California Layoff Laws

Layoffs are an unfortunate part of the labor market. When an employer is no longer in need of a workers’ services, they have to right to end their working relationship. Layoffs can come when an employer is in the midst of financial hardship or when a particular branch or business location becomes unprofitable.

However, workers still have many rights when it comes to layoffs. If a worker is laid off due to discrimination or unfair treatment, they may be able to take legal action.

California layoff laws are designed to give workers advance warning and help them through a potentially difficult time.

California Layoff Laws

The primary law governing layoffs in California is the Worker Adjustment and Retraining Notification Act (WARN Act). Passed in 1988, the Federal WARN Act provides a strict protocol for employers to follow during mass layoffs.

The WARN Act typically only applies to large employers with at least 75 full-time or part-time employees within the last 12 months. In order for the act to apply, the workforce reduction must be considered a “mass layoff.” A mass layoff is defined as the dismissal of at least 50 employees within a 30-day period. As a result, this act’s protection extends more often to employees of large businesses and national corporations.

WARN ACT Protections

• Advance Notice: Employers are required to give at least 60 days of advance notice to all employees prior to any mass layoff. The warning gives employees time to seek new employment opportunities and helps prevent circumstances where they may be unable to meet their financial obligations. Employers who fail to provide advance notice are in violation of their employees’ rights.
• Final Wages: Under California layoff laws, employers must provide final wages immediately on the last day of work. This standard varies slightly for specific industries. In the motion picture industry, workers are entitled to their last check by the next regular payday. Whereas in the oil drilling industry, for example, workers are entitled to their pay within 24 hours (excluding weekends and holidays).
• Unemployment Benefits: The WARN Act allows workers who lose their jobs due to mass layoffs, relocations, or plant closures to be eligible for unemployment benefits. These benefits are designed to give workers financial assistance during a potentially difficult transition period.
• Severance pay: California employers are not required to pay severance. However, some employers promise severance pay in their employment contract, which they are required to pay during a layoff.
• Penalties for Noncompliance: An employer who violates the WARN Act could face serious penalties, including lawsuits and fines. Employees who believe their employer conducted a layoff unfairly should contact an employment lawyer.

What Causes Layoffs?

Employers won’t always be transparent with their rationale for conducting a layoff. Layoffs can occur for a variety of reasons, often tied to the financial health, operational needs, or strategic direction of a business. Common causes include economic downturns, budget cuts, company restructuring, natural disasters, or other unforeseeable business circumstances. In some cases, layoffs result from a decline in consumer demand, supply chain disruptions, or a shift in company focus that renders some departments or positions redundant. Regardless of the cause, employers in California must follow specific legal obligations when implementing layoffs, particularly when they affect large groups of employees.

Being Laid Off: What Are My Rights?

4 Things to do Immediately During a Layoff

• Get the Final Paycheck: Under California law, if an employee is laid off, the employer is required to provide the last paycheck immediately on the final work day (California Labor Code Section 201). This check should include all earned wages, accrued vacation time, severance packages, and any other owed compensation. Any employee who does not receive the check promptly may be entitled to waiting time penalties. There are a few industry exceptions to this, including seasonal employees for fruit and meat packing.
• File for Unemployment: Any employee who was recently laid off should apply for unemployment benefits with the California Employment Development Department (EDD) as soon as possible. Even if they received severance or expect a short gap before their next job, filing early helps minimize financial disruption. Most laid-off employees qualify for EDD benefits unless they were terminated for misconduct.
• Look for Health Insurance: If the employer-provided health coverage ends with the job, workers should explore options through COBRA, Covered California, or a spouse’s plan. COBRA allows workers to keep their current coverage temporarily, while state exchanges may offer more affordable alternatives based on a worker’s income. It’s important not to let health coverage lapse during a transition.
• Look into Wrongful Termination Claims: Not all layoffs are lawful. Workers who suspect they were let go for discriminatory reasons, retaliation, or in violation of a contract should consult an employment lawyer. In certain cases, there are laws designed to protect employees that they may not be aware of.

When Does a Layoff Constitute Wrongful Termination?

Layoffs are typically legal when based on legitimate business reasons, such as restructuring, downsizing, or economic hardship. However, a layoff may constitute wrongful termination if it violates an employee’s legal rights. For example, a layoff may be unlawful if affected employees are disproportionately represented by a protected class, such as race, gender, age, or disability. Similarly, terminating an employee under the guise of a workforce reduction as retaliation for whistleblowing, taking protected leave, or filing a complaint may also be grounds for a wrongful termination claim. Additionally, if the layoff breaches an employment contract or violates the terms of a collective bargaining agreement, it could be challenged in court for a violation of employment law.

I Got Laid Off. Now What? – FAQ

What Happens When You Get Laid Off? When an employee is laid off, it means their position was eliminated due to reasons unrelated to their performance, often because of company downsizing, restructuring, or financial challenges. The employment relationship ends, but the employee may be entitled to certain rights and benefits. California sets certain protections for laid-off workers. For example, they must receive their final paycheck, including any earned and unused vacation time, within a specific timeframe.

How Long Does an Employer Have to Pay You After Being Laid Off? In California, employers are required to make a prompt payment of a worker’s final paycheck. The exact timing of the paycheck depends on whether the layoff was planned or unexpected. If an employee is laid off without notice, their employer is required to pay all final wages immediately at the time of termination. However, if the layoff was announced in advance, such as with written notice, then final wages must be paid by the final day of employment. Failing to pay on time can subject the employer to waiting time penalties, which accrue daily until the wages are paid, up to 30 days.

Can An Employer Lay You Off Without Notice California? California is an at-will employment state, which means an employee can be fired at any time for any reason, with a few exceptions. Workers cannot be fired for being a member of a protected class. Protected classes, such as sexual orientation or race receive additional protections in California. Wrongful termination suits can bring in hefty settlements to workers, which ensures compliance from employers.

How big can wrongful termination settlements get?

Is Severance Required in California? Severance packages are not required in the state of California. However, certain employers will offer severance agreements in order to give their employees a sense of commitment and stability. If an employer fails to pay promised severance, they may be in violation of California and Federal law.

What is Warn Pay? WARN pay refers to compensation that may be owed to both part-time and full-time employees when an employer fails to provide sufficient advance notice of a mass layoff or plant closure, as required under the Worker Adjustment and Retraining Notification (WARN) Act. Under the federal WARN Act and the more stringent California WARN Act, covered employers must give 60 days’ advance written notice before conducting large-scale layoffs or closures.

Can a Company Layoff and Hire at the Same Time? Yes. A Company can hire while making layoffs so long as they do not overlap the same jobs, positions or locations.