Wrongful Termination Defense in California: What Employers Need to Know

California is an at-will employment state, which means you can generally terminate an employee for any lawful reason or no reason at all. But "at-will" has real limits, and those limits are exactly where wrongful termination lawsuits are built.

This guide explains where California law draws the line, how to defend a claim, and what documentation separates a defensible termination from an expensive one.

Does At-Will Employment Actually Protect You?

Under California Labor Code § 2922, an employer may end employment at any time for any lawful reason. That's the foundation. The issue is what "lawful" excludes, and California's list of exclusions is longer than most employers realize.

At-will status also erodes gradually. These are the situations where it stops being a reliable protection:

• Implied contracts. Language in offer letters, handbooks, policies, or manager statements can be used to argue that termination would occur only for cause or only after certain steps are taken. Whether that overcomes at-will status depends on the full context, including any disclaimers and the employer's actual practices.

• Public policy violations. Under Tameny v. Atlantic Richfield Co. (1980), terminating an employee for refusing to break the law, for filing a workers' comp claim, or for serving on jury duty violates public policy, regardless of at-will status.

• FEHA-protected characteristics. California's Fair Employment and Housing Act prohibits termination because of protected characteristics, including race, sex, disability, age 40 and over, pregnancy, sexual orientation, gender identity or expression, religion, national origin, and others.

• Retaliation. Under Labor Code § 1102.5, employers cannot terminate employees who reported a violation of law to a supervisor or government agency, as long as the employee had a reasonable belief that a violation occurred.

To get a better understanding, John Fagerholm breaks down in this video, “At-Will Employment and Termination,” exactly how at-will employment works in California and where its protections end.

The 90-Day Retaliation Presumption: Your Biggest Timing Risk

Timing matters in California retaliation cases, but the legal framework depends on the type of claim.

For whistleblower and certain Labor Code retaliation claims, California now provides a 90-day rebuttable presumption in the employee's favor if the employer takes adverse action within 90 days of the protected activity.

Separately, Labor Code § 1102.6 sets forth the burden-shifting standard for § 1102.5 whistleblower cases: once the employee shows that protected activity was a contributing factor in the challenged action, the employer must prove by clear and convincing evidence that it would have made the same decision for legitimate, independent reasons.

In leave and accommodation cases under CFRA, FEHA, PDL, or FMLA, timing still poses a major risk, but the analysis is not identical to that in a § 1102.5 whistleblower claim. What protects employers most is documentation that predates the protected activity:

• written warnings 

• pre-existing performance plans 

• contemporaneous manager notes created before the complaint, leave request, or accommodation issue arose

Here's more in the video "Employer Law: Termination and Whistleblowers," where John walks through how whistleblower and termination claims intersect in California and what employers need to understand about the legal exposure.

What Actually Wins or Loses These Cases

Wrongful termination defense is almost entirely a documentation fight. Courts and juries ask one question: was the stated reason real, or was it manufactured after the fact to cover a discriminatory or retaliatory motive?

What builds a strong defense:

• Written performance reviews with below-expectations ratings, dated before any protected activity

• Disciplinary warnings signed by the employee

• Manager notes from performance conversations, written contemporaneously (not reconstructed)

• A performance improvement plan with specific, measurable benchmarks

• Consistent application of the same standards to comparable employees

What creates vulnerability:

• A clean personnel file with no negative documentation for weeks before termination

• Disciplinary records created after an HR complaint was filed

• Inconsistent treatment, where a non-protected employee with similar conduct kept their job

• Oral termination without any written record of the reasons

The single most common mistake: treating termination as a single decision rather than the documented conclusion of a process. A final written warning issued one week before termination, with nothing prior to it, does not provide a defense.

John covers the two specific termination practices that most commonly lead to lawsuits, and how to avoid them. Watch here: Avoid These 2 Termination Practices to Prevent Lawsuits.

Constructive Discharge: When the Employee Quits but Still Sues

Employers sometimes assume that because they didn't formally fire someone, they can't be sued for wrongful termination. That assumption is wrong.

Constructive discharge claims arise when an employee argues that working conditions were made so intolerable that they had no reasonable choice but to resign. California courts apply an objective standard from Turner v. Anheuser-Busch, Inc. (1994): would a reasonable person in that position have felt compelled to quit?

Common patterns that support constructive discharge claims:

• Systematic exclusion from projects or meetings after a protected complaint

• Demotion to a meaningless role following protected activity

• Sudden unexplained pay cuts

• Harassment or hostility tolerated by management after an employee raised concerns

Your defense centers on showing that the conditions were objectively reasonable, that the changes were driven by legitimate business needs, and that the employee had internal channels available to raise concerns but didn't use them. If an employee resigned without ever submitting a written complaint through HR, that absence matters.

Terminating Employees on Leave or With Pending Accommodations

This is one of the highest-risk termination scenarios in California. 

An employer may still terminate an employee who is on CFRA, FMLA, or pregnancy-related leave, or who has requested accommodation, but the employer must be prepared to show that the decision was based on legitimate, well-documented reasons unrelated to the protected leave or accommodation process. 

Courts and agencies will look closely at timing. FEHA also requires a timely, good-faith interactive process when disability accommodation is at issue, and failure to engage in that process can create separate liability.

Our Wage and Hour and Hybrid Claims Defense team regularly advises employers on protected leave termination decisions before they become lawsuits.

The After-Acquired Evidence Doctrine

If you discover, after termination, that the employee engaged in serious misconduct that would have justified termination on its own, that discovery can limit your damages exposure. Under the framework established in McKennon v. Nashville Banner Publishing Co. (1995), a court will typically cut off backpay from the point of discovery forward.

This doesn't erase liability for a wrongful act. But in cases where liability is contested, and a post-termination investigation uncovers genuine misconduct, it can meaningfully reduce what a plaintiff collects.

To preserve access to this defense: conduct post-termination reviews systematically, document what you find and when, and preserve records. Employers who conduct ad hoc reviews or destroy documents before assessing legal exposure may lose this protection.

Pre-Termination Checklist

Before finalizing any termination in California, work through these:

1. Is the stated reason documented in the personnel file, and does that documentation predate any protected activity the employee engaged in?

2. Has this employee filed a complaint, taken protected leave, or asserted any legal right in the past 12 months?

3. Is the employee a member of any FEHA-protected class?

4. Have similarly situated employees who engaged in similar conduct been treated consistently?

5. If the employee has a pending accommodation request or is currently on leave, has counsel reviewed the decision?

6. Does the termination process follow your handbook's stated disciplinary procedure?

7. Are final wages being paid in compliance with Labor Code § 201 (immediate on involuntary termination) or § 202 (72 hours on voluntary resignation)?

This checklist surfaces the questions that, left unasked, turn a defensible termination into a six-figure dispute.

Ready to talk through your situation? Our attorneys defend employers only, so every conversation starts from your side of the table. Book a free 15-minute consultation or call (818) 418-6625.

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Disclaimer: The above content is for informational purposes only. This is not legal or tax advice. Laws, IRS guidance, and withholding requirements can change, and outcomes depend on specific facts. You are advised to contact a qualified attorney for any legal advice.