📋 Overview

You've received a demand letter alleging wrongful termination. While California is an at-will employment state (Labor Code 2922), there are important exceptions. Understanding which exception applies to the claim is critical to formulating your response.

⚠ Not Truly "At Will"

Despite at-will employment, numerous exceptions can make a termination wrongful: discrimination, retaliation, public policy violations, and implied contracts.

🕒 Document Everything

Proper documentation of performance issues, policy violations, and termination reasons is your best defense against wrongful termination claims.

💰 High Damages

Wrongful termination damages can include lost wages, emotional distress, punitive damages, and attorney fees - potentially exceeding $500,000.

Common Wrongful Termination Theories

  • Discrimination - Termination based on protected characteristic (FEHA)
  • Retaliation - Termination for protected activity (complaints, whistleblowing)
  • Public Policy Violation (Tameny) - Termination for refusing to violate law or exercising legal right
  • Implied Contract - Handbook or statements created expectation of continued employment
  • Breach of Covenant of Good Faith - Termination to avoid paying earned benefits
  • WARN Act Violation - Mass layoff without required notice
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🔍 Evaluate the Claim

Before responding, identify which wrongful termination theory applies and gather evidence supporting your legitimate business reasons for the termination.

Risk Assessment Matrix

Claim Type Potential Damages Risk Level
Discrimination-based termination Lost wages + emotional distress + punitives + fees HIGH
Retaliation for whistleblowing Lost wages + emotional distress + punitives + reinstatement HIGH
Public policy violation (Tameny) Lost wages + tort damages + punitives HIGH
Implied contract breach Contract damages (typically lost wages) MEDIUM
WARN Act violation 60 days pay + benefits MEDIUM

📄 Termination Documentation

  • ✓Written termination notice/letter
  • ✓Documented reason for termination
  • ✓Performance reviews and write-ups
  • ✓Attendance/discipline records

📝 Policy & Timeline

  • ✓Employee handbook with at-will disclaimer
  • ✓Timeline of events leading to termination
  • ✓Any complaints made by employee before termination
  • ✓Decision-maker's notes and reasoning

⚠ Timing Is Critical

Courts scrutinize the timing between protected activity and termination. If the employee complained, filed a claim, or exercised a legal right shortly before termination, this "temporal proximity" can be evidence of retaliation. Document legitimate reasons thoroughly.

🛡 Your Defenses

California recognizes at-will employment, which provides a strong default defense. The key is documenting legitimate, non-pretextual reasons for the termination.

At-Will Employment (LC 2922)

California Labor Code 2922 establishes that employment with no specified term is at-will and can be terminated by either party at any time, with or without cause. This is your primary defense if no exception applies.

When to use: No discrimination, retaliation, public policy violation, or contract limiting termination rights.

Legitimate Business Reason

If you can articulate a legitimate, non-discriminatory, non-retaliatory business reason for the termination (poor performance, policy violation, restructuring), the burden shifts to the employee to prove that reason is pretextual.

When to use: Documented performance issues, attendance problems, misconduct, or reduction in force.

Same Decision Defense

Even if the employee engaged in protected activity, you may prevail if you can show you would have made the same termination decision regardless, based on independent legitimate reasons.

When to use: Clear pattern of issues predating any protected activity or complaint.

At-Will Acknowledgment

A signed acknowledgment of at-will status can defeat implied contract claims. The acknowledgment should be clear, conspicuous, and not contradicted by other representations.

When to use: Employee signed offer letter or handbook acknowledgment confirming at-will status.

Statute of Limitations

Different wrongful termination theories have different limitations periods: 2 years for discrimination/retaliation (from CRD filing), 4 years for written contract breach, 2 years for oral contract breach.

When to use: Claim filed beyond the applicable limitations period.

🚨 What Undermines Your Defense

  • Inconsistent reasons given for termination at different times
  • Termination shortly after protected activity ("temporal proximity")
  • Similarly situated employees treated more favorably
  • Shifting or false explanations for the decision
  • Statements suggesting discriminatory or retaliatory motive

⚖ Response Options

Based on your evaluation, choose the appropriate response strategy.

Assert At-Will Defense

If the termination was for legitimate business reasons with no protected activity involved, assert the at-will defense and document your reasoning.

  • Strongest legal position
  • Creates clear record
  • May deter litigation

Negotiate Severance Package

Offer an enhanced severance package in exchange for a general release of all claims. This can be cost-effective even for strong cases.

  • Immediate resolution
  • Full release of claims
  • Avoids litigation costs

Mediation

Propose early mediation to explore settlement before positions harden and costs escalate.

  • Confidential process
  • Neutral evaluation
  • High success rate

Request Specifics

Ask the former employee to identify the specific legal theory and facts supporting their claim before responding substantively.

  • Clarifies allegations
  • Identifies weak points
  • Informs strategy

📊 Cost-Benefit Analysis: Settlement vs. Litigation

Example: Wrongful termination claim

Lost wages (front and back pay)$150,000
Emotional distress damages$50,000-$200,000
Punitive damages$100,000+
Employee attorney fees$150,000+
Your defense costs (through trial)$125,000+
MAX EXPOSURE IF YOU LOSE$575,000+

💡 Severance Strategy

A well-drafted separation agreement with general release can resolve wrongful termination claims for a fraction of litigation costs. Consider offering 2-4 weeks pay per year of service, plus COBRA continuation assistance, in exchange for a comprehensive release.

📝 Sample Responses

Copy and customize these response templates for your situation.

Denial - At-Will Employment
We have reviewed your demand letter dated [DATE] alleging wrongful termination and respectfully deny the claim. As you acknowledged upon hire, your employment with [COMPANY] was at-will, meaning either party could terminate the relationship at any time, with or without cause. This at-will status was clearly stated in your offer letter and employee handbook, both of which you signed. Your employment was terminated on [DATE] for legitimate business reasons, specifically [state reason - performance, restructuring, policy violation, etc.]. This decision was made in accordance with our rights under California Labor Code Section 2922 and was not based on any protected characteristic or protected activity. We deny any allegation of wrongful conduct and stand by our termination decision.
Denial with Documentation Reference
We have carefully reviewed your demand letter and thoroughly investigated the circumstances of your termination. The decision to terminate your employment was based on documented performance issues spanning [TIME PERIOD]. Specifically: - On [DATE], you received a written warning for [issue] - Your performance review dated [DATE] identified concerns regarding [issues] - On [DATE], you received a final warning regarding [issue] These documented issues, not any protected activity, formed the basis for the termination decision. We followed our standard progressive discipline process as applied consistently across all employees. Your claim of wrongful termination is without merit, and we deny all allegations.
Offer of Separation Agreement
We have received your demand letter and, while we disagree with your characterization of your separation from [COMPANY], we are open to discussing an amicable resolution. Without any admission of wrongdoing, and in the spirit of putting this matter behind us, we are prepared to offer: - Severance payment of [$AMOUNT] - [X] months of COBRA premium assistance - Neutral employment reference This offer is contingent upon your execution of a separation agreement including a general release of all claims and confidentiality provisions. Please respond within [14] days if you wish to pursue this resolution. Otherwise, we are prepared to defend against any claims through appropriate legal channels.

🚀 Next Steps

What to do after receiving a wrongful termination demand letter.

Step 1: Preserve Records

Gather and preserve all documentation related to the employee's tenure and termination decision.

Step 2: Identify the Theory

Determine which wrongful termination exception the employee is claiming (discrimination, retaliation, public policy, contract).

Step 3: Review Timeline

Check for any protected activity or complaints that preceded the termination decision.

Step 4: Consider Settlement

Evaluate whether a severance package with release would be more cost-effective than litigation.

If They File with CRD (Discrimination/Retaliation Claims)

  • Position Statement - Submit a detailed written response to the allegations
  • Mediation - CRD offers free mediation; consider participating
  • Investigation or Right-to-Sue - CRD may investigate or issue immediate right-to-sue

If They File a Lawsuit

  • Answer within 30 days - File your response to avoid default judgment
  • Discovery - Expect extensive document production and depositions
  • Summary Judgment - If strong documentation exists, you may seek early dismissal

Get Professional Help

Wrongful termination claims require careful analysis of your documentation and the employee's theory. Get a professional response letter drafted on attorney letterhead.

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