California Layoff Rules: WARN, Final Pay, and COBRA

If you’ve been laid off in California, the state’s layoff laws give you more protection than federal law does: 60 days’ advance written notice for mass layoffs, your final paycheck (including every hour of unused vacation) on your last day of work, and the right to continue health coverage and collect unemployment even if your employer also pays severance. The rules below walk through what your employer owes you, what you can negotiate, and what to do if something is missing.

Advance Notice Before a Mass Layoff

California’s Worker Adjustment and Retraining Notification Act, known as Cal-WARN and codified at Labor Code Section 1400, requires covered employers to give 60 days’ written notice before a mass layoff, a relocation, or a facility shutdown. Notice has to go to three places: the affected employees, the state Employment Development Department, and local elected officials.¹

Cal-WARN kicks in at any industrial or commercial facility that employed 75 or more workers (full-time or part-time) at any point in the prior 12 months. That’s lower than the federal WARN threshold of 100 employees, so some California workers get notice protection that federal law alone wouldn’t give them.¹²

Under Cal-WARN, a “mass layoff” is 50 or more jobs cut within any 30-day period. A “relocation” means moving operations at least 100 miles. A “termination” means a substantial shutdown of a facility.¹

When the 60 Days Don’t Apply

Cal-WARN allows shorter notice in a handful of situations. A “faltering company” actively seeking capital or new business can shorten notice if giving it would have killed the deal, backed by written documentation and a sworn affidavit filed with the state.³ Unforeseeable business circumstances, a physical calamity, or an act of war can also shorten the notice period. Workers hired for specific projects under motion picture, construction, drilling, logging, or mining wage orders, or hired with the understanding that the work was seasonal and temporary, are not covered at all. Even when an exception applies, the employer still has to give as much notice as it practically can and explain why 60 days wasn’t possible.⁴

What a Notice Violation Is Worth

An employer who skips or shortens the required notice owes each affected employee back pay and the value of lost benefits for every day of the violation, up to the full 60 days. There’s also a civil penalty of $500 per day of violation, and a court can order the employer to pay the employees’ attorney fees if they win a lawsuit.¹

Your Final Paycheck

Labor Code Section 201 requires employers to pay all earned, unpaid wages immediately when they lay off or terminate a worker. Not next Friday, not the next regular pay period. The last day of work.⁵

That final paycheck also has to include every hour of accrued, unused vacation. Under Labor Code Section 227.3, California treats vacation as earned wages that cannot be forfeited, and the payout is calculated at your final rate of pay. If you were making $40 an hour when you were laid off but accrued some of that vacation while earning $35, the whole balance pays out at $40. Paid time off policies that bundle vacation with sick time generally follow the same rule. Standalone sick leave balances don’t have to be paid out.

The check is due at the place of termination. There are narrow mailing exceptions for seasonal workers in curing, canning, or drying operations and for the motion picture industry.⁶

Waiting Time Penalties If the Check Is Late

When an employer willfully fails to pay final wages on time, Labor Code Section 203 adds a waiting time penalty of one day’s wages for every day the payment is late, up to 30 calendar days. For someone earning $200 a day, that’s up to $6,000 on top of the wages already owed.

“Willfully” doesn’t require malice. It just means the employer intentionally chose not to pay, as opposed to a genuine dispute about the amount. If your final pay is short or late, you can file a wage claim with the Division of Labor Standards Enforcement online, by email, or in person at a local Labor Commissioner’s office.⁷

Severance Agreements

California does not require employers to pay severance. The only time it becomes legally required is when an employment contract, a collective bargaining agreement, or an established company policy already promises it. Most severance you’ll see is offered voluntarily in exchange for a signed release of legal claims against the employer. These agreements are negotiable, and given what you’re giving up, having an employment attorney review the terms before signing is usually worth the cost.

How Long You Have to Decide

If you’re 40 or older, federal law gives you mandatory time to review the agreement because age discrimination waivers have to meet specific standards under the Older Workers Benefit Protection Act. For an individual layoff, the minimum review period is 21 days. For a group layoff or exit incentive program (the more common scenario in a mass layoff), the minimum jumps to 45 days. In both cases you also get a 7-day revocation window after signing, during which you can back out.⁸ An employer who pressures you to sign faster is creating an agreement a court can void.

What a Severance Agreement Can’t Take Away

California law puts several things off limits even in a signed release:

Wages already owed. An employer cannot condition payment of earned wages, including unpaid overtime or minimum wage, on signing a release.
Unemployment insurance. You can’t waive your right to file for benefits.
PAGA claims. Waivers of representative actions under the Private Attorneys General Act are unenforceable.

California also restricts non-disclosure clauses in separation agreements. Under Government Code Section 12964.5, a separation agreement cannot prohibit you from disclosing information about unlawful workplace conduct you have reasonable cause to believe occurred, including harassment, discrimination, and retaliation. Any such clause is void.⁹

Health Insurance After the Layoff

Which continuation law applies depends on how many people your former employer had.

Federal COBRA

COBRA covers employers with 20 or more employees and lets you stay on the group health plan for up to 18 months after a layoff. You pay the full premium (both the employee and employer shares) plus a 2% administrative surcharge, for a total of up to 102% of the plan’s cost.¹⁰

The timing: your employer has 30 days after the layoff to notify the plan administrator, who then has 14 days to send you an election notice. Once you receive the notice, you have 60 days to decide whether to enroll.¹¹

Cal-COBRA

California’s state continuation law fills two gaps. Employees of smaller companies with 2 to 19 workers (too small for federal COBRA) can get up to 36 months of continuation coverage under Cal-COBRA. And if you’ve already used your full 18 months of federal COBRA, Cal-COBRA can extend coverage for an additional 18 months, bringing the combined total to 36 months. The Cal-COBRA election window is 60 days from the date you receive the notice or the date coverage would otherwise end, whichever is later.¹²

Continuation premiums are often startlingly high because you’re paying the full cost your employer used to subsidize. Before enrolling, compare the premium to what a Covered California marketplace plan would cost, especially if your post-layoff income qualifies you for subsidies. COBRA’s main advantage is keeping your exact doctors and plan network, which matters most if you’re mid-treatment.

Unemployment Benefits

If you were laid off through no fault of your own (a reduction in force, a business closure, a position elimination), you’re generally eligible for unemployment insurance through the California Employment Development Department. Layoffs are the textbook qualifying event.

You need to have earned enough wages during the “base period,” typically the first four of the last five completed calendar quarters before you filed. You also need to be able to work, available for work, and actively looking for a job each week you collect.

How Much You’ll Get

California unemployment replaces roughly 60% to 70% of your prior weekly earnings, subject to a cap. For 2026, the projected maximum weekly benefit is $450 and the minimum is $40.¹³ Benefits last up to 26 weeks in a standard benefit year, and the actual weekly amount depends on your highest-earning quarter during the base period.

Severance and Unemployment at the Same Time

Most people assume severance will cancel out unemployment. In California, it usually doesn’t. Under Section 1265 of the California Unemployment Insurance Code, severance that comes from a company plan or policy, is available to a group or class of employees terminated for reasons like job elimination, and is meant to supplement unemployment or cushion the transition is not treated as wages for unemployment purposes. When your severance fits those criteria, you can collect it alongside unemployment benefits with no delay or reduction.¹⁴

The EDD will look harder at payments that look like continued wages rather than true severance, and the structure matters more than what the employer calls it.¹⁴

Taxes on Layoff Payments

Your final wages and accrued vacation payout are taxed as regular income. Severance is classified as supplemental wages, which changes the withholding math. Federally, employers can withhold income tax on severance at a flat 22% rather than using your regular bracket.¹⁵ California applies its own supplemental withholding rate of 6.6% for severance (bonuses and stock options use a higher 10.23% rate). Social Security and Medicare still come out on top of those.

The withholding rate is not your actual tax rate. If too much came out, you get it back when you file. If your severance pushes you into a higher bracket for the year, you may owe. A lump sum paid in December lands very differently than the same amount spread across months, so if you have any flexibility in how the severance is structured, it’s worth a conversation with a tax professional before you sign.

1
California Legislative Information. California Code LAB – Labor Code Section 1400
2
U.S. Department of Labor. Plant Closings and Layoffs
3
California Department of Industrial Relations. Exception Under Labor Code 1402.5 (Cal-WARN Act) Determination
4
Employment Development Department. Worker Adjustment and Retraining Notification (WARN)
5
California Legislative Information. California Code LAB – Labor Code Section 201
6
California Department of Industrial Relations. Paydays, Pay Periods, and the Final Wages
7
California Department of Industrial Relations. How to File a Wage Claim
8
eCFR. 29 CFR 1625.22 – Waivers of Rights and Claims Under the ADEA
9
California Legislative Information. California Government Code Section 12964.5
10
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers
11
U.S. Department of Labor. An Employees Guide to Health Benefits Under COBRA
12
California Department of Managed Health Care. Keep Your Health Coverage (COBRA)
13
Employment Development Department. January 2026 Unemployment Insurance (UI) Fund Forecast
14
Employment Development Department. Total and Partial Unemployment TPU 460.35 – Severance Pay, Dismissal or Separation Pay
15
Internal Revenue Service. Employers Supplemental Tax Guide (2026)