If your company plans to fire an employee, you may want to contact our team here at Hackler Flynn & Associates first. We will work closely with you and your team to provide crucial and cost-effective guidance.
At-Will or For Cause Termination
If your company plans to fire an employee, you may want to negotiate a severance agreement and liability waiver. We can assist you to make sure the provisions of those agreements protect your company and comply with the law.
At-Will or For Cause Termination
If you have an agreement with your employee that specifies that he or she can only be terminated “for cause,” you will need to review that agreement before firing the employee. You’ll need to make sure you have the necessary “cause” as set out in the agreement. Always document instances of “cause” as they occur, to fend of potential allegations of discrimination or retaliation later. Whether an employee failed to meet sales targets or engaged in unprofessional conduct, those incidents should be documented and kept in the employee’s file.
Whether your employee may be let go “for cause” or “at will,” you should review the person’s file before letting them go. You should determine if the employee has made any complaints about mistreatment, discrimination, or wage and hour issues. Make sure you are not firing the employee for a reason that he or she could claim is retaliatory.
If you work in HR and the employee has complained about the supervisor who is now trying to fire the employee, firing the employee now could be unlawful retaliation. If you have questions about potential retaliation, our experienced employment attorneys can review the employee’s file with you to determine if the termination would be lawful.
It is also important to note that if your workforce is unionized, collective bargaining agreement(s) will apply. You will need to follow the agreed-upon procedures in either laying off employees or terminating individual employees.
Following Your Policies
Many companies have written policies that list the steps your company must take before terminating an employee. For example, your company may have a policy of terminating employees after a certain number of written warnings. If your company only fires some employees after they receive those warnings, your company could be vulnerable to a discrimination or wrongful termination lawsuit if the people fired more often are in a protected group.
Likewise, if your company has a written policy that lists your process for terminating employees, it is important to comply with those. If you deviate from your policies for some employees but not others, terminated employees might again claim that this is discrimination.
Final Pay and Waiting Time Penalties
California Labor Code section 201(a) mandates, “If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.” Section 227.3 requires that if your company offers paid vacation, that you must pay out any vested but unused vacation time to the employee upon termination.
Therefore, on the employee’s last day, your company must have a check ready with the employee’s final pay (including overtime), accrued vacation payout, and any reimbursements due. (An employee may elect, five days or more before the last day, to have these funds contributed to a 401k or other retirement account instead. Labor Code sections 201(b)-(c), 202(b)-(c).)
There are also strict rules for timing of final pay for employees who quit. So, if you give an employee two weeks’ notice, and the employee declares “you can’t fire me, I quit!” and leaves on the spot, your company cannot wait two weeks to send final pay. Employees who give at least 72 hours’ notice of quitting are still entitled to their final pay on their last day. This includes final vacation payout too.
Employees who quit on the spot are still entitled to have their final pay mailed out no later than 72 hours after they quit. Labor Code section 202(a).
The penalties for failing to pay all of an employee’s final wages, reimbursements, and vacation pay on time are steep. Labor Code section 203(a) sets penalties for late final pay. If the employer “willfully” fails to pay wages timely upon termination, the employee is entitled to a penalty of their daily wage rate for the next 30 days, or until the payment is made.
The calculation of the daily wage rate for an 8-hour-a-day, 40-hour-a-week employee can be more complicated than multiplying the employee’s hourly wage by 8. If you have paid the employee bonuses or incentives, for example, the calculation of penalties becomes more complicated. We can assist you to ensure you pay the correct amount and avoid wage and hour litigation.
Severance Agreements and Liability Waivers
Under California law, you are not required to provide severance pay to terminated employees unless you previously contracted to do so. However, you may wish to do so in exchange for the employee’s agreement to certain terms. We can help you craft a severance agreement that protects your company’s interests.
First, you may wish to offer a severance payment in exchange for the employee’s waiver of claims against your company. These can include claims for wrongful termination, discrimination, or harassment. Liability waivers in severance agreements are generally enforceable. There are exceptions, however, including:
- Individual claims for wage and hour violations, which may not be waived if they are for undisputed amounts due. If there is an existing dispute as to the amount of wages due, a severance agreement may be able to resolve that dispute. Also, although class action waivers are enforceable, waivers of claims under the Private Attorneys General Act (“PAGA”) are not.
- Unemployment compensation claims are not waivable.
- Workers’ compensation claims are not waivable via a general severance agreement, but instead must be waived as part of a separate agreement that must be approved by the Workers’ Compensation Appeals Board.
- Waivers of age discrimination claims for employees over 40. In this case, the employee is ordinarily entitled to 21 days to consider the agreement – and 7 days to reconsider and revoke the agreement after signing.
- California Civil Code section 1542 bars waivers of unknown claims, unless Section 1542’s protections are specifically and expressly waived within the agreement. The Section 1542 waiver should quote the statute verbatim.
Have an Employee Agreement
Second, you may wish to ensure the employee’s agreement to keep certain information confidential. This typically includes trade secrets and other proprietary information. It can also include the terms of the severance agreement itself, the circumstances of the employee’s termination, and the substance of any complaints the employee may have made while employed. Even non-disparagement clauses can be enforceable.
However, non-competition clauses are generally not enforceable in California; you cannot ordinarily block an employee from working for competitors.
Do Not Ask as Employee to Violate the Law or Lie to a Court
Third, you may not include in a severance agreement any provision that would require an employee to violate the law or lie to a court or in an official proceeding.
Contact us at Hackler Flynn & Associates and our expert attorneys can help you prepare a severance agreement that best fits your company’s circumstances.
Regardless of whether you are just starting a brand new small ‘mom & pop’ business, or you already have a large established corporate enterprise with dozens of locations across California, we are able to meet your legal needs, and grow with you.