Wrongful Termination Lawsuit in California: What Employers Do First
“An employment, having no specified term, may be terminated at the will of either party on notice to the other.” That sentence from Labor Code section 2922 is where an employer’s defense to a wrongful termination lawsuit begins. At-will employment is the default, so the former employee has to prove an exception, such as a firing that violated public policy or discrimination under FEHA. The employer’s exposure depends on which exception the complaint pleads and what the termination file shows.
What does “at will” protect, and where does it stop?
It protects the decision to end employment without proving a good reason. It doesn’t protect a decision made for an illegal reason. The Supreme Court of California put it this way in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317: “Labor Code section 2922 establishes the presumption that an employer may terminate its employees at will, for any or no reason.”
The same opinion cautions that “While the statutory presumption of at-will employment is strong, it is subject to several limitations.” There are two kinds. Contract limits are promises the employer made, in writing or by conduct, about how or why it would end the job. Legal limits apply no matter what the employer promised: an employer can’t fire someone for a reason the law forbids.
Wrongful termination isn’t a single claim. When a complaint uses the phrase, I’d treat it as a label and look for the causes of action underneath. Most fall into the categories below.
| Claim | Where it comes from | What the employee has to show | Where the employer’s defense usually starts |
|---|---|---|---|
| Termination in violation of public policy | Tameny; Stevenson | A firing that violated a policy grounded in a statute or the constitution | No qualifying policy, or no link between the policy and the decision |
| Breach of an implied contract to fire only for cause | Guz | Words or conduct showing a shared understanding of job security | Signed at-will agreement, handbook disclaimers, no specific assurances |
| Discrimination or retaliation under FEHA | Gov. Code § 12940 | A protected trait or activity was a substantial motivating factor | The documented, legitimate reason, and a same-decision showing |
What is a Tameny claim, and how do employers defeat it?
It’s a tort claim for a firing that violated public policy, and the policy has to come from a statute or the constitution. In Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, the Supreme Court held “that when an employer’s discharge of an employee violates fundamental principles of public policy, the discharged employee may maintain a tort action and recover damages traditionally available in such actions.” The employee in Tameny alleged he was fired for refusing to take part in illegal price-fixing.
Because it’s a tort, the damages exposure is broader than a contract claim. That’s why plaintiffs so often plead it, usually alongside a FEHA or Labor Code claim based on the same facts.
The court later spelled out which policies count. In Stevenson v. Superior Court (1997) 16 Cal.4th 880, it said “a policy may support a wrongful discharge claim only if it satisfies four requirements.” The policy must be “(1) delineated in either constitutional or statutory provisions,” and it must also benefit the public instead of only the employee, be well established when the employee was fired, and be substantial and fundamental. (Stevenson held FEHA’s policy against age discrimination qualifies.)
The defense usually works on two fronts. First, make the employee name the statute. Under Stevenson, the policy has to be delineated in a constitutional or statutory provision, so a complaint that says only that the employee raised concerns gives the employer something to challenge at the pleading stage. Second, test the link between the policy and the firing. I think the strongest facts for an employer are a decision-maker who didn’t know about the protected conduct and a decision documented before it happened. Timelines win these cases more often than legal arguments do.
When does a handbook or a manager’s promise create an implied contract?
Only when the employer’s words or conduct show a real understanding that the employee could be fired only for cause. In Guz, the court held that “an employee’s mere passage of time in the employer’s service, even where marked with tangible indicia that the employer approves the employee’s work, cannot alone form an implied-in-fact contract that the employee is no longer at will.” Raises and good reviews don’t add up to job security on their own.
The court also noted that “an at-will provision in an express written agreement, signed by the employee, cannot be overcome by proof of an implied contrary understanding,” according to most cases applying California law. That’s the single most useful document in an implied contract case. A handbook disclaimer helps too, but Guz said a disclaimer doesn’t necessarily foreclose the employee from proving a contrary agreement. Bechtel’s disclaimer satisfied its initial burden, if any, and the court then looked at whether Guz had other evidence.
So the first document I’d want is the signed offer letter or acknowledgment form. The second is the company’s own discipline policy. A progressive discipline policy that says employees “will” get warnings before termination can be read as a promise. One that reserves discretion usually can’t. If the company skipped steps its own policy promised, expect that to be the centerpiece of the complaint, even under a FEHA theory, because it looks like pretext.
How does FEHA change a wrongful termination case?
FEHA, California’s Fair Employment and Housing Act, is usually where the real exposure sits. It applies to employers that regularly employ five or more people under Government Code section 12926, and section 12940 makes it unlawful to discharge a person because of a protected characteristic, or to retaliate against someone for opposing practices FEHA forbids. A FEHA violation can also supply the public policy for a Tameny claim, which is why the two often travel together.
Before suing under FEHA, the employee files a complaint with the Civil Rights Department (CRD) and receives a right-to-sue notice. A right-to-sue notice is a procedural step that lets the employee go to court. Under section 12965(c), the CRD issues it on the employee’s request or when its investigation ends, so the notice isn’t a finding that the employer did anything wrong.
On the merits, the employee doesn’t have to prove discrimination was the only reason. In Harris v. City of Santa Monica (2013) 56 Cal.4th 203, the Supreme Court held the employee must show discrimination was a “substantial motivating factor” in the decision. If the employer then proves it would have made the same decision anyway for lawful reasons, the court held, the employee can’t recover damages, backpay, or reinstatement, though declaratory or injunctive relief and attorney fees may still be available. That same-decision defense is only as strong as the documentation made before the employee complained.
Fees are lopsided. Under section 12965(c)(6), a prevailing employer “shall not be awarded fees and costs unless the court finds the action was frivolous, unreasonable, or groundless when brought, or the plaintiff continued to litigate after it clearly became so.” A prevailing employee can recover fees in the court’s discretion. That asymmetry drives settlement value more than most clients expect.
What should the employer gather before it responds?
Often the first thing that arrives isn’t a lawsuit but a demand letter or a records request. A former employee or their representative can ask for the personnel file under Labor Code section 1198.5, and the employer must make it available “not later than 30 calendar days from the date the employer receives a written request,” unless the parties agree in writing to a date no more than 35 days out. A records request from a lawyer is usually the first sign of a claim. Treat it that way.
Once the claim is real, work through these:
- Put a litigation hold on the personnel file, the termination paperwork, performance reviews, payroll and timekeeping data, the decision-makers’ emails and texts, and every version of the handbook and discipline policy in effect during the employment.
- Calendar the deadline on the summons, demand letter, or records request, and pull any arbitration agreement and the notice terms of any employment practices liability (EPLI) policy.
- Write down who made the termination decision and when, along with what they knew about any complaint, leave request, or protected activity at that moment, and make sure nobody contacts or acts against the former employee in a way that could look like retaliation.
- Collect the documents the decision rested on: warnings, reviews, attendance records, and the offer letter or signed at-will acknowledgment.
- Talk to a lawyer before responding to the demand, contacting the former employee or their lawyer, or offering severance or anything else to settle.
The firm’s California employment defense page explains how it defends employers against termination claims, including those built on FEHA and the Labor Code.
My strongest advice is about item 3. The decision-maker’s memory of what they knew and when is the evidence that decides most retaliation cases, and it fades fast. Get it written down in a privileged setting while it’s fresh.
Wrongful termination questions from California employers
Does an at-will clause in the offer letter end the case?
It ends most implied contract claims, but not the others. Under Guz, a signed at-will provision usually can’t be overcome by an implied understanding. It does nothing against a Tameny claim or a FEHA claim, because those claims say the reason for the firing was unlawful, not that the employer broke a promise. Expect the complaint to lead with those theories for that reason.
Do we have to give a former employee their personnel file?
Yes, if they or their representative ask in writing, within the time section 1198.5 allows. The statute also says the right to inspect or copy the records “ceases during the pendency of the lawsuit” once the employee files a lawsuit that relates to a personnel matter. Before the suit, comply on time. A missed deadline adds a penalty claim to a case that didn’t need one.
Can the company recover its attorney fees if it wins a FEHA case?
Rarely. Section 12965(c)(6) lets a court award fees to a prevailing employer only if the action was frivolous, unreasonable, or groundless when brought, or the employee kept litigating once that became evident. A Labor Code or contract claim in the same lawsuit may follow different fee rules, so the answer depends on which claims are pleaded.
Should we offer severance as soon as the demand letter arrives?
Not as a reflex. A quick offer can make sense, but it should come after someone has read the termination file, because the file sets the price. An early offer made without that review tends to anchor too high or too low. When there’s a payment, it should be tied to a written release drafted for the claims actually at issue.
When a former employee says the firing was illegal
If a former employee has sent a demand letter or filed suit claiming they were wrongfully fired, the decision-maker’s timeline and the documents created before the termination usually decide the case. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving wrongful termination and retaliation. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code section 2922, Labor Code section 1198.5, and Government Code sections 12926, 12940, and 12965. The decisions are Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, Stevenson v. Superior Court (1997) 16 Cal.4th 880, Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, and Harris v. City of Santa Monica (2013) 56 Cal.4th 203.
This post is general information about California and federal employment law as of November 5, 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.