Understanding California’s Wrongful Termination Settlements

Short answer: most California wrongful termination cases end in a settlement rather than a trial, and what a case settles for depends on the strength of the evidence, the wages and benefits lost, the emotional harm, whether punitive damages and attorney fees are available, and the employer’s appetite for risk. There is no average settlement that means anything for an individual case. This post explains what wrongful termination is in California, what a settlement is made of, how long it takes, and what to check before you sign.

What wrongful termination means in California

California is an at-will state: an employer may fire an employee for any lawful reason or for no reason (Labor Code section 2922). A termination is wrongful when the reason is unlawful. The main categories are discrimination because of a protected characteristic (Government Code section 12940), retaliation for protected activity such as complaining about discrimination, harassment, unpaid wages or safety, requesting leave or an accommodation, filing a workers’ compensation claim, or reporting a violation of law (Government Code section 12940(h); Labor Code sections 98.6, 1102.5, 6310 and 132a), termination in violation of a fundamental public policy, and breach of an employment contract. Being fired without cause is not, by itself, wrongful termination.

What a wrongful termination settlement is made of

• Lost wages and benefits (back pay) from the termination to the settlement, less what you earned or reasonably could have earned in a replacement job;
• front pay for future lost earnings when reinstatement is not realistic;
• emotional distress damages, which in FEHA and public policy cases are not capped;
• punitive damages where the employer acted with malice, oppression or fraud, typically through a managing agent;
• statutory penalties, such as waiting time penalties for late final pay or the civil penalty under Labor Code section 1102.5;
• attorney fees, which FEHA and several Labor Code sections shift to the employer, and which employers factor into settlement.

What moves the number

Documentary evidence of the unlawful motive (emails, texts, timing, comparators), your earnings and how long you were out of work, a clean performance record before the protected activity, the employer’s shifting explanations, the size of the employer and whether the conduct was by a supervisor, medical or therapy records supporting emotional distress, and whether the case is in court or in arbitration. Cases with strong liability evidence and large wage loss settle for more; cases that rest mainly on timing settle for less.

How the process works

For FEHA claims, a complaint is filed with the California Civil Rights Department, usually with a request for an immediate right-to-sue notice, and the lawsuit is filed in superior court. Many employers demand arbitration under an agreement signed at hiring. Settlement discussions can happen before filing, at mediation, or during litigation; most cases that settle do so at mediation after the key documents and depositions are exchanged. A straightforward case can settle within months; a litigated case typically takes one to two years.

Before you sign a settlement or severance agreement

• California gives you at least five business days to consult a lawyer before signing a release of employment claims (Government Code section 12964.5); employees 40 and over get 21 days and a seven-day revocation period for a release of age claims.
• The agreement cannot stop you from disclosing facts about unlawful workplace conduct, and confidentiality about harassment or discrimination facts is unenforceable (Code of Civil Procedure section 1001).
• Non-compete clauses are void in California (Business and Professions Code section 16600).
• Understand the tax treatment: wage-based amounts are taxed as wages; emotional distress damages for a non-physical injury are also taxable income.
• Do not release wage claims for less than what is owed; earned wages cannot be waived.

Deadlines

Three years to file a Civil Rights Department complaint for discrimination, harassment or retaliation (Government Code section 12960), then one year after the right-to-sue notice; two years for wrongful termination in violation of public policy (Code of Civil Procedure section 335.1); one year for a Labor Code section 132a petition after a workers’ compensation claim.

How Abdi & Associates can help

Abdi & Associates, Inc. helps individuals with wrongful termination claims throughout California. We evaluate the claim, explain the deadlines and agency filings, review any severance or settlement agreement before you sign, and, where a case calls for it, work with experienced employment trial counsel we trust while staying involved in your case. Call (888) 772-2529 for a free consultation, or read our wrongful termination and severance agreement pages.

Reviewed by Shawn Abdi, Esq., Abdi & Associates, Inc. Last reviewed: September 4, 2026. Attorney advertising. This page is general information, not legal advice about your specific situation. Legal deadlines have exceptions; confirm the deadlines that apply to your case with a lawyer.