During 2020-2021, demand for tech-related products and services soared as more people worked from home and relied on digital solutions, and companies expanded quickly accordingly. Now, as the world returns to more in-person activities, employers are scaling back the global workforce and investors are changing what they focus on (i.e., cutting costs to be more profitable).
Not to mention, artificial intelligence has also grown exponentially within the last few years. An increasing number of organizations are automating tasks that were once done by humans. For all these reasons and more, there have been reported layoffs across the Silicon Valley. Amazon has let go 27,000 workers so far, while IBM is planning to replace 8,000 job roles with AI.
What does this mean for you, as a worker in the IT or software industry? California, like most states, has “at-will” employment laws, which means an employer can terminate employees at any time for any reason (except illegal reasons such as discrimination) and without warning, as long as the reason isn’t prohibited by law. There is no legal entitlement for employees to retain their jobs indefinitely or to be automatically considered for other positions within the company if their position is terminated.
Continue reading to learn your legal rights in these situations with insights from our California employment lawyers at Hershey Law.
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If you are terminated, your employer must pay all of the wages immediately at the place of termination. This includes all your earned and unpaid wages up to and including the final day of work. Accrued vacation or paid time off (PTO) must be included in the final paycheck, as these are considered earned wages under California law. Unused sick leave is not required to be paid out unless the employer’s policy specifically provides for payment.
If you resign and provide at least 72 hours of notice, your final paycheck is due on the last day of work. If less notice is given, the paycheck must be provided within 72 hours after the notice.
There is no specific provision in California labor laws that discusses transferring unpaid vacation or PTO directly into a retirement fund upon termination. With that said, employees can negotiate such agreements with their employers, or handle their payouts in ways that contribute to their retirement plans independently. Employers who fail to timely pay final wages, are legally punished by having to pay the worker’s regular rate for each day the wages remain unpaid, up to a maximum of 30 days.
Generally, employees who lose their job through no fault of their own, such as in a layoff, are eligible for unemployment benefits in California. The benefit amount is approximately 50% of your average weekly wage, with a maximum benefit of $450 per week (as of 2023). The standard duration for receiving these benefits is up to 26 weeks, although extensions may be available during periods of high unemployment.
There is no statewide requirement forcing tech companies to provide severance pay when they lay off employees. The obligation to offer severance exists only if there is a prior agreement, i.e., your employer must have explicitly agreed to this, either in a contract or another formal arrangement. Without such an agreement, there is no entitlement to severance pay.
Based on this, sometimes, even in the absence of a written contract, your employer might have indicated the possibility of severance in other forms. For instance, an employee handbook could state that laid-off employees will receive two weeks’ severance pay. In such cases, the employer is expected to honor these promises.
Similarly, if there is a consistent history of your organization providing two weeks’ severance to all laid-off employees over a period, such as the last ten years, you might also have a rightful expectation to receive the same.
On occasion, some employers choose to offer severance as a gesture of goodwill to loyal employees, even though the law does not require it. The specifics of these severance packages can depend on how long you have worked with the company. A common approach is to offer a week’s pay for each year of service.
Keep in mind that it is not uncommon for employers to tie the severance package to a legal agreement where you waive the right to sue the company for any issues related to your employment. If you’re presented with such a waiver, please seek advice from an employment lawyer before agreeing. This document could prevent you from pursuing legal claims that you might not currently recognize. Consulting with a lawyer could also help you negotiate a better severance package or take legal action to assert your rights if necessary.
There are a set of legal requirements as mandated by the federal and California laws that must be strictly complied with when an organization decides to let their workers go:
Under the California and federal WARN Act (Worker Adjustment and Retraining Notification Act), employers with 75 or more full or part-time employees are required to provide at least 60 days’ notice before conducting a mass layoff, relocation, or plant closure affecting 50 or more employees at a single site of employment. This notice must be given to the affected tech employees, any labor representatives, the California Employment Development Department (EDD), the local workforce investment board, and the city and county government officials.
Employers must provide laid-off employees with their final paychecks at the time of termination. This final pay includes all earned wages and accrued vacation or PTO (paid time off) up to the last day of work.
As per the Consolidated Omnibus Budget Reconciliation Act (COBRA), employers must notify laid-off workers of their right to choose to continue their group health benefits provided by their group health plan for limited periods. COBRA allows you to keep your employer’s group health plan for up to 18 months after your employment ends. In some cases, like disability, this period can be extended up to 29 months.
Before you were terminated, your employer likely paid a part of your health insurance premium every month, which kept your costs lower. After layoff under COBRA, you can continue your health insurance, but you must pay the entire premium yourself, along with a 2% administration fee.
Employers must maintain records for each laid-off employee, including their name, job classification, and last known address and telephone number, and must report their biggest tech layoffs (or plant closing) to state and local authorities under the WARN Act.
California layoffs must be conducted in a manner that does not discriminate against employees based on age, race, gender, national origin, disability, or other protected characteristics. Employers must make sure their redundancy decisions comply with all applicable federal and state anti-discrimination laws.
If the employer has a policy or if it is stipulated in a union contract, laid-off workers might have rights to be rehired when the company starts hiring again. Employers must adhere to these policies if they exist.
👉Also Read: Severance Pay Delays: How Long Does It Take to Receive Severance Pay?
👉Also Read: Understanding Severance Agreements: Insights from Hershey Law
The tech world moves fast, and sometimes that means even the most skilled professionals face unexpected job cuts. But remember, your contributions matter, and so do your rights. At Hershey Law, we are exclusively dedicated to California’s employment laws to make sure that workers like you are respected and fairly compensated.
Whether it is a case of being misclassified or wrongfully terminated, we are here to advocate for the compensation you have earned and the rights you are entitled to. If you think something does not seem right about the way your layoff was handled, consulting with our employment lawyers at Hershey Law can help determine if your employer has acted unlawfully.
We can file a claim for discrimination, wage theft, or other unlawful conduct on your behalf, or directly sue your employer for their actions. Give us a call at (310) 929-2190 or send us a message to discuss how we can support you through this and help you get back on your feet.
Hershey Law is an employment law firm serving Los Angeles, Orange County, and the surrounding areas. We’ve been able to successfully assist hundreds of clients, and are looking forward to potentially being able to work with you.