Question:

One of my employees has been having performance issues since his first day of work. I have given him several chances over the past two years but have decided to terminate his employment. He is an at-will employee. Are there any precautions I need to take?

Answer:

There are several things you should keep in mind when terminating an employee to avoid exposure to future claims by the employee.

First, before you terminate the employee, stop and look at his personnel file. You mention that this individual is an at-will employee and has been having performance issues for the last two years. It is true that under California law, employment with no specified term may be terminated at any time by either the employer or the employee for cause or for no reason. Nevertheless, if you are terminating an employee for performance reasons, you want to be sure that you have the documentation to back it up. For example, if you are terminating an employee because he has attendance problems, there should be write-ups or performance evaluations reflecting that he has been notified of those problems and has been warned of the consequences for not correcting that conduct. If you are terminating an employee because he has not been performing his duties, there should be documentation specifying what duties he has not performed and advising him that he needs to improve in those areas. If there is no documentation of these performance issues, the employee may claim that he was terminated for an unlawful reason.

You may ask yourself how an employee can make such a claim if he is an at-will employee. If an employee can prove that he was terminated for an unlawful reason, even though he was at-will, he may have a claim against an employer if it has five or more employees. Employers cannot, for example, terminate or take some other adverse employment action against employees based on their membership in a protected class. Under California law, the protected classes include race, color, national origin, ancestry, citizenship, disability, medical condition, age, religion, creed, pregnancy, sexual orientation, genetic characteristics, marital status, and veteran status. Employers also cannot retaliate against employees for engaging in actions such as complaining about harassment or discrimination in the workplace. For example, in the case of your employee, if he is the only male employee, or if he has complained that others in the workplace are making inappropriate remarks to him, he may claim that he was terminated for an unlawful reason. If you do not have the documentation to support yourself that he is a poorly performing employee, it could appear that he was terminated for a discriminatory or retaliatory reason.

Once you have decided to go forward with the termination, you must ensure that the employee is paid correctly. When an employer terminates an employee, it must pay the employee all wages earned and unpaid immediately at the time and on the day of termination. Unpaid wages include all accrued vacation. Therefore, the employee’s accrued vacation must be calculated and included in the final paycheck, or provided in a separate check at the time of termination. Furthermore, if the employee owes the employer money, the employer cannot withhold that amount from the final paycheck. An employer also cannot hold on to an employee’s final paycheck until the employee has returned tools, cell phones, laptops, keys, or any other item belonging to the employer. The California courts have noted that “because of the economic position of the average worker and, in particular, his dependence on wages for the necessities of life for himself and his family, it is essential to the public welfare that he receive his pay” promptly.

The consequences for failing to pay an employee on a timely basis at the time of termination can be steep. The employee may be entitled to waiting time penalties in the amount of his or her regular daily wages up to a maximum of thirty (30) days. To give you an idea of the dollar amount of waiting time penalties, if you pay an employee $10 per hour and do not pay him all of his final wages on a timely basis, for each day that you do not pay the employee, you incur waiting time penalties of $80 per day up to a maximum of $2,400.

Stepping back and looking at the reasons for terminating an employee before taking action can minimize the risk of liability. Once an employer makes the termination decision, it is important to ensure timely payment of all wages owed.
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