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Do I have to have a particular reason to terminate an employee?
As a general rule, no.  Employment in the State of California is considered to be at will, meaning that an employment relationship without a specified term may terminated by either party at any time, without notice.  The rationale behind this public policy is that in a free market system, businesses should not be second-guessed by the courts as to business reasons behind their hiring and firing decisions.  Further, employees should be able to seek the best paying, most rewarding positions at any time.

Are their any circumstances where I can't terminate an employee?
The doctrine of at will employment has three main exceptions to this general rule:

1) Where a contract exists for any other length of employment (can be either express or implied).  An express contract could be created by saying: "I'll pay you $3,000 a month for the next six months for working as plumber".  An implied contract can evolve out of a seemingly harmless compliment: "If you keep up the good work, you've have a nice pension to look forward to."   Since the latter situation can create a huge liability for the employer, it is highly recommended that your employee handbook:
a) Clearly state that all employees are "at will" and that all employment contracts must be in writing; b) Avoid using terms like "probationary period" that could lead an employee to believe that once that period is over, they may only be discharged for cause.
c) Not require employees to give two weeks notice when they leave -- it creates an obligation on the employer to: 1) either give the same notice or,  2) pay them for two weeks after they leave.

2) Where a certain types of discrimination are prohibited by law (applies to all aspects of employment, including hiring, promotions, and termination).  The major classes that are protected include: race, ethnicity, religion, gender, marital status, age (if over 40), sexual orientation, and political affiliation.

3) Where the employer retaliates against an employee for exercising a protected legal right.  Examples include terminating an employee because they: file a worker's compensation claim, report a workplace violation to a government agency, or refuse to perform an illegal act.  The key word here is because.  If your company is closing a product line and lays off everyone in that division, there is no requirement to retain one of those employees just because they are on worker's compensation leave.  However, if you plan to terminate an individual employee who is in a protected class (from either discrimination or retaliation), be prepared to defend your decision with legitimate business reasons. 

What exactly is Sexual Harassment, and how do I protect myself from being sued?
Sexual harassment exists in two forms: Quid Pro Quo and Hostile Work Environment.

Quid Pro Quo sexual harassment is where one employee told by another that consenting to certain types of relations will either avoid detrimental treatment or create favorable treatment.  Example: A manager tells a subordinate "If you don't go out on a date with me, I'll have you transferred to mail room."  

Hostile Work Environment occurs where an environment exists that would be considered sexually offensive to a reasonable person.  Examples: nude pictures of women (or men) in work areas, sexually explicit jokes being told to a person who voices an objection, frequent comments about a person's anatomy, repeated requests for a "date" after the other person has made their rejection clear, etc.

Employers can reduce their exposure in two basic ways:

1) Constantly train employees on what constitutes sexual harassment, how to recognize it, and who to report it to.  This is especially true of supervisors, since employers are strictly liable for any sexual harassment caused by them (even if the employer had no prior knowledge).

2) Conduce a thorough, fair, and timely investigation whenever a claim of sexual harassment is made.  If the employer objectively concludes that an employee perpetrated any form of sexual harassment, appropriate disciplinary measures should be taken.  Employers who follow these procedures as soon as they learn of a potential incident are generally not liable for either:
a) sexual harassment by a non-supervisory employee, or
b) wrongfully disciplining the perpetrator. 

Can I avoid paying overtime to an employee if I just put them on "salary"?
Usually not.  All non-exempt employees are subject to overtime pay (150% of their normal rate for any time worked that exceeds 40 hours in a week).   The same applies to the first 4 hours worked that exceeds 8 hours in a day, then 200% for any time worked over 12 hours in a day).  Even if a non-exempt employee is paid a "salary" of $2000 per month, the employer must still compute the equivalent hourly rate for overtime purposes.

Exempt employees are not subject to overtime wage laws.  While there is no single litmus test for establishing an employee as exempt, they generally must spend over half their time performing managerial or supervisory functions, make several times the minimum wage, and not lose any pay for missing less than a full day of work.  Certain licensed professionals may also be exempt: doctors (but not nurses), attorneys (but not paralegals), CPAs (but not bookkeepers).
  
Employers who misclassify an employee as exempt may be liable for substantial back overtime pay.

Can I avoid all these labor laws by paying someone as an "Independent Contractor"?
Almost always, the answer is NO.  Even if both the employer and the employee agree that the worker is an "independent contractor", they are still subject to all employment laws unless they meet a fairly rigorous series of tests.  An independent contractor must possess a substantial amount of autonomy in performing their tasks, be paid based on their production / performance, and provide their own tools or equipment.  Any worker who punches a time clock for eight hours a day would almost certainly not qualify.  An outside sales representative might qualify if they were allowed to set their own schedule, sell products from other companies, and provide for their own sales and travel expenses.

Employers who misclassify an employee as an independent contractor may be liable for enormous back taxes, not to mention severe penalties.  Further, if misclassified worker gets injured on the job, the employer may end up paying all their medical expenses that they would have received under workers compensation insurance.  When in doubt, workers should be classified as employees.  

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