California Law on Layoffs

Midsection close up of unknown caucasian man holding a box with personal items stuff leaving the office after being fired from work due recession economic crisis downturn losing job company shutdown
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While few workers have an absolute right to a job, layoffs are subject to a variety of state and federal laws that protect employees. California laws offer some of the strongest worker protections in the country, including mandatory rest and meal breaks, a high minimum wage and strict overtime requirements. State laws also offer workers health and safety regulations, the right to take legal action against an employer without fear of employment-based punishment, and benefits for those injured on the job.

California's layoff laws are also quite stringent. The Labor Enforcement Task Force of California enforces the laws that protect all workers in the state, regardless of legal status. It is important to get an overview of layoff laws and the rights and remedies available to those subject to wrongful termination.

Federal and State Employment Laws

Most employees hold their jobs only as long as their employer wishes to keep them employed; both full-time employees and part-time employees can be laid off or fired at any time, whether or not there are unforeseeable business circumstances. But that doesn't make every job termination legal. Sometimes employment contracts insulate a worker from certain kinds of layoffs. And all workers are protected from being terminated for illegal, discriminatory or retaliatory reasons.

A worker enjoys the protections of both federal laws and state laws when it comes to employment rights. The general rule is that a worker is entitled to rely on whichever law – state or federal – that offers the greatest protection. Workers in California are particularly fortunate since the state has enacted some of the most progressive labor laws in the country. The state's wage and hour laws are without exception more protective than federal laws. The mandated minimum wage in California is almost double the federal minimum wage, and cities are free to mandate even higher hourly wages.

Federal law also provides protections, but some are duplicated by state laws. For example, federal laws make it illegal to fire a worker for discriminatory or retaliatory reasons. This means that if an employee is fired because of their race, sex or ethnicity, for example, or because they have exercised other legal rights such as protected political activities or whistleblower activities, federal law has been violated.

Contractual Layoff Protection in California

Despite legal protections in California, most workers are still at-will workers who can be fired at any time and for any reason that is not against the law. This is set out in California Labor Code Section 2922. However, the state recognizes exceptions to this at-will status.

California labor law provides that an employee may have a contractual right to their job in which case they cannot be terminated without good cause. Certainly this is the case if there is a written contract that offers this protection. However, in California, even absent a written contract, the parties can create an implied contract term that the employment will not be terminated without good cause. This occurs when there is an implied agreement, understood by both parties. For example, if the employer provides an employee handbook that contains a specific list of reasons for firing a worker.

Terminations in Violation of Public Policy

Another important exception to at-will worker status is founded in public policy violations. Wrongful termination in violation of public policy is not permitted, despite the general at-will status of the worker. A typical public policy violation occurs when an employer fires a worker for refusing an order to commit wrongful or illegal acts, including violating criminal laws or to commit fraud.

Another common form of termination in violation of public policy involves whistleblowers, workers who tell authorities about wrongdoing by or on behalf of their employers. When an employer fires a worker for reporting a potential or actual violation of law to a government agency, to a supervisor or to law enforcement, they cannot be fired for this action under California Labor Code Section 1102.5.

Protections for Employees

The California False Claims Act contains a "qui tam" section that protects employees who report their employer's fraud or embezzlement of government funds. The law gives the worker the right to sue their employer on behalf of the state government for wrongful discharge/qui tam retaliation.

Federal law also outlaws whistleblower termination. The Sarbanes-Oxley Act is a federal law that protects investors from fraudulent accounting by public companies. This law also protects employees from termination for reporting suspected securities fraud. Workers fired in these circumstances have the right to sue for wrongful termination.

Termination for Exercising Rights

The primary state law prohibiting workplace harassment and discrimination is the California Fair Employment and Housing Act. This Act prohibits employers from firing or otherwise retaliating against employees who complain of harassment or discrimination on the job. This includes those workers who file a complaint or report on-the-job harassment or discrimination or who appear, assist or testify in any resulting litigation.

The right to sue the employer in this type of case does not turn on actually being fired from a job. California recognizes wrongful constructive termination, which occurs if an employer does not actually fire the employee for opposing or reporting harassment or discrimination, but rather changes the person's working conditions to force the person to resign.

The employee can sue by providing evidence to show: their employer intentionally created intolerable working conditions for an employee that could be expected to cause a reasonable employee to resign because of them, and that the employer did not have the legal right to terminate the employee outright because of an implied oral contract or public policy reasons.

Termination for Political Activities

Does the First Amendment of the U.S. Constitution governing free speech protect an employee from employer-regulation of their political activities? Courts have held that it does not apply to situations where an employee works for an employer in the private sector. That means if an employer fires an employee for participating in political rallies or for giving a political speech, the employee does not have a legal cause of action under the First Amendment's free speech protections.

However, California labor laws create the possibility that employees can sue for wrongful termination in that situation. Section 1101 of the Labor Code provides that it is illegal for employers to control or direct their employees’ political activities or speech, and termination for those activities is considered an attempt to control them. In addition, a California worker can also bring a wrongful termination case against an employer who terminates them for labor union activities.

Termination for Exercising Worker Rights

A worker in California has an absolute right to exercise their legal employee rights. These include the right to file a workers' compensation claim if they lose their job and the right to report a work injury. These rights are similar and arise from the same Labor Code section – Section 132a of the California Labor Code – that prohibits an employer from firing an employee for filing a claim for workers' compensation.

It also prohibits the employer from taking any other actions to penalize the employee and also prohibits firing and/or discrimination against the employee because they suffered and reported a work injury. If the employer violates this section of the California Labor Code, an employee can file a lawsuit for wrongful termination and seek job reinstatement and recovery of back wages. An injured worker who wins a Section 132a claim can also receive a 50 percent increase in permanent disability compensation, up to $10,000. The employer in this situation may also be charged with a misdemeanor.

Termination for Taking Leave

Workers in California are covered by both federal and state leave laws. The primary applicable federal leave law is the Family and Medical Leave Act. This law gives eligible employees up to 12 weeks of unpaid leave if they are ill, need to care for an ill relative, or are having or adopting a new child. After taking the leave, the worker has the right to return to their prior job or a substantially similar one.

Under California law, the same protections are found under the California Family Rights Act. But California also offers many other types of leave to employees, including that guaranteed under the Paid Family Leave Act, the Pregnancy Disability Leave Act and the California Fair Employment and Housing Act.

California prohibits employers from taking any negative actions against employees for taking leave under state and federal leave laws. Any employer who retaliates against an employee for taking leave for which they legally qualify is acting illegally. This is also true if the employee fires or threatens to fire the worker. The employee can file a lawsuit against their employer and, under most state leave laws, an employer who loses the litigation will be required to cover the employee's legal fees.

Violations of the Federal WARN Act

The California Worker Adjustment and Retraining Notification Act (WARN Act) gives employees the right to notice before the employer lays off 50 or more employees or closes a plant. This applies to every enterprise with at least 75 employees. There is a 60 day notice requirement, and notice must include information about whether the layoffs are expected to be temporary or permanent, when they will begin and whether employees with seniority will be given priority in rehiring.

Under the state law, at the same time as employers give the required notice to their employees, they must also give written notice to the Employment Development Department or Workforce Services Division. They also must inform the Local Workforce Development Areas, the relevant county government and the chief elected official of each municipality in which the layoffs occur.

There is also a federal WARN law, but it does not apply as broadly or offer as much protection as the state law. It applies only to employers with at least 100 employees working at least 20 hours per week, six months of the year. Covered employers who violate the WARN Act can be liable for affected employees' pay and benefits for 60 days. And businesses in violation can be hit with civil penalties of up to $500 a day for each violation.

Severance Pay Not Mandated for California Employers

California laws do not obligate employers to pay severance pay to laid-off employees. This is only required as a matter of contract law when a worker's employment contract includes a compensation package with severance pay. Even absent direct mention of severance pay in the employment contract, an employer may be found to have guaranteed severance in some cases. For example, if there is a company-wide severance policy set out in an employee handbook, a union agreement or simply as part of the company's established practice, courts may find that the employer must pay severance.

California also requires that a terminated employee must receive their final paycheck by the time their work is terminated. That paycheck must include compensation for any accrued vacation or paid time off. And terminated employees must also be provided a copy of the State of California Employment Development Department's booklet on unemployment insurance benefits.