Terminating Employees in California

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When employers are faced with terminating employees in California, they often miss the numerous required notices and action steps they must take at or before the time of termination in order to comply with the law. In this presentation, Beth Arnese and I go over how to handle terminations in a legally compliant manner (not to mention as kindly and consciously as possible - which prevents lawsuits and bad karma).

Topics addressed include federal and state requirements for terminating employees, the necessary forms and notices, the California Unemployment Insurance Code, final wages, termination letters, COBRA and Cal-COBRA coverage, and severance pay and agreements.

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Terminating Employees in California

  1. 1. Law Offices of Diana Maier Employment and Privacy Attorneys www.dianamaierlaw.com Terminating Employees in California Presented by: Diana Maier & Beth Arnese
  2. 2. 2 TODAY’S SPEAKERS Diana Maier received her J.D. from Stanford University Law School in 1998. She has been practicing law for 18 years, 15 years in employment law. In addition, Diana practices privacy law and is IAPP certified in both United States and European privacy law (CIPP-US/E). Diana also conducts workplace investigations in Spanish and English.
  3. 3. 3 TODAY’S SPEAKERS Beth Arnese received her J.D. from UCLA Law School in 2005. She practiced law for over 10 years, at both large firms and for the public sector, before joining the Law Offices of Diana Maier in 2016. She specializes in litigation as well as employment and privacy law. Beth also conducts workplace investigations.
  4. 4. 4 HOW MUCH NOTICE IS REQUIRED BEFORE TERMINATION? • 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.
  5. 5. 5 OTHER CONSIDERATIONS BEFORE TERMINATION • Review the original offer letter (if any). Are you following any specific promises you made about termination? • Review the employment contract (if any) and employment handbook to make sure you are following the terms of the contract. • Does your company have a policy of progressive discipline? Was it followed in this case?
  6. 6. 6 WHY IS PROGRESSIVE DISCIPLINE STILL IMPORTANT GIVEN THE AT-WILL STATUS OF CALIFORNIA? • You can get employee buy-in; they feel that they've been treated fairly, or at least are slightly less outraged when they are terminated. • If you face an employment discrimination lawsuit, you have documented, lawful reasons for the termination. This is critical especially if there are extenuating circumstances (like the person was on leave, or was older and had worked for the company for a long time).
  7. 7. 7 WHY IS PROGRESSIVE DISCIPLINE STILL IMPORTANT GIVEN THE AT-WILL STATUS OF CALIFORNIA? • The best strategy is documenting performance issues from the moment they occur, and showing the employee your documentation- just have them sign off that they saw it. Also praise the positives. • Employees can and do change. A termination might not be necessary, but you won't know if you don't give a chance to find out what the real issues are with a person's performance.
  8. 8. 8 ADDITIONAL RECOMMENDATIONS • Make sure you are applying your procedures and policies consistently. • Keep the termination confidential or tell only those who need to know. • Respect the privacy of the person being terminated.
  9. 9. 9 WHAT ARE THE REQUIRED FORMS AND NOTICES? 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.
  10. 10. 10 WHAT ARE THE REQUIRED FORMS AND NOTICES? Federal requirements continued: • 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.
  11. 11. 11 WHAT ARE THE REQUIRED FORMS AND NOTICES? California requirements: • 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. • 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.
  12. 12. 12 IS A TERMINATION LETTER NECESSARY? • Yes, California Unemployment Insurance Code 1089 requires employers to give a written Notice to Employee as to Change in Relationship form. • More detailed letters can be provided if the employer chooses.
  13. 13. 13 WHAT ARE THE REQUIRED FORMS AND NOTICES? California requirements continued: • 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.
  14. 14. 14 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 sent to a home address if need be. • 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.
  15. 15. 15 WHAT ELSE IS INCLUDED IN FINAL WAGES? • Expense reimbursements • Commissions must be paid on the date of discharge for all commissions earned • For commissions not yet "earned," they must be paid immediately upon satisfaction of condition precedent (i.e., customer payment) • Non-discretionary bonuses or profit-sharing agreements
  16. 16. 16 CAN THE FINAL WAGES BE PAID BY DIRECT DEPOSIT? • Direct deposits are allowed with written authorization, but that authorization immediately terminates when an employee quits or is discharged. • If the employee voluntarily provides written authorization for the specific deposit of the final payment, direct deposit of the final paycheck is allowed. The same rules about timing still apply.
  17. 17. 17 HOW LONG DOES MEDICAL COVERAGE CONTINUE? • 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.
  18. 18. 18 UNEMPLOYMENT INSURANCE • If a former employee files for unemployment insurance, then EDD will mail the employer the form "Notice of Unemployment Claim Filed." An employer has 10 days to contest in writing. • If the employer contests, the response should contain all relevant facts showing that the employee is not eligible. • Employer rates go up if the former employee takes unemployment insurance.
  19. 19. 19 WHEN IS A FORMER EMPLOYEE INELIGIBLE FOR UNEMPLOYMENT? • Termination for misconduct (this is a very high standard - failure to perform/ordinary negligence is not misconduct) • Voluntarily quitting without good cause
  20. 20. 20 IS SEVERANCE PAY REQUIRED? • 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 • Making a layoff more bearable
  21. 21. 21 SHOULD THE EMPLOYER ASK THE EMPLOYEE TO SIGN A SEVERANCE AGREEMENT? • Pro: • Employees waive their right to sue • Con: • Employer has to give something to employee that they would not otherwise be entitled to (i.e., additional money, paying for benefits to continue)
  22. 22. 22 DRAFTING A SEVERANCE AGREEMENT • Tip #1: If the employee is over 40, special considerations apply for a valid waiver of claims under the ADEA. • Include language in the severance agreement that the employee acknowledges waiver of claims under the ADEA and specify that: • Employee should consult with an attorney prior to executing the agreement; • Has up to 21 days to consider the severance agreement and up to 7 days following the execution of the agreement to revoke it; and • The agreement is not be effective until the revocation period has expired.
  23. 23. 23 DRAFTING A SEVERANCE AGREEMENT • Tip #2: If you have a “group layoff” with employees over 40, there are additional requirements if you want employees to waive their claims under the ADEA. • The employer must give employees written notice of the layoff and at least 45 days to consider the waiver before signing it. • There are many additional rules about information the employer is required to provide, such as "the decisional unit" - the class, unit or group of employees from which the employees who were and were not selected for the layoff. • The EEOC’s guidance and sample release is worth reading if you are in this situation: www.eeoc.gov/policy/docs/qanda_severance-agreements.html
  24. 24. 24 DRAFTING A SEVERANCE AGREEMENT • Tip #2 Continued: If you have a “group layoff” with employees over 40, there are additional requirements if you want employees to waive their claims under the ADEA. • Employers also have to disclose: • eligibility factors for the program; • the time limits applicable to the program; • the job titles and ages of all individuals who are eligible or who were selected for the program; and • the ages of all individuals in the same job classifications or organizational unit who are not eligible or who were not selected.
  25. 25. 25 WHAT SHOULD BE EXCLUDED FROM A SEVERANCE AGREEMENT • Employees cannot waive their right to file a charge with the EEOC, DFEH, or any other agency. • No agreement between an employee and employer can limit an employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC under the ADEA, Title VII, the ADA, or the EPA. • Any provision in a waiver that attempts to waive these rights is invalid and unenforceable.
  26. 26. 26 OTHER EXCLUSIONS FROM SEVERANCE AGREEMENTS • Workers’ compensation claims: Waiver of these claims requires a specific form release that must be approved by the Workers’ Compensation Appeals Board. • Claims for wages owed: An employer cannot require an employee to sign a release of rights to wages that are undisputedly due. A valid release has to offer something to which the employee was not already entitled.
  27. 27. 27 TIMING OF LAWSUITS • Employees in CA have one year from the date of the alleged discriminatory act to file an administrative complaint of employment discrimination under the California Fair Employment and Housing Act (“FEHA”). • If an employee chooses to file an administrative complaint with the U.S. Equal Employment Opportunity Commission (“EEOC”), the employee must do so within 300 calendar days if a state or local agency enforces a law that prohibits employment discrimination on the same basis (CA does). • Employees then have one year after receiving a right to sue letter to file a lawsuit.
  28. 28. 28 OTHER TIPS ABOUT TERMINATION • Do tell your employee why you are terminating her! Otherwise, she may make up a reason that’s not favorable to you. • Do offer severance and a release if you have a potentially litigious plaintiff. • Make sure you have a policy in your handbook or elsewhere, with a separate sign off on it, that whatever an employee does with company hardware or software, or on company time, is property of the employer. This helps you legally get access to their files, emails, and accounts once they leave. • Be aware that, even after termination, an employee is entitled to his personnel files (and records that relate to the employee’s performance or to any grievance concerning the employee) if they request it in writing. If you don't provide the files within 30 days, they can get penalties.
  29. 29. 29 • California Department of Human Resources’ “Consolidated Omnibus Budget Reconciliation Act (COBRA),” available at https://www.calhr.ca.gov/employees/Pages/cobra.aspx • California Governor’s Office of Business and Economic Development’s “At-Will Employment and Wrongful Termination,” available at http://business.ca.gov/StartaBusiness/AdministeringEmployees/EqualEmploymentOpportunityLaws/AtWillEmployment.aspx • Law Offices of Diana Maier’s “California Termination FAQ,” available at http://dianamaierlaw.com/california-employee- termination-faq/ • Law Offices of Diana Maier’s “Top 10 Things to Consider When Terminating Employees,” available at http://dianamaierlaw.com/things-to-consider-when-terminating-employees/ • Law Offices of Diana Maier’s “What’s Required When You Terminate Employees in California?” available at http://dianamaierlaw.com/whats-required-when-you-terminate-employees-in-california/ • Society for Human Resource Management’s “What Notices or Forms Must Employers Provide to Terminating Employees in California?” available at http://www.shrm.org/templatestools/hrqa/pages/californianoticesforms.aspx • State of California’s Employment Development Department’s “Misconduct MC 5,” available at http://www.edd.ca.gov/uibdg/Misconduct_MC_5.htm RESOURCES
  30. 30. 30 DISCLAIMER: The information contained in this presentation has been prepared by the Law Offices of Diana Maier and is not intended to constitute legal advice. The Firms have used reasonable efforts in collecting, preparing, and providing this information, but do not guarantee its accuracy, completeness, adequacy, or currency. The publication and distribution of this presentation are not intended to create, and receipt does not constitute, an attorney-client relationship. COPYRIGHT © 2016, Diana Maier and Beth Arnese. All rights reserved. THANK YOU FOR LISTENING
  31. 31. 31 CONTACT INFORMATION Law Offices of Diana Maier www.dianamaierlaw.com Diana Maier 415-515-1707 diana@dianamaierlaw.com Beth Arnese 415-283-8970 beth@dianamaierlaw.com For attorneys seeking MCLE credit: Email your Bar Number to Lauren McMahon at lauren@dianamaierlaw.com

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