How to Lay Off Employees in California: WARN Notice, Final Pay, COBRA

To lay off employees in California legally, you generally need to give 60 days’ written notice under the state or federal WARN Act, choose who is affected using criteria that don’t discriminate against protected groups, and hand each laid-off worker a final paycheck covering all earned wages and unused vacation on their last day of work. Severance, health coverage continuation, and unemployment insurance obligations follow from there. California’s rules are stricter than federal law on nearly every one of these points, and the penalties for missing a deadline start accruing the day you miss it.

Whether You Owe 60 Days’ Notice

Two laws can require advance written notice: the federal WARN Act and the California WARN Act. They overlap but aren’t identical, and you can trigger one without triggering the other. If both apply, follow whichever imposes the broader obligation.

Federal WARN Act

Federal WARN applies to businesses with 100 or more full-time employees, or 100 or more employees (including part-timers) who together log at least 4,000 hours per week.¹ You must send notice before either of two events at a single site:

A plant closing that will cost 50 or more full-time employees their jobs within any 30-day window.
A mass layoff eliminating 500 or more full-time positions, or 50 to 499 positions if those represent at least one-third of the full-time workforce at that site.

Notice goes to each affected employee (or their union representative), the state dislocated worker unit, and the chief elected official of the local government where the site sits.²

California WARN Act

California’s law casts a much wider net. It applies to any employer that has employed 75 or more people, including part-timers, at any point in the preceding 12 months.³ Notice is required for:

A mass layoff of 50 or more employees at a covered establishment within any 30-day period, regardless of what share of the workforce that represents.
A plant closure, meaning ceasing or substantially ceasing operations at a covered location, affecting any number of employees.
A relocation of operations 100 or more miles away, affecting any number of employees.

The California notice must go to affected employees, the Employment Development Department (EDD), the local workforce development board, and the chief elected official of each city and county where the action occurs.⁴ The practical trap: a company with 80 employees closing a facility owes 60 days’ notice under California law even though federal WARN wouldn’t apply at all.

What the WARN Notice Must Say

California Labor Code 1401 requires the notice to contain every element federal law requires, and as of 2026, Senate Bill 617 adds more. Your notice needs to cover:

Whether the layoff is permanent or temporary, the expected date of the first separation, the schedule for any subsequent separations, and whether the entire facility is closing.
Job titles of affected positions and the number of employees in each title, broken down by location if multiple sites are involved.
Name, phone number, and email of a company contact who can answer questions.
A statement about whether you intend to coordinate Rapid Response services with your local workforce development board, contact information for that board, and a description of available reemployment services (new for 2026).
A description of the CalFresh nutrition assistance program, the CalFresh helpline number, and a link to the application website (new for 2026).
The name, address, and chief elected officer of any affected union, and whether bumping rights exist, if applicable.

If you’re reusing a WARN notice template from before 2026, update it before sending anything.⁵

When You Can Give Less Than 60 Days’ Notice

Both laws include narrow exceptions, and neither eliminates the notice requirement entirely: you must give as much notice as circumstances allow and explain in the notice why the full 60 days wasn’t feasible.⁶

Federal law recognizes three situations for shortened notice.² A faltering-company exception applies when an employer was actively seeking capital or business that would have avoided the shutdown and reasonably believed notice would have scared off the deal; this one covers plant closings only, not mass layoffs. An unforeseeable-business-circumstances exception applies when the layoff is caused by a sudden, dramatic change outside the employer’s control that couldn’t have been predicted 60 days out, such as a major client canceling a contract. A natural-disaster exception applies to floods, earthquakes, storms, and similar events.

California’s exceptions are narrower. The state recognizes a physical calamity or act of war exception under Labor Code 1401(c) and a faltering-company exception under Labor Code 1402.5 that applies only to relocations and plant closures, not mass layoffs, and that requires documentation to the Department of Industrial Relations proving you were actively seeking capital and that notice would have prevented the deal. California has no standalone unforeseeable-business-circumstances exception, which is one reason the state law is generally considered stricter.⁵

Penalties for Skipping or Shortening Notice

Federal WARN violations expose you to back pay and benefits for each affected employee for the period of the violation, capped at 60 days. Fail to notify the local government and you can face a civil penalty of up to $500 per day. That civil penalty can be avoided if you pay affected employees in full within three weeks of the closing or layoff.⁷ Courts can also award reasonable attorney’s fees to employees who win.

Under California Labor Code 1402, an employer that violates the state WARN Act owes each affected employee back pay and the value of lost benefits for the period of the violation, up to 60 days or half the number of days the employee was employed, whichever is shorter. Employees can bring a civil action to enforce these penalties.

Choosing Who Gets Laid Off Without Discriminating

Selection is where discrimination lawsuits are born. California’s Fair Employment and Housing Act protects a longer list of characteristics than federal law, including race, color, national origin, ancestry, religion, age (40 and over), physical and mental disability, sex, gender identity, gender expression, sexual orientation, medical condition, genetic information, marital status, military or veteran status, and reproductive health decision-making.⁸ Criteria that disproportionately affect a protected group can expose you to a disparate impact claim even if they look neutral on their face.

Use objective, documented criteria: seniority, performance ratings recorded before the layoff was announced, or elimination of specific roles or departments. Before finalizing the list, compare the demographics of employees selected against those retained. If the numbers show a lopsided impact on any protected group, reconsider the criteria or document a clear business justification.

Final Paychecks and Vacation Payout

This is where large layoffs most often go wrong. When you lay someone off in California, all earned wages must be paid immediately on the employee’s last day of work.⁹ “All earned wages” includes accrued but unused vacation time, which California treats as wages payable at the employee’s final rate of pay.¹⁰

Miss the deadline willfully and Labor Code 203 imposes a waiting-time penalty: the employee’s daily wage continues to accrue as a penalty for each late day, up to 30 days. For a well-paid employee, that penalty can easily exceed the final paycheck itself. Processing dozens or hundreds of final checks on the same day requires advance coordination with payroll, so plan the mechanics before you send the WARN notice.

A narrow exception exists for seasonal employees in certain food processing industries, where the employer has up to 72 hours to compute and issue final pay.⁹ For everyone else, the deadline is the moment the employee is told they’re laid off.

Severance Agreements

California doesn’t require severance pay. Most employers offer it voluntarily in exchange for a release of legal claims. If any affected employee is 40 or older, the federal Older Workers Benefit Protection Act sets the floor for a valid waiver of age-discrimination claims. The agreement must be written in plain language, specifically reference rights under the Age Discrimination in Employment Act, and advise the employee in writing to consult an attorney. The employee must get at least 21 days to consider the offer. In a group layoff, that period extends to 45 days, and you must also disclose the job titles and ages of all employees eligible for the program alongside those who are not.¹¹ After signing, every employee gets a 7-day window to revoke. Severance paid before that revocation period ends is premature and can render the waiver unenforceable.

The 45-day and disclosure requirement for group layoffs is where this gets complicated. You must identify the “decisional unit” affected by the layoff and provide a chart showing every job title and the ages of the people selected and not selected within that unit. Getting the decisional unit wrong is one of the most common mistakes, and courts have invalidated releases over it.

Tax Withholding on Severance

Severance pay is wages. The IRS classifies it as a supplemental wage, so you report it on Form W-2 and withhold Social Security tax, Medicare tax, federal unemployment tax, and federal income tax.¹² If you pay severance separately from regular wages (typical for a lump sum after termination), you can use the 22% flat federal supplemental rate. Once an employee has received more than $1 million in supplemental wages from you during the calendar year, the rate on the excess jumps to 37%. California state income tax withholding applies on top. Do not report severance to a former employee on a 1099; it belongs on a W-2.

Continuing Health Coverage

Laid-off employees generally have the right to continue their group health coverage at their own expense. Which law applies depends on your company’s size.

COBRA (20 or More Employees)

Federal COBRA requires employers with 20 or more employees to offer continuation coverage to employees and dependents who lose coverage due to a qualifying event like a layoff. The baseline coverage period is 18 months.¹³ A second qualifying event during those 18 months can extend it to 36 months from the original event. California generally requires employers to extend COBRA-equivalent coverage to a total of 36 months when the initial federal period is less than 36 months.

Send the election notice and enrollment forms promptly after the layoff. Employees have 60 days from the date they receive the notice (or the date coverage would otherwise end, whichever is later) to elect coverage.

Cal-COBRA (2 to 19 Employees)

If your company has 2 to 19 employees and is too small for federal COBRA, Cal-COBRA provides similar continuation rights, with up to 36 months of coverage available depending on the qualifying event.¹⁴ Employees who exhaust 18 months of federal COBRA can also use Cal-COBRA to extend coverage an additional 18 months, reaching 36 months total.

Handing Off to Unemployment

Employees laid off through no fault of their own are generally eligible for unemployment insurance through the EDD.¹⁵ You aren’t required to file for them, but giving clear application information reduces confusion.

After a claim is filed, the EDD will contact you to verify employment details and the reason for separation. Respond promptly and accurately. Contesting a claim without a valid basis creates unnecessary friction, and failing to respond generally means the EDD approves the claim based on the employee’s account alone, and you lose the chance to correct inaccuracies.

Records to Keep After the Layoff

Federal regulations require you to preserve all personnel and employment records related to a layoff for at least one year from the date of termination. If a discrimination charge is filed, you must keep all records relevant to that charge until final disposition, which could be years.¹⁶

Treat the one-year minimum as a floor. FEHA discrimination claims can be filed up to three years after the alleged violation, and wrongful termination lawsuits can surface later. Keep your layoff selection criteria documentation, copies of all WARN notices, final-pay records, severance agreements, and COBRA election forms for at least four years. Ongoing obligations after the layoff also include administering any severance payment schedules you agreed to, collecting and remitting COBRA or Cal-COBRA premiums for employees who elected continuation, and responding to EDD inquiries that arise during the benefit period.

1
Office of the Law Revision Counsel. 29 USC 2101 – Definitions; Exclusions From Definition of Loss of Employment
2
Office of the Law Revision Counsel. 29 USC 2102 – Notice Required Before Plant Closings and Mass Layoffs
3
California Legislative Information. California Labor Code 1400
4
Justia. California Labor Code 1400-1408
5
EDD. Worker Adjustment and Retraining Notification (WARN)
6
U.S. Department of Labor. WARN Advisor – Exceptions
7
U.S. Department of Labor. Additional Frequently Asked Questions About WARN
8
California Civil Rights Department. Employment Discrimination
9
California Legislative Information. California Labor Code 201
10
California Legislative Information. California Labor Code 227.3
11
Office of the Law Revision Counsel. 29 USC 626 – Recordkeeping, Investigation, and Enforcement – Section: Waiver
12
Internal Revenue Service. Publication 15 (2026), Employer’s Tax Guide
13
Office of the Law Revision Counsel. 29 USC Chapter 18, Part 6 – Continuation Coverage and Additional Standards for Group Health Plans
14
Justia. California Health and Safety Code 1366.20-1366.29
15
California Legislative Information. California Unemployment Insurance Code 1251
16
eCFR. 29 CFR 1602.14 – Preservation of Records Made or Kept