Episode 240 - What to Consider When Terminating an Employee in California

Welcome to The Workplace, a podcast by Cal Chamber. I'm Matthew Roberts, Associate General Counsel for Labor and Employment with the California Chamber of Commerce. Hello, listeners. Managing a workforce and making personnel decisions can be a real complex task in California, full of potential risks if not done with care and due diligence. The following common scenario that we encounter often highlights the analysis required when choosing to let someone go or reorganize your workforce. So we have an employee we recently hired that is not meeting expectations for the position, and we want to reassign those duties instead to existing staff and either quote unquote terminate the employee or quote unquote eliminate their position through a reduction in force. However, the employee also has this protected class status, so as an employer, we're not sure that we can end their employment. Okay, so with that scenario, and to walk us through how to handle this workforce management issue, we welcome back two amazing guests. First, Bianca Sod, CalChamber's General Counsel for Labor and Employment. Thank you for being back with me today, Bianca.

Absolutely. Always a pleasure to join you, Matt.

Also joining me is CalChamber's Employment Law Counsel, Vanessa Green. Welcome back, Vanessa.

Thanks, Matt. I'm so glad to be here.

All right. So we've set the stage here in the intro and there is a lot to it. But what's crazy is how common the scenario can be. And so, of course, the first question we really have to answer is, isn't California an at-will state altogether? Vanessa, how do we look at the principle of at-will for California employers and employees as we think about this scenario?

Oh, good old at-will employment. So, yes, at-will employment still is the standard here in California. And that generally means that employers and employees without an employment contract can end the employment relationship at any time for any reason or for no reason at all, except for unlawful reasons. Now, that's an important part to remember. Unlawful reasons, we can really think of those as being put in one big bucket that basically means termination of employment would violate some kind of statute or law. In practice, that normally looks like things like discrimination claims, under California's Fair Employment and Housing Act, also known as FEHA, or retaliation claims, which are covered by dozens of laws. So even when we terminate someone in California for, you know, where we exercise our at-will rights, we really have to evaluate every termination decision at the onset and think about the risk factor and whether we're looking at potentially one of those unlawful reasons appearing present in our decision to terminate.

Okay, so because our scenario, our employer is concerned about some kind of protected class concern, I think we should start with those discrimination claims that Vanessa described there under FEHA. Bianca, how does discrimination factor into workforce management decisions for you?

Yeah, so FEHA lists more than a dozen protected characteristics. These are also commonly referred to as protected classes, as we've mentioned earlier. That prohibit employers from using those as the basis for employment benefit decisions or any sort of personnel decision. So, most specifically, discrimination claims require that the employer make a negative personnel decision based in part on a protected characteristic and for which there is no legitimate business reason for the decision. So, because we all have protected characteristics when we are born, such as race, sex, ancestry, genetic information, and national origin. Just having a protected characteristic will not form the basis of a discrimination claim. So, it's not just about having a protected characteristic that is going to prevent somebody from being terminated from employment, it's if the decision is motivated by that characteristic. So, that is really what is making the difference in terms of whether something is discrimination or not.

Yeah, and I think I can't highlight that last point enough because we'll very frequently hear from employers, well, this employee is of, you know, this particular race or sex or has a disability, and so we just can't do anything at all because they have a protected characteristic. So I think that motivation is really important in terms of how we decide whether or not we can go forward with our personnel management decisions here. So, Vanessa, we often see employers confuse what I call termination of employment with layoffs or reductions in force. Is there a difference in those concepts?

So the short answer is no, there's really no difference in those concepts. I mean, obviously the reasons can be different for a termination versus a layoff or reduction in force, but the principle really remains the same. That is, the employer is choosing to end the employee's employment. So in other words, we won't avoid discrimination concerns just by classifying a decision and calling it a layoff or a position elimination rather than a termination. The key here with ending anyone's employment is we always want to look at why are we motivated to make this decision that we're making to end their employment. For example, when we're making a layoff or reduction in force, What are the common legitimate business reasons that we're focusing on in this situation? So for example, operational needs is usually a big one, right? When we're making these kinds of decisions, we want to be really thinking about, is that the actual reason, not just being used as a veil for the real reason? So for example, saying the position's no longer needed, But then all of the job duties are still being performed or rehiring somebody right after we've quote unquote eliminated that position. Those are risky things to do.

Okay, so now that we've got kind of a handle around protected classes and the differences or lack thereof differences between terminations and layoffs, Bianca, how would you walk this employer in this hypothetical situation through their decision-making process in order to put their best foot forward and do so with confidence?

Sure, so first and foremost, we want to define the legitimate reason for making the— ambiguous or underdeveloped rationale sets the stage for an employee to argue that the decision isn't legitimate. The employer has said, you know, not meeting expectations, but that the duties will be assigned elsewhere. So, what does it mean that the employee wasn't meeting expectations? Is this a performance issue, a skill issue? Real issue, some other issue. The disbursement of duties means this isn't really an elimination of the position, but more that the employee wasn't performing the job correctly. So, if this is the case, then we need to look at, okay, what documentation exists now to support this assessment? Are we just coming to this conclusion now with no support or feedback to the employee? Personnel management isn't limited to decisions to terminate employment, but rather there are ongoing discussions and efforts with the employee that lead to that decision. So, have we had any sort of discussions or things of that nature? The employer here is concerned about protected characteristics, so the employer needs to evaluate the types of arguments that an employee could make that the decision is related or motivated by the protected characteristic. So, for example, are they the only person of that demographic in the organization, or are they newly pregnant or disabled? Have they made their first religious accommodation requests? An employee may argue that this status is the real reason for the move, especially if the protected characteristic is recently disclosed. So, this really just highlights the need for that strength of proof, and again, what is the documentation, what is the objective basis for that decision that is a legitimate business reason and not unlawfully motivated?

Bianca, I think that's excellent, and that really succinctly highlights this process that can really empower employers to make those difficult decisions while accounting for the unlawful concerns that we discussed at the outset. So I really encourage employers to kind of review that as they go through this episode again. Vanessa, it seems from this conversation then that employers would benefit from certain practices long before the decision to terminate even comes up, right? So what kind of proactive steps do you suggest for employers to help them perform that assessment that Bianca laid out, or at least to make that assessment easier for them when they have to get to that stage?

So the first thing to think about is we really want to know who and what you're hiring for. So you want to be really clear about the role that you need filled, the expectations of the role, making sure that you have a good job description for that role, and then making sure that the candidate can adequately perform the role. Now, the recruitment process may never be perfect, but if it's tailored to your specific expectations, such as making applicants explain or demonstrate how they'd meet these expectations for the role, that can really give you the best chance of landing the right person in the role. Then once you find that person, you really wanna think about setting expectations with them. So again, going through that job description, providing them training on any specific operations, and then explaining clearly the consequences of what's going to happen if they don't meet expectations. So that early performance management is really important, and these can be anything from formal trainings to informal discussions. But the proof of those informal discussions shouldn't be informal. So what we mean by that is, and it sounds kind of weird, but we really want to make sure that these verbal conversations are documented in some manner. Even if they're just informal conversations, we need to actually have that documentation on the back end. So continue to communicate effectively if issues arise. If we do this, then the decision to terminate an employee, if it gets to the point of like poor performance or they're violating our policies, it's not going to come as a surprise to the employee or anybody, right? Because we've gone through all these steps to really make sure we've outlined what our expectations are. We've communicated that. We've communicated very clearly when they're not being met and what the consequences would be if that doesn't change. And so that's really the type of situation we want to see leading up to ending someone's employment. If your organization is in a situation where you have to make these unfortunate decisions about cutting people or roles, then just making sure you know ahead of time to treat it this way, right? You're gonna be terminating an individual, whether or not you call it a layoff, reduction in force, or whatever reason is supporting that, because at the end of the day, that's exactly what you're doing, right? You're ending their employment. So this process is really gonna be the same type of thing in most every situation.

[Speaker] Well, this was a real amazing discussion, and I think there's a lot of real good practical considerations that you both have brought to the table for helping employers make the right decisions for their workforce while really accounting for some of these compliance issues that pop up regularly. So Bianca, Vanessa, thank you both so much for participating in this discussion with me today.

Thanks for having us, Matt.

Great to be here, Matt.

And thank you, listeners, for joining this discussion on the workplace. Please share and subscribe to CalChamber's podcast by visiting calchamber.com.