Termination
California is an “at-will” employment state. This means that either party (employer or employee) may terminate employment for any reason, for no reason, at any time and with or without notice. According to the law, absent an employment contract that specifies other arrangements, no notice period or severance payment is required upon termination of employment.
We recommend that you create a work agreement to clarify expectations and responsibilities. If you decide to create a work agreement, any language you include around a required notice period could supersede the “at-will” provision of the law.
When terminating an employee, you are required by law to pay all wages for hours worked, plus any accrued but unused vacation pay owed on their last day of employment. Unused sick time does not need to be paid. If the employee quits, you must legally pay any wages owed plus accrued vacation pay owed within 72 hours.
You cannot legally withhold money from a final paycheck even if it is for an outstanding debt that the employee owes you, or for any damage you believe the employee has done. Under California law, this must be addressed separately from wages.
We are often asked about severance payments. Employers typically offer some form of severance either to reward a long term of good employment, to make up for an unexpected need by the employer to make a change (e.g., a layoff), or to obtain a release & waiver. It is normal and strongly advised, regardless of the reason for offering the severance payment, that you get a full release & waiver of claims in exchange for the severance payment. The form of this severance agreement is important and should be reviewed by your attorney.
