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California Bans 'No-Rehire' Provisions

November 5, 2019
California recently enacted a law that prohibits “no-rehire” provisions in employment settlement agreements. 
The new law provides that almost all no-rehire provisions in settlement agreements entered into on or after January 1, 2020 in California will be illegal. 
Massachusetts employers that operate in California must be aware of the new law. It’s also important because California is a bellwether and the ban on no-rehire provisions may eventually appear in Massachusetts as well.
Negotiated agreements to settle employee lawsuits against companies often include a release of claims containing a “no rehire” clause. These provisions prevent the employee from applying for reemployment and then claiming retaliation if not rehired.
While these provisions may be controversial, especially in the eyes of the Equal Employment Opportunity Commission, employers often find them an essential tool in the settlement negotiation process.
The California law’s sponsor argued that the bill was necessary to protect victims of workplace harassment who would lose out on the opportunity to work at the former employer while the alleged harasser continue to work.
The new law states:
“An agreement to settle an employment dispute shall not contain a provision prohibiting, preventing, or otherwise restricting a settling party that is an “aggrieved person” from obtaining future employment with the employer against which the aggrieved person has filed a claim, or any parent company, subsidiary, division, affiliate, or contractor of the employer.
Under this law, an “aggrieved person” is defined as anyone who has “filed a claim against the… employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.”  
The law does contain some limited exceptions:
  • It does not eliminate an employer’s and current employee’s ability to enter into a severance agreement.  
  • An employer may include a no-hire provision in a settlement agreement if the employer has made a good-faith determination that the person signing the release engaged in sexual harassment or committed sexual assault.
  • The law also provides an exception that allows no-rehire provisions “if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person.”  
Legislation such as this should serve as a reminder to employers to consult a lawyer any time they consider providing a release of claims to an employee.
AIM members with questions about this or any other HR-related issue may call the AIM Employer Hotline at 1-800-470-6277.
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