The End of the “No-Rehire” Clause in Settlement Agreements

I don’t know about you, but if someone sued me, I am pretty sure that hiring them for a future position at my business would not top my list of qualities I was looking for in a new hire.  Governor Gavin Newsom just made that option for employers “illegal.”  California’s new law, effective January 1, 2020, provides that settlement agreements between employers and employees can no longer include any provision that prohibits, prevents, or otherwise restricts an employee from obtaining future employment with that employer, or any subsidiaries, or other related entities.

AB 749 will be codified as California Code of Civil Procedure §1002.5 is another chapter to California’s longtime aversion to restraints on trade and employee favorable laws. The no-rehire clause prohibition will only apply to no-rehire provisions in agreements between employers and “aggrieved persons” (basically any 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). AB 749 is California’s attempt to prevent employers from punishing victims of harassment or discrimination and prevent employees from being dissuaded from reporting workplace issues.   But is that what they are doing?

While exceptions to the no-rehire clause law are few, such as a no-rehire clause in a settlement agreement is permissible with an employee who has engaged in sexual harassment or sexual assault, and in a severance or separation agreement that is unrelated to employment disputes, now more than ever it is important to get guidance from qualified counsel when an employee makes any claim.  As Governor Newsom keeps signing into laws even Governor Brown vetoed, it is even more important to understand as an employer what your options are when hiring, addressing disputes in the workplace and firing or settling cases.  If you have any questions about the applicability of AB 749 or to learn more about 2020 employment law updates, please contact the employer lawyers at Chauvel & Glatt.

This material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes.  For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500.

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