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A founder puts an employee on a Performance Improvement Plan. Thirty days later, they terminate. Two weeks after that, a lawyer's letter arrives.
This is the most common employment law mistake we see at early-stage startups in California.
The PIP is not a formality
Most founders treat a PIP as a pre-termination step. A box to check before firing.
California employment law does not work that way. A PIP is a document. In a dispute, it becomes evidence. A vague PIP with no measurable targets and no documented follow-through is evidence against the company.
What a defensible PIP looks like
Specific performance gaps. Not "needs to improve communication." Instead: "Failed to deliver three assigned project milestones by their deadlines in Q2."
Measurable targets. Each target should have a number, a deadline, or both. The employee must know exactly what "improvement" means.
Scheduled check-ins. Document every meeting. Note what was discussed. Get written acknowledgment from the employee.
A realistic timeline. Thirty days is standard for most roles. Some roles need 60 or 90 days depending on the complexity of the improvement required.
California-specific termination rules
California adds requirements that catch founders off guard.
Final paycheck timing. Due on the last day of employment. Not the next pay cycle. Not "within 72 hours" (that rule applies only to voluntary resignations with no notice). Penalties accrue daily under Labor Code Section 203. Up to 30 days of wages.
PTO payout. California treats accrued, unused PTO as earned wages. You must pay it out in full at termination. "Use it or lose it" policies are illegal.
No non-competes. California does not enforce non-compete agreements against employees. Including them in separation agreements creates legal exposure. Do not include them.
At-will does not mean risk-free. You can terminate without cause. But "without cause" does not mean "without consequences." Discrimination, retaliation, and wrongful termination claims do not require a contract breach.
The documentation checklist
Before any termination, confirm you have:
- A written PIP with specific, measurable targets
- Documented check-ins with dates and notes
- Evidence the employee received and acknowledged the PIP
- Final paycheck prepared for the last day
- PTO payout calculated and included
- A separation agreement reviewed by counsel (if applicable)
- No non-compete language anywhere in the paperwork
The bottom line
The PIP is either your strongest defense or your biggest liability. The difference is documentation.
California employment law protects employees aggressively. Founders who document properly rarely face problems. Founders who skip documentation face expensive ones.
We help startups build defensible employment processes from day one. If you are navigating a PIP or termination, reach out at Fellow.
