“No-Rehire” Clauses Are a No-go in California
California has banned employers from including “no-rehire” provisions in employment dispute-related settlement agreements with its employees.FN1 No-rehire provisions prohibit the employee from applying for a job with that company in the future as a condition of the settlement.
The new law, which goes into effect January 1, 2020:
does not prohibit an employer and the aggrieved personFN2 from agreeing to end the employment relationship;
does not require an employer to continue to employ an employee or rehire a former employee if it has a legitimate nondiscriminatory or non-retaliatory reason for terminating the employee’s employment; and
has an exception that allows no-hire provisions if the employer determines in good faith that the individual signing the agreement engaged in sexual harassment or sexual assault.
California becomes the third state to ban no-rehire clauses, joining Vermont and Oregon.
Takeaway
California employers have until the end of the year to work with legal counsel to review and revise their agreements to comply with this new law.
Footnotes:
FN1 California Assembly Bill No. 749, “Settlement agreements: restraints in trade.” See http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB749
FN2 The law defines an aggrieved person as “a person who has filed a claim against the person’s employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.”