California Employee Termination FAQ
As employment attorneys, we often receive questions about the legal requirements surrounding terminating employees in California. Here are some of the most common questions we’re asked along with their answers.
1. How much notice is required when terminating employees?
California is an “at-will” state, meaning that the employer or employee can terminate the employment relationship at any time, with or without cause. However, some employment contracts specify an amount of notice that will be provided. In that case, there is a contractual obligation to have a certain amount of notice, such as two weeks.
2. What are the required forms and notices when terminating employees?
A previous blog post of mine detailed this information, but I will reiterate the federal and state requirements here.
Federal requirements:
For employers with 20 or more employees, a Consolidated Omnibus Budget Reconciliation Act (COBRA) notice and election form needs to be provided to employees who are participating in the employer’s group health plan and to any of the terminating employee’s dependents on the plan. The Department of Health Care Services requires employers with 20 or more employees to provide the Health Insurance Premium Payment (HIPP) notice, DHCS 9061, to certain employees covered under the program. If termination is due to a layoff or position elimination covered under the WARN Act, notices need to be sent out 60 days prior to termination.
California requirements:
The California Employment Development Department (EDD) requires employers to provide their unemployment benefits pamphlet, For Your Benefit, DE 2320, to all discharged or laid off employees no later than the effective date of the discharge or layoff. California Unemployment Insurance Code 1089 requires employers to give a written Notice to Employee as to Change in Relationship form to all discharged or laid off employees immediately upon termination. Employers must notify any covered, terminated employees of their Cal-COBRA continuation rights. Cal-COBRA must be offered to both terminated employees of small employers (2-19 employees) and terminated employees covered under federal COBRA when their 18 months of federal COBRA coverage expires. Employers must provide notification of all continuation, disability extension, and conversion coverage options under any employer-sponsored coverage for which the employee may remain eligible after employment terminates.
3. Must an employer provide COBRA upon termination?
Employers with at least 20 employees are generally required to offer COBRA coverage.
4. Is there a checklist for what employers must do?
There are several termination checklists available, such as this one, to make sure the termination is compliant with the law.
5. Are employers required to provide a termination letter?
Yes, the written Notice to Employee as to Change in Relationship form is required at a minimum. More detailed letters can be provided if the employer chooses.
6. What do employers need to know about the California Unemployment Insurance Code?
Employers must provide a notice to the employee as to the change in relationship (Section 1089). In addition, employers shall supply each individual at the time he becomes unemployed with copies of printed statements or materials relating to claims for benefits (Section 1089). If the employee is discharged for misconduct, such as theft, he or she is disqualified from receiving unemployment compensation benefits (Section 1256).
7. How long does an employee have medical coverage after termination?
Group coverage can be continued under COBRA for 18 months following termination. Special circumstances can extend coverage to a maximum of 36 months under COBRA. For example, if a second event occurs such as divorce or death of employee. Under Cal-COBRA, coverage can continue for up to 36 months.
8. Does an employer have to pay a severance at termination?
No, California does not require severance pay for at-will employees when either the employer or employee terminates the employment relationship. Employers can still offer severance if they would like, for reasons such as: avoiding potential disputes by having the employee release claims in exchange for receiving severance pay and making a layoff more bearable.
9. Are California termination documents available in Spanish?
Several forms related to termination are available in Spanish, as well as many other languages, here.
10. What do employers need to know about final wages?
Employers must have the employee’s entire paycheck ready to go at the moment of termination. This should include unused vacation, which is considered wages in California. If the employee quits, the employer has 72 hours to provide a final paycheck. It’s not an excuse if the employee storms out – it should be delivered to a home address if need be, or deposited into a bank account. Failure to pay the employee his or her final paycheck at the time of termination will result in hefty fines many times the amount owed.