California Wrongful Termination Response Guide

For Employers: Evaluate Claims | Assert Defenses | Respond Strategically | Protect Your Business

✍️ Need to Send a Wrongful Termination Demand Letter? See my guide on California Wrongful Termination Demand Letters →
Understanding the Wrongful Termination Claim Against Your Business
You Have Received a Demand Letter: A former employee is alleging that their termination was unlawful and demanding compensation. Do not ignore this letter. A thoughtful, strategic response can protect your business, limit exposure, and potentially resolve the dispute before costly litigation. However, anything you say can be used against you - consult with employment defense counsel before responding.
What is Wrongful Termination?

California is an "at-will" employment state under Labor Code Section 2922, meaning employers can generally terminate employees for any reason or no reason at all. However, there are significant exceptions. A wrongful termination claim alleges that an employer fired an employee for an illegal reason, such as:

Claim Type Legal Basis What Employee Must Prove
FEHA Discrimination Government Code 12940(a) Termination was motivated by protected characteristic (race, age, disability, gender, etc.)
FEHA Retaliation Government Code 12940(h) Termination was in retaliation for opposing discrimination/harassment or filing a complaint
Whistleblower Retaliation Labor Code 1102.5 Termination was in retaliation for reporting illegal activity or refusing to participate in it
Public Policy Violation Tameny v. ARCO (1980) Termination violated fundamental public policy (e.g., fired for refusing to break law)
Implied Contract Breach Foley v. Interactive Data (1988) Employer made implied promises of job security that were breached
Covenant of Good Faith Common Law Termination was done in bad faith to deprive employee of earned benefits
Employee's Burden of Proof: The former employee bears the initial burden of establishing a prima facie case of wrongful termination. If they meet this burden, you must articulate a legitimate, non-discriminatory/non-retaliatory reason for the termination. The employee then must prove that your stated reason is pretextual.
At-Will Employment Doctrine

California's at-will doctrine is your primary defense in most termination cases. Under Labor Code Section 2922:

  • Default presumption: Employment with no specified term is presumed at-will
  • Employer rights: You may terminate for any reason, no reason, or even an unfair reason
  • Employee rights: Employee may quit for any reason at any time
  • Limitations: At-will status does not permit termination for an illegal reason
Exceptions to At-Will Employment
Exception 1: Public Policy Violations (Tameny Claims)
An employee cannot be terminated for reasons that violate fundamental California public policy. This includes termination for:
  • Refusing to violate the law (e.g., refusing to commit perjury, falsify records)
  • Performing a legal duty (e.g., serving jury duty, reporting for military service)
  • Exercising a statutory right (e.g., filing workers' compensation claim, taking protected leave)
  • Reporting violations of law (whistleblowing to authorities or internally)
Exception 2: Implied Contract
Even without a written employment contract, an implied contract may exist based on:
  • Employee handbooks stating employees will only be terminated for "cause"
  • Oral assurances of job security ("you'll have a job here as long as you perform")
  • Course of dealing and length of employment
  • Industry practices and employer policies
Review your employee handbook carefully - promises of progressive discipline or termination only "for cause" can create implied contracts.
Exception 3: Covenant of Good Faith and Fair Dealing
California recognizes a limited exception when an employer terminates an employee in bad faith specifically to deprive them of benefits they have earned. Example: Firing a salesperson the day before a large commission becomes payable to avoid paying it.
FEHA Claims (Government Code 12940+)

The Fair Employment and Housing Act (FEHA) is California's primary anti-discrimination law. It applies to employers with 5 or more employees (or 1+ for harassment claims). FEHA prohibits discrimination and retaliation based on:

Protected Characteristics Examples
Race, Color, National Origin, Ancestry Cannot terminate based on race, ethnicity, or national background
Sex, Gender, Gender Identity, Sexual Orientation Includes pregnancy, childbirth, breastfeeding, gender expression
Religion Must reasonably accommodate religious practices
Age (40+) Cannot terminate based on age; avoid age-related comments
Physical/Mental Disability Must engage in interactive process and provide reasonable accommodation
Medical Condition Cancer, genetic characteristics, HIV/AIDS
Marital Status, Military/Veteran Status Cannot discriminate based on these statuses
Whistleblower Claims (Labor Code 1102.5)
Enhanced Protections: California Labor Code 1102.5 provides broad whistleblower protections. It prohibits retaliation against employees who:
  • Disclose or may disclose information to a government or law enforcement agency
  • Provide information to or testify before any public body conducting an investigation
  • Refuse to participate in activity that would violate a law, rule, or regulation
  • Report violations internally to someone with authority to investigate
Critical: If termination occurred within 90 days of protected whistleblower activity, Labor Code 1102.5(j) creates a rebuttable presumption that the termination was retaliatory. You bear the burden of proving a legitimate, non-retaliatory reason.
Statute of Limitations

Understanding when claims expire can be a complete defense:

Claim Type Time Limit Notes
FEHA Discrimination/Retaliation 3 years to file with CRD Must file administrative complaint first
Wrongful Termination (Public Policy) 2 years Common law tort claim
Whistleblower (LC 1102.5) 3 years Can file directly in court
Breach of Implied Contract 2 years (oral) / 4 years (written) Depends on nature of contract
Workers' Comp Retaliation (LC 132a) 1 year Filed with WCAB
Evaluating Your Position: Building Your Defense
Honest Assessment Required: Before responding, conduct an honest internal review of the termination. Your response strategy depends on the strength of your documentation and whether the termination was truly based on legitimate business reasons. If there are weaknesses in your position, early settlement may be more cost-effective than litigation.
Step 1: Review Termination Documentation

Gather and review all documentation related to the employee and their termination:

Document Type What to Look For Why It Matters
Personnel File Employment application, offer letter, job description, performance reviews, disciplinary records Establishes baseline and pattern of performance issues
Termination Documents Termination letter, exit interview notes, separation agreement Documents stated reason for termination at the time
Email/Communications Emails between managers discussing the employee, communications with the employee May reveal true motivations or problematic statements
Employee Handbook Progressive discipline policies, at-will disclaimers, complaint procedures Determines if you followed your own policies
Complaint Records Any complaints filed by or against the employee Critical for retaliation analysis
Comparator Evidence How similarly situated employees were treated Key to defeating discrimination claims
Step 2: Examine Performance Records

Performance documentation is your strongest defense. Evaluate:

  • Performance reviews: Were they consistent? Did problems predate any protected activity?
  • Written warnings: Were performance issues documented in writing?
  • Objective metrics: Sales numbers, productivity data, error rates, attendance records
  • Witness statements: Can supervisors and coworkers corroborate performance problems?
  • Training records: Did you provide training and opportunity to improve?
Red Flags in Your Documentation:
  • Recent positive performance reviews followed by sudden termination
  • No documented warnings before termination
  • Performance issues only documented after employee engaged in protected activity
  • Inconsistent application of policies compared to other employees
  • Comments about age, disability, pregnancy, or other protected characteristics
  • Termination shortly after protected leave, accommodation request, or complaint
Step 3: Evaluate Progressive Discipline

Even though at-will employers are not required to use progressive discipline, inconsistent application can support discrimination claims:

  • Did you follow your handbook? If your handbook promises progressive discipline, you should have followed it
  • Was discipline consistent? Were other employees who committed similar violations treated the same way?
  • Were there warnings? Sudden termination without prior warnings is harder to defend
  • Was there opportunity to improve? Did you give the employee a chance to correct performance issues?
Step 4: Confirm Legitimate Business Reasons

Your stated reason for termination must be legitimate and well-documented. Common defensible reasons include:

Strong Defense Positions:
  • Documented performance deficiencies: Written warnings, performance improvement plans, objective metrics
  • Policy violations: Clear violation of written policy applied consistently
  • Misconduct: Theft, dishonesty, insubordination, harassment of others
  • Legitimate restructuring: Position elimination affecting multiple employees
  • Attendance issues: Excessive absences beyond protected leave, documented pattern
  • Loss of required qualifications: License revocation, failure to maintain certifications
Step 5: Analyze the Timing

Timing is critical in retaliation cases. Evaluate the timeline:

  • When did protected activity occur? Complaint, leave request, accommodation request, whistleblower report
  • When did performance issues arise? Before or after the protected activity?
  • How much time between protected activity and termination? Close timing suggests retaliation
  • What was the decision-making process? Who decided to terminate and when was it decided?
90-Day Presumption: For whistleblower claims under Labor Code 1102.5, if termination occurred within 90 days of protected activity, there is a rebuttable presumption of retaliation. You must prove the termination was for a legitimate, non-retaliatory reason. This is a significant burden.
Step 6: Review Comparator Treatment

One of the strongest indicators of discrimination is disparate treatment. Consider:

  • Were employees outside the protected class who committed similar violations treated the same?
  • Were employees with similar performance issues given more opportunities to improve?
  • Were termination decisions made consistently across similar circumstances?
  • Can you articulate a legitimate reason for any differential treatment?
Document Everything: Create a comprehensive timeline of events, gather all relevant documentation, preserve electronic communications, and interview supervisors involved in the decision. This information will be essential for your response and any potential litigation. Implement a litigation hold to preserve evidence.
Response Strategies: How to Reply to a Wrongful Termination Demand
Choose Your Strategy Carefully: Your response should be strategic, not reactive. Consider the strength of the employee's claim, the strength of your documentation, the amount demanded, litigation costs, and your company's risk tolerance. Consult with employment defense counsel before responding.
Strategy 1: Deny Allegations with Documentation
When to Use: Use full denial when you have strong documentation supporting legitimate, non-discriminatory/non-retaliatory reasons for the termination. This works best when:
  • Performance issues were documented before any protected activity
  • You followed progressive discipline consistently
  • The termination decision was made by individuals unaware of protected activity
  • Similarly situated employees were treated the same way
  • The stated reason for termination is objectively verifiable

Elements of Denial Response:

  • Deny the allegations of wrongful termination
  • Assert that the employee was at-will
  • State the legitimate business reason for termination
  • Reference supporting documentation (without providing it)
  • Reserve all defenses and rights
  • State your intent to defend vigorously if sued
Strategy 2: Assert Legitimate Business Reason
When to Use: When you have a legitimate reason but some facts may be disputed. Focus on the business justification for the termination:
  • Document specific performance failures or policy violations
  • Show the decision was made by the appropriate personnel
  • Demonstrate consistent application of standards
  • Emphasize objective, measurable grounds for the decision
Strategy 3: Offer Severance for Release
When to Use: Settlement makes sense when:
  • Documentation is weak or incomplete
  • Timing of termination raises retaliation concerns
  • Litigation costs would exceed settlement value
  • Witnesses may be problematic (e.g., managers made inappropriate comments)
  • Business wants to avoid publicity or disruption
  • The employee has a credible claim worth resolving

Settlement Offer Components:

Component Description Considerations
Monetary Payment Lump sum in exchange for release Consider lost wages, emotional distress, litigation costs avoided
General Release Employee releases all claims (FEHA, whistleblower, etc.) Must be knowing and voluntary; special rules for age claims (OWBPA)
Confidentiality Terms remain confidential May not prohibit disclosure to government agencies or of unlawful conduct
Non-Disparagement Mutual agreement not to disparage Consider mutual provision
Neutral Reference Agree to provide neutral reference Standard: dates of employment and job title only
No Rehire Agreement employee will not seek reemployment May not be enforceable if termination was unlawful
Strategy 4: Early Mediation
When to Use: Mediation can be effective when both parties want resolution but are far apart on value. Benefits include:
  • Neutral third party can help bridge gaps
  • Confidential process protects both parties
  • Lower cost than litigation
  • Opportunity to hear the other side's perspective
  • Higher settlement rates than direct negotiation
Timing Considerations
  • Respond promptly: Respond before the deadline stated in the demand letter
  • Request extension if needed: Ask for additional time to investigate and consult counsel
  • Do not ignore: Silence may be seen as admission and will likely lead to immediate litigation
  • Implement litigation hold: Preserve all relevant documents and communications
  • Notify insurance: Contact your EPLI carrier if you have employment practices liability coverage
Warning: Anything you say in your response can be used against you in litigation. Be factual and professional. Avoid emotional language, admission of fault, or statements that could be misinterpreted. Have employment defense counsel review your response before sending.
Sample Response Letters
Customize These Templates: These sample letters provide a starting point. Modify them to fit your specific situation, insert accurate facts, and ensure all statements are truthful. Have employment defense counsel review your response before sending, especially for significant claims.
Sample 1: Denial with Documented Performance Issues
[COMPANY LETTERHEAD] [Date] VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED [and via email to: former.employee@email.com] [Former Employee Name] [Former Employee Address] [City, State ZIP] RE: RESPONSE TO DEMAND LETTER DATED [DATE] Former Employee: [Employee Name] Dear [Mr./Ms. Employee Name]: We are in receipt of your letter dated [Date] alleging that your termination from [Company Name] was wrongful. We have thoroughly reviewed your allegations and the circumstances of your termination. We firmly deny your claims. AT-WILL EMPLOYMENT As you are aware, your employment with [Company Name] was at-will pursuant to California Labor Code Section 2922 and the express terms of your employment offer letter dated [Date], which you acknowledged in writing. As an at-will employee, your employment could be terminated by either party at any time, with or without cause. LEGITIMATE BUSINESS REASON FOR TERMINATION Your employment was terminated for legitimate, well-documented business reasons unrelated to any protected activity you allege. Specifically, your termination was based on [state legitimate reason(s), for example]: 1. PERFORMANCE DEFICIENCIES: Your work performance failed to meet the standards required for your position. This was documented in: - Written performance warning dated [Date] - Performance Improvement Plan issued [Date] - Performance reviews dated [Dates] noting specific deficiencies - [Specific examples of performance failures] 2. POLICY VIOLATIONS: You violated company policy regarding [specific policy] on [dates], as documented in [reference documentation]. 3. [ADDITIONAL REASONS AS APPLICABLE] These performance issues and policy violations predated [any protected activity alleged] and were the sole basis for the termination decision. DENIAL OF DISCRIMINATION/RETALIATION We categorically deny that your termination was motivated by discrimination based on any protected characteristic or retaliation for any protected activity. The individuals involved in the termination decision considered only your job performance and conduct, applied company standards consistently, and made the decision based solely on legitimate business considerations. RESPONSE TO SPECIFIC ALLEGATIONS [Address specific allegations in the demand letter. For example:] - You allege that your termination was in retaliation for [specific allegation]. This is false. The issues leading to your termination were documented beginning on [date], before [alleged protected activity]. - You allege discrimination based on [protected characteristic]. This is false. [Provide factual rebuttal without excessive detail]. DAMAGES CLAIM Your damages calculation is speculative and unsupported. You have a duty to mitigate damages by seeking comparable employment. We dispute both liability and your claimed damages. CONCLUSION We are confident that if you pursue litigation, the facts will demonstrate that your termination was lawful and supported by substantial documentation. We reserve all defenses available to us under California law, including but not limited to at-will employment, legitimate business reason, after-acquired evidence, failure to mitigate damages, and any applicable statutes of limitations. We encourage you to consult with an attorney regarding the merits of your claims before incurring litigation costs. We are prepared to defend this matter vigorously. Sincerely, [Name] [Title] [Company Name] cc: [Company's Employment Counsel] [HR File]
Sample 2: Response to Whistleblower Retaliation Claim
[COMPANY LETTERHEAD] [Date] VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED [Former Employee Name] [Former Employee Address] [City, State ZIP] RE: RESPONSE TO DEMAND LETTER DATED [DATE] Alleged Whistleblower Retaliation Claim Dear [Mr./Ms. Employee Name]: We are in receipt of your letter dated [Date] alleging that your termination from [Company Name] constituted retaliation for whistleblower activity in violation of California Labor Code Section 1102.5. We have conducted a thorough investigation and firmly deny your allegations. POSITION STATEMENT [Company Name] maintains a strict policy prohibiting retaliation against any employee who reports concerns about potential legal violations or refuses to participate in unlawful activity. We take all such reports seriously and investigate them appropriately. Your termination was not based on any report you made or any refusal to participate in any activity. LEGITIMATE REASON FOR TERMINATION Your termination was based solely on legitimate business reasons, specifically: 1. [State specific, documented reasons for termination] 2. [Provide timeline showing performance issues predated or were independent of any protected activity] 3. [Reference specific documentation: warnings, PIPs, performance reviews, incident reports] These matters were documented contemporaneously and were the sole basis for the termination decision. RESPONSE TO WHISTLEBLOWER ALLEGATIONS You allege that you reported [describe alleged report] on [date] and were terminated in retaliation. We respond as follows: 1. INDEPENDENT DECISION-MAKING: The decision to terminate your employment was made by [decision-maker(s)] based on [documented reasons]. [If applicable: The decision-maker was unaware of any report you made / The termination decision was made before the alleged report]. 2. NO CAUSAL CONNECTION: The issues leading to your termination arose [before / independently of] any report you made. [Provide timeline if helpful.] 3. LEGITIMATE INVESTIGATION: [If applicable: Your report was taken seriously and investigated. The investigation concluded [findings]. The termination was unrelated to this report.] 4. CONSISTENT TREATMENT: Other employees who engaged in similar [performance issues / policy violations] were treated the same way, regardless of whether they had made any reports. REBUTTAL OF PRESUMPTION [If applicable:] We are aware that Labor Code Section 1102.5(j) provides for a rebuttable presumption of retaliation if termination occurs within 90 days of protected activity. We rebut this presumption by demonstrating that the termination was based on legitimate, non-retaliatory reasons that are supported by contemporaneous documentation. The performance issues and/or policy violations at issue predated your alleged protected activity and would have resulted in termination regardless of any report. CONCLUSION [Company Name] is committed to compliance with all applicable laws and maintains a culture of ethical conduct. We do not retaliate against employees who raise legitimate concerns. Your termination was lawful and based on documented, legitimate business reasons. We reserve all defenses available under California law. If you choose to pursue litigation, we are prepared to vigorously defend our position with the substantial documentation supporting our decision. Sincerely, [Name] [Title] [Company Name] cc: [Employment Counsel]
Sample 3: Settlement/Severance Offer with Release
[COMPANY LETTERHEAD] [Date] CONFIDENTIAL - SETTLEMENT COMMUNICATION PROTECTED UNDER CALIFORNIA EVIDENCE CODE SECTION 1152 VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED [and via email] [Former Employee Name] [Former Employee Address] [City, State ZIP] RE: RESPONSE TO DEMAND LETTER - SETTLEMENT PROPOSAL Former Employee: [Employee Name] Dear [Mr./Ms. Employee Name]: We are in receipt of your demand letter dated [Date] regarding your separation from [Company Name]. While we firmly believe that your termination was lawful and for legitimate business reasons, we recognize that litigation is costly and time-consuming for both parties. In the interest of resolving this matter efficiently, we are prepared to make a settlement offer. COMPROMISE OFFER Without admitting any liability whatsoever, and solely to avoid the expense and distraction of litigation, [Company Name] offers the following: 1. MONETARY PAYMENT: [Company Name] will pay you the gross sum of $[Amount], less applicable withholdings and deductions, within fifteen (15) days of execution of a comprehensive Settlement Agreement and General Release. 2. NEUTRAL REFERENCE: [Company Name] will provide a neutral reference limited to confirming your dates of employment ([Start Date] to [End Date]) and final job title ([Title]). 3. NON-DISPARAGEMENT: Both parties will agree not to make disparaging statements about the other, subject to legal limitations. 4. CONFIDENTIALITY: The terms of this settlement will remain confidential, except as required by law. CONDITIONS OF SETTLEMENT This offer is contingent upon: 1. GENERAL RELEASE: You will execute a General Release of all claims against [Company Name], its affiliates, officers, directors, employees, and agents, arising from your employment or separation, including but not limited to claims under FEHA, Labor Code 1102.5, Title VII, ADEA, ADA, and common law claims for wrongful termination, breach of contract, and emotional distress. 2. [FOR EMPLOYEES 40+] ADEA/OWBPA COMPLIANCE: In accordance with the Older Workers Benefit Protection Act, you will have twenty-one (21) days to consider this offer and seven (7) days after signing to revoke your acceptance. 3. FULL SATISFACTION: Upon execution and performance of the Settlement Agreement, all claims will be fully and finally resolved. 4. NO ADMISSION: This offer is made for settlement purposes only, does not constitute an admission of liability, and is inadmissible under California Evidence Code Section 1152 and Federal Rule of Evidence 408. RATIONALE We are making this offer because: 1. Litigation is expensive and distracting for both parties 2. Early resolution allows both parties to move forward 3. This offer represents a fair resolution given the disputed facts and competing claims 4. Certainty of resolution benefits both parties RESPONSE DEADLINE This offer will remain open for [twenty-one (21) / fifteen (15)] days from the date of this letter. If we do not receive your acceptance by [specific date], this offer is withdrawn, and we reserve all rights to defend against your claims. If you wish to discuss this offer or propose alternative terms, please contact [Name/Title] at [phone/email]. This letter is a confidential settlement communication protected under California Evidence Code Section 1152 and Federal Rule of Evidence 408. It is inadmissible in any legal proceeding. Sincerely, [Name] [Title] [Company Name] cc: [Employment Counsel] Enclosure: [Draft Settlement Agreement and General Release, if prepared]
Legal Defenses to Wrongful Termination Claims
Affirmative Defenses: Beyond asserting legitimate business reasons, California law provides several affirmative defenses that can defeat or limit wrongful termination claims. You must raise these defenses; the court will not apply them automatically.
1. At-Will Employment

The fundamental defense in most termination cases is California's at-will doctrine:

Labor Code Section 2922: "An employment, having no specified term, may be terminated at the will of either party on notice to the other." This creates a presumption that employment is at-will absent an agreement otherwise.

Strengthening the At-Will Defense:

  • Written acknowledgment of at-will status in offer letter and employee handbook
  • Clear disclaimer that handbook does not create a contract
  • Signed acknowledgment that no oral promises of job security were made
  • Avoiding language suggesting termination only "for cause"
2. Legitimate Business Reason (Non-Discriminatory/Non-Retaliatory)

The core of most employment defenses is proving a legitimate, non-discriminatory, non-retaliatory reason for the termination:

Legitimate Reason Documentation Needed
Poor job performance Performance reviews, warnings, PIPs, objective metrics, supervisor statements
Policy violations Written policy, documentation of violation, consistent enforcement records
Misconduct Investigation reports, witness statements, evidence of misconduct
Reduction in force Business justification, selection criteria, evidence affecting multiple employees
Position elimination Business records showing elimination, evidence duties redistributed or eliminated
Attendance issues Attendance records, warning notices, documentation excluding protected leave
3. After-Acquired Evidence
After-Acquired Evidence Doctrine: Evidence discovered after termination of employee misconduct or resume fraud can limit damages, even if the employer did not know about it at the time of termination. Under McKennon v. Nashville Banner (1995) and its California progeny:
  • If you discover the employee lied on their resume about qualifications you required, this limits damages
  • If you discover misconduct that would have resulted in termination, back pay may be cut off from the date of discovery
  • Does not completely bar the claim but can significantly reduce damages
  • Must prove you would have terminated for the after-acquired evidence alone
4. Failure to Mitigate Damages

Employees have a duty to mitigate damages by seeking comparable employment:

  • The Rule: Former employee must make reasonable efforts to find substantially similar employment
  • Your Burden: You must prove suitable positions were available and the employee failed to use reasonable diligence to seek them
  • Effect: Reduces back pay and front pay by amounts employee could have earned with reasonable effort
  • Discovery: Request job search records, applications submitted, offers received or rejected
5. Statute of Limitations

Time-barred claims provide a complete defense:

Claim Type Deadline Defense Application
FEHA Claims 3 years to file with CRD If no CRD complaint filed within 3 years, claim is barred
Public Policy Tort 2 years If lawsuit not filed within 2 years of termination, claim is barred
LC 1102.5 Whistleblower 3 years If lawsuit not filed within 3 years, claim is barred
LC 132a (Work Comp) 1 year Very short deadline; often missed by employees
Breach of Oral Contract 2 years Implied contract claims based on oral promises
6. Exhaustion of Administrative Remedies
FEHA Requirement: For FEHA discrimination and retaliation claims, the employee must first file a complaint with the California Civil Rights Department (CRD, formerly DFEH) before filing a lawsuit. If the employee filed suit without first obtaining a Right to Sue notice from CRD, the claim may be dismissed for failure to exhaust administrative remedies.

Checking Exhaustion:

  • Request proof that employee filed CRD complaint
  • Verify employee received Right to Sue notice
  • Check that lawsuit was filed within 1 year of Right to Sue notice
  • Confirm allegations in lawsuit match those in CRD complaint (may be limited to exhausted claims)
7. Same-Actor Inference

If the same person who hired the employee also made the termination decision, courts may infer discrimination is unlikely:

The Inference: "Where the same actor is responsible for both the hiring and the firing of a discrimination plaintiff, and both decisions occur within a short time span, a strong inference arises that there was no discriminatory motive." This is not a complete defense but can be powerful evidence against discriminatory intent.
8. Honest Belief Defense

Even if the employer's belief about performance issues or misconduct was mistaken, a good faith belief can defeat a discrimination claim:

  • Focus is on whether employer honestly believed the stated reason, not whether it was correct
  • Must show decision-makers genuinely believed the performance issues or misconduct occurred
  • Investigation records and contemporaneous documentation support honest belief
  • Pretext analysis looks at whether employer's belief was genuinely held, not whether it was accurate
9. Business Judgment Rule

Courts generally do not second-guess business decisions unless they are discriminatory or retaliatory:

  • Employer's business judgment about performance standards is entitled to deference
  • Courts do not require employers to make the best or fairest decision, only a non-discriminatory one
  • Subjective evaluations are permissible if applied consistently
  • Reorganizations and restructuring decisions receive deference if not pretextual
Limits: The business judgment defense fails if the plaintiff can show the stated business reason is pretextual - i.e., not the true reason for the decision. Strong documentation of consistent application is essential.
Attorney Services
Received a Wrongful Termination Demand Letter?

Being accused of wrongful termination can expose your business to significant liability and distraction. I help California employers and businesses evaluate claims, develop defense strategies, respond appropriately, negotiate settlements, and defend against litigation. Do not respond without understanding your risks and options.

How I Can Help
  • Claim Evaluation: I analyze the demand letter, review termination documentation, and assess the strength of the employee's claims and your defenses
  • Documentation Review: I examine your personnel files, policies, and communications to identify strengths and weaknesses in your position
  • Response Drafting: I prepare professional, legally sound response letters that protect your interests and avoid admissions
  • Defense Strategy: I develop a comprehensive defense strategy tailored to your specific situation
  • Settlement Negotiation: I negotiate with the former employee or their counsel to achieve favorable settlements
  • Litigation Defense: If sued, I defend your company in court, asserting all applicable defenses
  • Insurance Coordination: I coordinate with your EPLI carrier if you have employment practices liability coverage
  • Policy Review: I review and strengthen your employment policies to prevent future claims
When to Consult an Attorney
Consider consulting an employment defense attorney if:
  • You received a demand letter from a former employee alleging wrongful termination
  • The demand letter comes from an attorney
  • The former employee has filed or threatened to file a CRD complaint or lawsuit
  • The termination involved timing close to protected activity (complaint, leave, whistleblowing)
  • Your documentation of the legitimate reason for termination is weak or incomplete
  • Managers made comments that could be construed as discriminatory or retaliatory
  • The claim involves a high-level or long-tenured employee
  • You are unsure whether the termination was defensible
  • The claimed damages are significant
  • You want to offer a settlement but need guidance on appropriate terms
What to Bring to Your Consultation
  • The demand letter you received
  • The employee's personnel file (application, offer letter, performance reviews, warnings)
  • Termination documentation (termination letter, exit interview notes, decision-makers' notes)
  • Relevant communications (emails discussing the employee, communications with the employee)
  • Employee handbook and relevant policies
  • Any complaints filed by or against the employee
  • Information about similarly situated employees
  • Timeline of relevant events
  • Information about your EPLI coverage, if any
Schedule a Consultation

Book a call to discuss your situation. I will review the claim against your company, assess your defenses, and advise on the best strategy for responding and protecting your business.

Contact Information

Email: owner@terms.law

Frequently Asked Questions
First, do not ignore the letter or respond hastily. Implement a litigation hold to preserve all relevant documents and communications. Gather the employee's personnel file, termination documentation, and relevant communications. Review your termination decision and documentation. Note the deadline in the demand letter. Contact your EPLI carrier if you have employment practices liability insurance. Consult with employment defense counsel before responding - anything you say can be used against you in litigation.
While California is an at-will employment state, at-will status does not permit termination for an illegal reason. Significant exceptions apply: you cannot terminate based on a protected characteristic (discrimination), in retaliation for protected activity (complaints, leave, whistleblowing), or in violation of public policy (refusing to break the law). At-will is your first line of defense, but you must also be able to show the termination was for a legitimate, non-discriminatory, non-retaliatory reason.
Timing can be problematic. Courts often view close temporal proximity between protected activity and termination as evidence of retaliation. For whistleblower claims, termination within 90 days creates a rebuttable presumption of retaliation. However, if you can demonstrate with documentation that the decision to terminate was made before the complaint, or that the performance issues leading to termination predated and were independent of the complaint, you may overcome the timing inference. The key is contemporaneous documentation of performance issues before any protected activity.
This depends on several factors: the strength of your documentation, the credibility of the employee's claims, potential exposure (damages), litigation costs, witness credibility, and business considerations like publicity and management distraction. Settlement makes sense when documentation is weak, timing is suspicious, litigation costs exceed potential settlement, or you want certainty. Fighting makes sense when you have strong documentation, the claim is clearly without merit, or you want to deter future claims. An attorney can help you evaluate the cost-benefit analysis.
Potential damages in wrongful termination cases include: back pay (lost wages from termination to trial), front pay (future lost earnings if reinstatement not appropriate), lost benefits (health insurance, retirement contributions), emotional distress damages (anxiety, depression, humiliation), and punitive damages if the conduct was malicious, oppressive, or fraudulent. Under FEHA and Labor Code 1102.5, the prevailing employee can also recover attorney fees, which can be substantial. Exposure can range from tens of thousands to millions of dollars depending on the case.
Employment Practices Liability Insurance (EPLI) typically covers defense costs and damages for wrongful termination, discrimination, harassment, and retaliation claims. However, coverage varies by policy. Review your policy carefully and notify your carrier promptly upon receiving a demand letter - most policies have notice requirements. Your carrier may appoint defense counsel or allow you to select counsel with their approval. EPLI can significantly reduce your financial exposure but may have deductibles, coverage limits, and exclusions.
At-will employers are not legally required to use progressive discipline. However, if your employee handbook promises progressive discipline or states that employees will only be terminated "for cause," you may have created an implied contract that limits at-will status. Additionally, inconsistent application of discipline - progressive for some employees but immediate termination for others - can support discrimination claims. The issue is not whether you used progressive discipline, but whether you applied your practices consistently and can document the legitimate reasons for termination.
Under Labor Code Section 1102.5(j), if an employee is terminated within 90 days of engaging in protected whistleblower activity (reporting illegal activity internally or externally, refusing to participate in illegal activity), there is a rebuttable presumption that the termination was retaliatory. This shifts the burden to the employer to prove by clear and convincing evidence that the termination would have occurred for legitimate, independent reasons regardless of the protected activity. This is a significant burden and makes pre-existing documentation of performance issues especially important.

Related Resources

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Whether you need to respond to a demand letter, negotiate a settlement, or defend against a lawsuit, I provide experienced guidance to help employers navigate wrongful termination claims and minimize exposure.

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Responding to Wrongful Termination Claims in California

When your business receives a wrongful termination demand letter from a former employee, you face important decisions that can significantly impact your liability exposure. California's employment laws provide substantial protections for employees, but they also provide employers with strong defenses when terminations are based on legitimate business reasons and properly documented.

Key Employer Defenses Under California Law

Strategic Response Options