminated or that holding it open is a significant hardship (often difficult to establish). PDL further requires that an employer provide accommodations, including temporary transfers, for conditions related to pregnancy, childbirth, or related medical conditions.

    Employees qualified to take leave under the California Family Rights Act (“CFRA”) may take up to 12 weeks of unpaid leave in a 12-month period for reasons of the birth, adoption, or foster-care placement of a child; the serious health condition of the employee or the employee’s child, parent, spouse, domestic partner, grandparent, grandchild or sibling; or a qualifying exigency related to the military service of certain family members of the employee. CFRA covers employers with 5 or more employees, whereas the federal Family and Medical Leave Act (“FMLA”) only applies to employers with at least 50 employees. An employee that takes up to four (4) months of PDL may take an additional 12 weeks of bonding leave under CFRA.

  • Location Of Work/Mobility
  • Employees are not required to have a specified location of work, although most do. For employees who do not have a regular work location, employers may be obligated to pay for certain travel time and travel expenses related to the employee’s commute. For remote employees, employers may be obligated to reimburse certain business expenses.

  • Pension Plans
  • Employers are not obligated to provide pension or retirement plans. In addition, if an employer chooses to provide such a plan, the employer is not obligated to make contributions to the plan. However, if a retirement plan is offered, the employer must fully disclose the plan and offer it to all employees. Pension and retirement plans are governed by federal law. Specifically, the plans are governed by the United States Employee Retirement Income Security Act (ERISA).

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • Employees who work for employers with five (5) or more employees and who are unable to work because they are disabled by pregnancy or a pregnancy-related condition are entitled to take up to four (4) months (17.33 weeks) of unpaid leave per pregnancy. All employees, male and female, who work for employers with 5 or more employees and who meet all eligibility requirements are entitled to take leave under CFRA for “baby bonding” within one (1) year of the birth or placement of the child. Employees taking leave are generally entitled to take 12 weeks of leave in a 12-month period. The eligibility requirements for such leave, and their interaction with federal leave under FMLA, are complicated and should be carefully navigated by California employers. If an employee is not entitled to take statutory leave, California employers may choose to provide time off for the birth or placement of a child. Employers cannot discriminate against an employee who takes statutorily protected leave. In addition, California has several leave rights impacting parents’ ability to take time off for family-related matters.

  • Compulsory Terms
  • California does not require that employers provide employees with an employment agreement.

  • Non-Compulsory Terms
  • The employer and employee are free to agree to any terms and conditions of employment, so long as the terms are not less favourable than the terms and conditions guaranteed by California and federal law.

Types Of Agreement

The employment relationship in California is heavily regulated, and even the presumption that employment is “at-will” has been codified by statute. However, as discussed above, employers are free to contract more precise terms and conditions of employment with the employees that can modify the “at-will” nature of employment. For example, employers and employees may enter into agreements for a fixed time period, and/or employment that can only be terminated “for cause” (as defined in the agreement), or termination with a set notice period. In addition, employers may contract with employees regarding maintaining confidentiality of information, utilizing arbitration to resolve employment disputes, and ownership of employee property. Finally, an employer’s policies or oral representations to the employees can create contractual obligations between the parties. For example, representations that the employee will be given notice of dismissal prior to dismissal can create an obligation to provide notice.


Broadly, the California Uniform Trade Secrets Act (“UTSA”) prohibits individuals, including employees, from using or disclosing another’s trade secrets, which are defined by statute. Employers may use agreements to mirror and reinforce the employee’s obligations under the UTSA, and protect information that may not rise to the level of trade secrets. California’s trade secret law is unique insofar as employers own trade secrets created by their employees, so long as the trade secrets were not created on the employee’s own time and without the use of employee materials. California generally prohibits non-competition and non-solicitation agreements. Agreements restricting competition are governed by California’s Business and Professions Code and are prohibited, except in rare circumstances expressly provided for in the code and to the extent necessary to protect trade secrets.

Ownership of Inventions/Other Intellectual Property (IP) Rights

Much like anything else that an employee acquires by virtue of his or her employment, inventions and intellectual property, which are developed by the employee during — and sometimes after the term of — employment, using the employer’s tools and work time, will belong to the employer.

Pre-Employment Considerations

Both California and federal law require employers to provide certain notices to employers before requesting a background check,and set forth specific procedures and requirements regarding the timing of such inquiries, the information that can be considered, and the rights of applicants to review and correct inaccuracies. The California Consumer Credit Report Agencies Act (“CCRAA”) further governs when employers may solicit credit reports for applicants. Certain local laws impose even stricter requirements.

State and federal law also limit the qualification standards, employment tests and other selection criteria employers may use to screen employees. Specifically, California law only permits employers to require a medical or psychological examination after an employment offer has been made but prior to the commencement of work if the inquiry is job-related and consistent with business necessity, and all employees in the same job classification are subject to the same examination.

State and federal law also prohibit employers from discriminating against applicants on a protected base.

Hiring Non-Nationals

Rules and regulations regarding hiring non-nationals are very strict and are governed by federal law. However, an employer may not discriminate in the hiring process against a person based on their right to work credentials, and may only ask for the credentials after a job has been offered. Employers may be subjected to penalties for employing an individual who is not entitled to work in the United States. Employers must also conduct the federally required I-9 verifications.


Hiring Specified Categories Of Individuals

Generally for private employers, there is no quota system that requires that an employer hire a certain number of ethnic minorities, disabled persons or other persons included in protected classes. There are restrictions on whether certain employees (e.g., children) can perform certain job duties. The restrictions are designed to protect the health and welfare of more vulnerable members of a workforce.

Outsourcing And/Or Sub-Contracting

California’s law on classifying workers as employees or independent contractors is set forth in the California Labor Code and requires that a very restrictive test – the “ABC” test – be used to determine whether many California workers are employees or independent contractors for purposes of various California employment laws including those relating to minimum wage, overtime pay, meal/rest period compliance, unemployment insurance, workers’ compensation insurance and paid family leave. Under the ABC test, there is a presumption that a worker is an employee, not an independent contractor, unless the hiring entity can establish all three prongs of the test. Under the Labor Code, certain professions and types of relationships are exempt from the ABC test, such that worker status is instead analysed under a less rigid test that focuses on the hiring entity’s right to control.

In addition to the California state-specific tests discussed here, for federal tax purposes, the IRS takes a holistic approach to the independent contractor classification and looks at various aspects of the worker’s control or independence.

In addition to liability for the wage, taxes or insurance payments that were avoided through the misclassification, significant penalties can be assessed against an employer who incorrectly classifies individuals as independent contractors instead of employees.

Note, however, that even when workers are properly classified as independent contractors in California, certain employers may be held jointly liable for wage and hour violations committed by labor contractors under provisions of the California Labor Code.

Changes To The Contract

California contract law does not permit a change to the contract by one party unless the other party consents. However, employers can include in the agreement how the agreement can be modified, and in what circumstances the employer is permitted to unilaterally modify the agreement without the employee’s consent.

Change In Ownership Of The Business

There are several considerations that should be addressed by the selling and purchasing of companies, and depending on the nature of the sale, a variety of different notices that must be provided to employees. Notices can be required by different administrative agencies, such as the California Employment Development Department, or required by different laws, such as the Consolidated Omnibus Reconciliation Act (COBRA), California Consolidated Omnibus Reconciliation Act, the Worker Adjustment and Retraining Notification Act (WARN), and the California Worker Adjustment and Retraining Notification Act (WARN).

In addition, purchasing employers are often determined to be the “successor employer” when an employee is pursuing a claim for wages, harassment, discrimination, breach of contract, and other claims. However, sellers should be aware that the sale of a business can act as a termination of the employment relationship, even if the employee continues working the same capacity at the new employer, and steps should be taken to address that issue as part of the sale process.

Social Security Contributions

Employees are required to make contributions to the federal Social Security program, and employers are obligated to make the contributions on behalf of the employee.

Accidents At Work

Employers are required to follow regulations enacted by the federal Occupational Safety and Health Administration as well as the California Occupational Safety and Health Administration. Additionally, employers are required to create Injury and Illness Prevention Programs that are individualized for their workplace. If, or when, employees do get hurt or become ill on the job, the Workers’ Compensation system provides an expeditious method for employees to get prompt treatment for their injuries so that they can return to work. Under the workers’ compensation system, employees are entitled to receive prompt and effective medical treatment for injuries or illnesses sustained on- the-job, regardless of fault. For employers who are properly insured, workers’ compensation is the “exclusive remedy’ for employees who sustain injuries while on the job. Employees are therefore prevented from suing their employers over those same injuries outside of the workers’ compensation system. If an employee does file a claim, it is unlawful for employers to retaliate against that employee for doing so. Failing to carry workers’ compensation coverage is not only punishable by a state-imposed penalty of up to $100,000; it is also considered to be a misdemeanour crime, punishable by a fine of up to $10,000 and / or imprisonment in the county jail for up to one year. In addition, if the Department of Labor Standards Enforcement learns that the employer is operating without workers’ compensation coverage, it can impose a “stop work” order on the employer. The Department of Labor Standards Enforcement can also impose a penalty of $1,000 per employee on the payroll at the time the stop order is issued and served, up to $100,000. Failure to abide by a stop work order is also a crime, punishable both by a fine and imprisonment. In addition, the employer will have to pay for all of the injured employee’s medical bills out-of-pocket.

Discipline And Grievance

No statutes exist that require a set procedure for discipline and grievances. Employers who use a progressive discipline policy guaranteeing certain steps prior to termination are required to follow that policy (a failure to do so could result in a breach of contract claim), and those who guarantee a grievance process must also follow that process. In addition, employers with collective bargaining agreements or memoranda of understanding with unions must follow the procedures outlined in those agreements.

Harassment/Discrimination/Equal pay

California employers must comply with both federal and state anti-discrimination and anti-harassment laws. In addition, counties, cities and municipalities may have additional laws providing further protections for employees. Protected classes under federal and/or California state law include: race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex (including pregnancy, childbirth, or medical conditions related to pregnancy, childbirth or breast feeding), gender, gender identity, gender expression, age (40 or older), sexual orientation, and military and veteran status.

Compulsory Training Obligations

California law requires all employers with 5 or more employees to provide one (1) hour of sexual harassment and abusive conduct prevention training to nonsupervisory employees and two (2) hours of training to supervisors and managers once every two years. Additional safety training obligations may exist for certain employers under OSHA and Cal-OSHA regulations.

Offsetting Earnings

All deductions made from an employee’s wages must be statutorily authorized or specifically authorized in writing by the employee. Employers engaging in “self-help” to recover debts owed will be subject to penalties.

Payments For Maternity And Disability Leave

Employers may choose to provide compensation for employees who are on leave for disability or family-related leave. Employees may apply for wage replacement through the state-run State Disability Insurance and Paid Family Leave programs, administered by the California Employment Development Department. These programs do not provide employees with the right to take a leave of absence, they simply provide wage replacement. All employers/employees participate in these programs through payroll deductions.

Compulsory Insurance

California employers are not required to provide employees with health, dental, vision or life insurance. California employers are required to purchase and maintain workers’ compensation insurance to compensate employees for workplace injuries. In addition, employers are obligated to make appropriate payroll deductions and payments to the state-run disability, unemployment and paid family leave insurance programs. Since 2014, the Affordable Care Act requires that employers with more than 50 full-time equivalent employees (FTEs) provide health insurance to full-time employees or pay a penalty.

Absence For Military Or Public Service Duties

Military leave is governed by federal and state law. California law provides some additional military benefits that are not required by the Uniformed Services Employment and Reemployment Rights Act of 1994. For example, California requires paid military leave under certain circumstances. California also requires employers with 25 or more employees to provide up to ten days of unpaid leave to an employee whose spouse has been granted leave from military service while on active duty. Military leave is governed by federal law, and employers must comply with the Uniformed Services Employment and Reemployment Rights Act of 1994. California does require employers with 25 or more employees to provide up to 10 days of unpaid leave to an employee whose spouse has been granted leave from military service while on active duty. In addition, California law requires that employers permit employees time off to vote, serve as a witness pursuant to a subpoena, serve as a juror, and to fulfil obligations as an emergency responder. In addition to the leaves of absence discussed above, California employers are also required to provide time off to employees to attend to disciplinary matters of their minor children in school; provide time off to attend the criminal proceedings when the employee, or his or her family member, was a victim of a serious crime; provide time off to obtain Court assistance when the employee, or his or her family member, was the victim of sexual assault or domestic violence (employers with 25 or more employees must provide additional time off for medical attention, counselling and safety planning); and provide time off for school or daycare activities up to 40 hours per year if the employer has 25 or more employees.

Works Councils or Trade Unions

The rights of employees of private employers to form and belong to unions are primarily governed by the federal National Labor Relations Act (“NLRA”). Rights of public body or governmental employees to form and be a member of a trade union are governed specifically by other state laws. California enacted the Agricultural Labor Relations Act, which applies solely to agricultural employers and employees, and mirrors the NLRA in many respects.

Employees’ Right To Strike

An employee’s right to strike under any of the laws discussed above is clearly set by the governing laws. These laws apply to employees on strike and set out the circumstances under which employees may strike. Private employees who are not members of a union do not have a statutory right to strike. Strikes in California most often occur in the agricultural, grocery and hospitality industries, as well as in the public sector.

Employees On Strike

Similarly, treatment of employees on strike is governed by the applicable law, and the agreement governing the parties’ relationship.

Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for the actions of their employees if the employee was acting in the course and scope of their employment at the time of the employee’s actions.

Procedures For Terminating the Agreement

Because an employee is presumed to be employed “at-will” in California, there are no specific requirements for terminating the employment relationship. If an employment agreement exists, the provisions of that agreement will govern the termination of the employment relationship and the procedures that must be followed in terminating the employee.

Instant Dismissal

“At-will” employees may be dismissed without warning or prior discipline. If employees have an employment agreement that modifies the “at-will” employment, employers will need to adhere to those agreements. If an employee’s agreement provides that they may only be terminated for the reasons set forth in the agreement, and the employer fails to adhere to those restrictions, the employer may be liable for breach of the agreement.

Employee's Resignation

“At-will” employees are free to resign their employment at any time. Those employees whose relationship is governed by an employment agreement may have certain provisions related to resignation that will need to be complied with.

Termination On Notice

Employers are not required to provide “at-will” employees with notice. An employee’s agreement may govern particular notice requirements. In addition, in the event of a “mass layoff” or plant closure, employers may be obligated to provide notice to employees prior to termination pursuant to the federal WARN or California WARN laws.

Termination By Reason Of The Employee's Age

Employees aged 40 and above may not be dismissed because of their age under California and federal law.

Automatic Termination In Cases Of Force Majeure

As discussed above, California employees may be dismissed at any time with or without cause, so long as the reason for dismissal is not an illegal reason. Employees whose employment is governed by an employment agreement may have those agreements terminated for the reasons enumerated in the agreement. Employers whose employment agreements that do not include provisions for termination in cases of force majeure – unexpected or uncontrollable events – may be held liable for breach of contract unless they are able to establish that their performance is excused under the general laws governing contracts.

Collective Dismissals

In the event of a “mass layoff” or plant closure, employers may be obligated to provide notice to employees prior to termination pursuant to the federal WARN or California WARN laws.

Moreover, when two or more employees are terminated on the same day or within a short period of time for the same reason, such as with a reduction in force, the OWBPA requires employers to include specific language in any severance agreement offered to employees if at least one of them is 40 or older, and a waiver of rights is included. Specifically, the employees that are 40 or older must be given up to 45 days to consider the severance agreement (instead of 21 days), and the employer must provide specific information related to the “decisional unit” of the company affected by the terminations (including ages and positions).

Termination By Parties’ Agreement

Parties are free to agree to termination on any grounds and terms they desire, so long as those provisions do not violate state and federal laws. Where the parties agree to sever the employment relationship and a severance payment is provided to the employee in exchange for the release of all claims against the employer, the release is only effective if it complies with certain statutory requirements. For example, a general waiver and release purporting to release all claims known or unknown must comply with the California Civil Code, and a release of age discrimination claims must comply with the federal Older Workers Benefit Protection Act. California has generally prohibited the waiver of prospective claims on the basis that enforcement would contravene public policy.

Directors Or Other Senior Officers

There are no special rules or requirements that relate to the termination of a director or other senior officer. Termination of employment does not always terminate the directorship. Terminating the employee’s role as director must be done in accordance with the company’s governing documents and law.

Special Rules For Categories Of Employee

There are no categories of employees to whom special rules apply from a general termination. However, employees protected by anti-discrimination laws may not be dismissed because of their membership to a protected class. If an employee is dismissed, even partly because of their membership in a protected class, the employee may bring claims for discrimination and wrongful dismissal, among other claims.

Whistleblower Laws

There are numerous state and federal laws that protect whistleblowers from retaliation by employers. Various anti-retaliation laws, wage and hour laws, and safety laws make it illegal for an employer to retaliate against someone who engages in conduct which the law protects or who complains (internally or externally) of suspected illegal activity on the part of the employer.

Specific Rules For Companies in Financial Difficulties

Employers who must comply with federal or California WARN laws may be exempt from compliance if the employer is in severe financial distress. Employers that must comply with WARN laws must generally provide advance notice (60 days) to employees of a plant closure or mass layoff. However, both laws contain exemptions from compliance with the notice requirements in defined circumstances in which the employer unexpectedly suffers severe financial hardship and is unable to maintain operations. Notwithstanding the foregoing exceptions, the employer must give as much notice as is practicable.

Special Rules For Garden Leave

As non-compete provisions are generally unenforceable in California (with limited exceptions), garden leave can be an effective means of preventing a departing employee from working for a competitor as the employee transitions out of their employment with a company. Namely, to be bound by a duty of loyalty and subject to non-competition restrictions, the employee must remain employed by the employer and paid a salary and benefits.

Restricting Future Activities

The California Business and Professions Code generally prohibits employers from restricting the employee’s future activities. The Code contains specific circumstances under which a reasonable non-competition agreement may be enforced, generally surrounding the sale of a business or significant portion thereof. In the traditional employer-employee relationship, agreements restricting competition will not be enforced.

Severance Payments

California law does not require that employers provide a severance payment to an employee. Severance payments are only required when guaranteed by contract or policy. Employers may choose to provide a severance payment, and may condition receipt of that payment upon the employee’s execution of a release of claims against the employer.

Special Tax Provisions And Severance Payments

Severance payments are generally subject to taxes in the same manner as wages.

Allowances Payable To Employees After Termination

Employers are not required to continue payments to the employee unless contractually obligated to do so. Employers who provide health benefits are required to permit employees to continue their coverage through the federal COBRA and/or California COBRA laws. Assistance with payment of the premiums for continued coverage may be available under state programs, and are potentially subject to employer contribution under the federal American Recovery and Reinvestment Act of 2009.

Time Limits For Claims Following Termination

The statutes of limitations for claims against employers vary depending on the nature of the claims brought. Generally the time limitations range from one year to four years following the incident underlying the claim.

Specific Matters Which Are Important Or Unique To This Jurisdiction

Many of California’s employment laws are unique to the state. Even the best intentioned employer can find themselves in violation of state law if the employer is unaware of the “lay of the land.” For example, California has extensive wage and hour regulations and several statutorily mandated unpaid leaves of absences.

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Lindsay Ryan
Polsinelli LLP
United States


© 2021, Polsinelli LLP. All rights reserved by Polsinelli LLP as author and the owner of the copyright in this chapter. Polsinelli LLP has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021