California Layoff Rules: WARN Notice, Final Pay, and Severance

California layoff rules give workers more protection than federal law does. If your employer has 75 or more employees, you are entitled to 60 days’ written notice before a mass layoff. Your final paycheck, including every hour of accrued vacation, is due on your last day. You keep the right to file for unemployment, continue your health coverage, and — if you are offered severance — take real time to review the agreement before signing.

Severance itself is not required by state law. Almost everything else about how you exit the job is.

When Your Employer Owes You 60 Days’ Notice

The California Worker Adjustment and Retraining Notification Act, known as Cal-WARN and codified at Labor Code Section 1400, requires 60 days’ written advance notice before a mass layoff, a relocation, or a plant closure. Notice has to go to the affected employees, the state Employment Development Department, and local elected officials.¹

Cal-WARN covers any industrial or commercial facility that employed 75 or more workers, full-time and part-time combined, at any point in the previous 12 months. That is a lower bar than the federal WARN Act, which only applies at 100 or more employees.¹² A “mass layoff” under Cal-WARN means cutting 50 or more jobs within any 30-day period. A “relocation” means moving operations at least 100 miles away.

If your employer skips or shortens the notice, you are entitled to back pay and the value of lost benefits for each day of the violation, up to the full 60 days. The employer also faces a $500 civil penalty per day of violation and can be ordered to pay your attorney fees if you sue and win.¹

When Full Notice Is Not Required

Cal-WARN allows shorter notice in a few situations. A “faltering company” that was actively pursuing capital or business it reasonably believed notice would kill can qualify, but the employer has to back the claim with written documentation and a sworn affidavit filed with the state.³ Layoffs caused by genuinely unforeseeable business circumstances, a physical calamity, or an act of war also qualify. Seasonal and project-based workers in motion picture, construction, drilling, logging, and mining are not covered in the first place.

Even when an exception applies, the employer still has to give as much notice as practicable and explain why the full 60 days was not possible.⁴

Your Final Paycheck Is Due the Same Day

Under Labor Code Section 201, when an employer lays off or fires you, all earned and unpaid wages are due immediately at the time of separation. Not next Friday. Not the next regular payday. That day.⁵

That final check has to include every hour of accrued, unused vacation. Under Labor Code Section 227.3, California treats accrued vacation as earned wages you cannot forfeit. The payout is calculated at your final rate of pay, not the rate at which the time accrued. So if you were making $40 an hour on your last day but built up some of your vacation while earning $35, the whole balance pays out at $40. Combined paid-time-off policies that fold vacation and sick time together generally get the same treatment. Standalone sick leave balances do not have to be paid out.

Waiting Time Penalties If Payment Is Late

When an employer willfully fails to pay final wages on time, Labor Code Section 203 authorizes a waiting time penalty at your daily wage rate for each day the payment is late, up to 30 calendar days. For a worker earning $200 a day, that is as much as $6,000 on top of the wages already owed.

“Willfully” here does not mean malicious. It just means the employer chose not to pay, as opposed to genuinely disputing the amount. If your employer has not paid what you are owed, 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.⁶

Severance Is Not Required, But It Is Negotiable

California does not require employers to pay severance. No state statute mandates it. Severance only becomes legally owed when an employment contract, collective bargaining agreement, or established company policy already promises it. Most severance in California is offered voluntarily, in exchange for a signed release of legal claims.

The trade is straightforward: you get money or extended benefits beyond what the law already requires, and the employer gets a promise you will not sue. The terms are negotiable, and an employment attorney’s review before you sign is usually worth what it costs.

How Long You Have to Review the Agreement

If you are 40 or older, federal law gives you mandatory review periods because age discrimination waivers have to meet specific standards under the Older Workers Benefit Protection Act. For an individual layoff, you get at least 21 days to review the agreement. When the severance is offered as part of a group layoff or exit incentive program, which is what happens in most mass layoffs, the minimum jumps to 45 days.⁷

You also get a 7-day revocation window after signing to change your mind. An employer who pressures you to sign faster than these timelines allow is creating an agreement a court can void.

What a Severance Agreement Cannot Take Away

Even when you sign a release, California preserves certain rights:

Unpaid wages already owed. An employer cannot condition payment of overtime, minimum wage, or other earned wages on signing a release.
Unemployment insurance. A severance agreement cannot waive your right to file.
PAGA claims. Waivers of representative actions under the Private Attorneys General Act are unenforceable.

Under Government Code Section 12964.5, a separation agreement also cannot include any provision prohibiting you from disclosing information about unlawful workplace acts. That covers harassment, discrimination, retaliation, and any other conduct you have reasonable cause to believe was illegal. Any such clause is void.⁸

Health Coverage After the Layoff

Losing employer-sponsored coverage is often the hardest financial part of a layoff. California workers have two continuation options, and which one applies depends on the size of the former employer.

Federal COBRA

COBRA covers employees of companies with 20 or more workers. It lets you stay on your former employer’s group health plan for up to 18 months. 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.⁹

The timeline: your employer has 30 days after the layoff to notify the plan administrator, the plan administrator has 14 days to send you an election notice, and you then have 60 days to decide whether to enroll.¹⁰

Cal-COBRA

California’s state continuation law fills two gaps. If your former employer had 2 to 19 workers, you were never covered by federal COBRA, but Cal-COBRA gives you up to 36 months of continuation directly. And if you have already used your 18 months of federal COBRA, you can pick up an additional 18 months under Cal-COBRA, for a combined maximum of 36 months. The Cal-COBRA election period is 60 days from either the notice date or the date coverage would otherwise end, whichever is later.¹¹

Both options are often shockingly expensive because you are suddenly paying what your employer used to subsidize. Before electing continuation, compare the premium to a Covered California marketplace plan, especially if your post-layoff income qualifies you for premium subsidies. COBRA’s main advantage is keeping the same doctors and network, which matters most if you are mid-treatment.

Unemployment Benefits

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

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

How Much You Can Collect

California unemployment replaces roughly 60% to 70% of prior weekly earnings, subject to a cap. For 2026, the projected maximum weekly benefit is $450 and the minimum is $40.¹² Benefits last up to 26 weeks in a standard benefit year, and your weekly amount depends on your highest-earning quarter in the base period.

Does Severance Reduce Your Unemployment?

Usually, no. Under Section 1265 of the California Unemployment Insurance Code, severance that meets certain criteria is not considered wages for unemployment purposes. The payment has to come from a company plan or policy, be available to a group or class of terminated employees for reasons like job elimination, and be intended to supplement unemployment benefits or cushion the transition. When severance meets those conditions, it does not delay or reduce your benefits, and you can collect both at the same time.¹³

The EDD does look closely at payments that resemble continued wages. A one-time payment decided after the fact by executives, or a payment structured to keep workers on call during a season, can be reclassified as wages and allocated to the period before termination. The structure of the payment matters more than what the employer labels it.¹³

How Severance Is Taxed

Final wages and accrued vacation payouts are taxed as regular income. Severance is different. It is classified as supplemental wages, which changes how withholding works.

At the federal level, employers can withhold income tax on severance at a flat 22% rate rather than using your regular withholding bracket.¹⁴ California applies its own supplemental wage withholding rate of 6.6% on severance. Social Security and Medicare taxes still apply.

The withholding rate is not your actual tax rate. It is just what gets taken out upfront. If too much was withheld, you get the difference back at tax time. If your severance pushes you into a higher bracket, you may owe more. A lump-sum payment in December can produce a very different tax result than the same amount spread across several months, so if the timing is negotiable, run it by 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. How to File a Wage Claim
7
eCFR. 29 CFR 1625.22 – Waivers of Rights and Claims Under the ADEA
8
California Legislative Information. California Government Code Section 12964.5
9
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers
10
U.S. Department of Labor. An Employees Guide to Health Benefits Under COBRA
11
California Department of Managed Health Care. Keep Your Health Coverage (COBRA)
12
Employment Development Department. January 2026 Unemployment Insurance (UI) Fund Forecast
13
Employment Development Department. Total and Partial Unemployment TPU 460.35 – Severance Pay, Dismissal or Separation Pay
14
Internal Revenue Service. Employers Supplemental Tax Guide (2026)