Setting Aside a Default Judgment in a California Employment Lawsuit

“These rare events should not combine to make defendants suffer a $200,240.39 judgment without a hearing on the merits,” the California Supreme Court wrote in Rappleyea v. Campbell when it set aside a default. Employers that miss a summons can sometimes get the same result. California gives a defaulted employer several routes back into the case, each with its own showing, and every one of them rewards a company that moves fast and brings a ready answer.

How does an employer end up in default?

Usually by not seeing the summons in time. A complaint is served on the company’s registered agent, an old office address, or a manager who doesn’t know what it is, and the response period passes. The plaintiff’s lawyer then asks the clerk to enter default, and the company loses the right to answer until the default is set aside.

Default judgments in employment cases often come after a prove-up hearing, where the former employee presents evidence of damages with nobody on the other side. Many employers first learn of the case when a bank account is levied or a judgment lien turns up.

What relief does CCP section 473(b) offer?

Two kinds: discretionary relief and mandatory relief based on the lawyer’s fault. Under Code of Civil Procedure section 473(b), a court “may, upon any terms as may be just, relieve a party” from a judgment or other proceeding “taken against the party through the party’s mistake, inadvertence, surprise, or excusable neglect.”

The same subdivision sets two conditions that trip up employers. The application “shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted,” and it must be made “within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.” A company that waits until month five hasn’t automatically acted within a reasonable time.

Mandatory relief works differently. When the default happened because the company’s lawyer dropped the ball, the court “shall” vacate the default or default judgment if the application is timely, “is in proper form, and is accompanied by an attorney’s sworn affidavit attesting to the attorney’s mistake, inadvertence, surprise, or neglect,” according to section 473(b). The court then directs the lawyer “to pay reasonable compensatory legal fees and costs to opposing counsel or parties.”

What if the company never actually knew about the lawsuit?

Then CCP section 473.5 may apply. It covers cases where “service of a summons has not resulted in actual notice to a party in time to defend the action.” Service can be technically valid, through substituted service or service on an agent, and still never reach anyone who could respond.

The motion has its own outside time limits, which run from the default judgment or from a written notice of it. It also needs an affidavit “showing under oath that the party’s lack of actual notice in time to defend the action was not caused by the party’s avoidance of service or inexcusable neglect,” and the company “shall serve and file with the notice a copy of the answer, motion, or other pleading proposed to be filed in the action,” under section 473.5(b). A company that let its registered agent lapse or ignored mail at its listed address will have trouble with the inexcusable neglect part.

Assembly Bill 747 (Stats. 2025, ch. 563) amended both section 473 and section 473.5, with new versions that take effect January 1, 2027. The 2027 version of section 473 adds a subdivision letting a party move “at any time” to vacate a default judgment “that is void for lack of proper service.”

Can a void judgment be challenged later?

Yes. Section 473(d) lets the court, on motion after notice, “set aside any void judgment or order.” A judgment entered without valid service of the summons is the usual example. That’s why the proof of service filed by the plaintiff deserves a close read: the name of the person served, the address, the date, and whether the method matches what the statute allows for a corporation or LLC.

A void-judgment argument isn’t an excuse to wait. The company still needs to act once it learns of the judgment, and an argument about service is much stronger when it’s raised right away.

Is there any relief after the statutory deadlines pass?

Sometimes, through the court’s equitable power, but the test is demanding. Rappleyea applied a three-part test for relief based on extrinsic mistake: the defaulted party “must demonstrate that it has a meritorious case,” must “articulate a satisfactory excuse for not presenting a defense to the original action,” and “must demonstrate diligence in seeking to set aside the default once … discovered.”

The defendants in that case won. The Supreme Court reversed the Court of Appeal “with directions to reverse the default judgment and to instruct the trial court to set aside the entry of default.” But the court said “We draw our conclusion narrowly,” based on a clerk’s error and the plaintiff’s incorrect statement of the law. It also said “mere self-representation is not a ground for exceptionally lenient treatment.” An employer shouldn’t plan around equitable relief. It’s a fallback.

How much can a default judgment award?

No more than the complaint asked for. CCP section 580(a) says “The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115.” When a default judgment awards more than the complaint or a properly served damages statement gave notice of, the excess is a separate ground to attack it, even when the default itself stands.

Which motion fits which situation?

What should a company do the day it finds out about a default?

1. Get the court file: the complaint, the proof of service, the request for entry of default, any damages statement, and the judgment, and preserve the company’s own records about where the papers went.
2. Calendar every deadline that runs from the default, the judgment, or any notice of entry, and notify the employment practices liability (EPLI) carrier, which may have its own notice requirement.
3. Identify who received or should have received the papers (the registered agent, the receptionist, the manager named in the proof of service) and get their accounts down in writing while memories are fresh.
4. Prepare the proposed answer now, with the defenses the company would have raised, because every one of these motions requires it.
5. Talk to a lawyer before contacting the former employee or the employee’s lawyer, paying anything toward the judgment, or signing a stipulation.

Speed is the theme. A company that files a complete motion within days of learning about a default is in a very different position from one that waits to see whether the plaintiff will collect. The firm’s page on employment lawsuit defense for California employers describes how it takes over cases at any stage.

Default judgment questions from California employers

Can we just call the plaintiff’s lawyer and ask them to agree to set aside the default?

Sometimes that works, and a stipulation is faster than a motion. But the conversation should go through counsel, and the company shouldn’t make admissions about service or the merits. If the plaintiff’s lawyer refuses, the time spent negotiating still counts against the company’s reasonable-time showing, so the motion papers should be ready at the same time.

Does a default mean we’ve lost on liability?

For practical purposes, yes, unless it’s set aside. A defaulted defendant can’t file an answer or contest the allegations, and the plaintiff proves damages at a hearing where the company generally can’t participate. That’s why the motion to set aside is usually the most important filing in the case, and why it needs the proposed answer attached.

What if the summons went to a former officer or an old address?

That fact can support relief under section 473.5 if nobody at the company actually learned of the case in time. The company will need sworn declarations explaining why the papers never reached anyone, and it will have to address whether keeping its agent and address current was its own responsibility. Records showing prompt action once it learned of the case matter a great deal.

Will we have to pay the plaintiff’s fees for the motion?

It depends on the route. When the court grants mandatory relief based on a lawyer’s affidavit of fault, section 473(b) directs the lawyer to pay reasonable compensatory fees and costs to the other side. In discretionary relief, the court can grant relief on terms it finds just, which may include costs.

If a former employee has a default against your company

If your company has learned about a default or default judgment in an employment lawsuit, the proof of service and how quickly the company acts usually decide whether it gets back into the case. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving defaults and default judgments. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.

Sources

The statutes are Code of Civil Procedure section 473 and Code of Civil Procedure section 473.5, both as amended by Assembly Bill 747 (Stats. 2025, ch. 563), and Code of Civil Procedure section 580. The decision is Rappleyea v. Campbell (1994) 8 Cal.4th 975.

This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.