One of the new bills recently passed (AB 749) prohibits standard “No Rehire” provisions in settlement agreements and general releases. These provisions typically read something like this:
No Future Employment. Employee agrees that she will not seek employment or any other remunerative relationship in the future with the Company, or with any of the Released Parties, nor will the Company or any related entity be obligated in any way to provide Employee with future employment. Employee further agrees that she hereby waives any claim of retaliation or discrimination against the Company or any Released Parties in the event that she applies for employment at such entity in the future and is denied employment. Employee also agrees that, in the event she is inadvertently employed by any entity that is related to the Company or any Released Parties, that she shall resign from said employment immediately upon request, and that should Employee fail or refuse to do so, Employee’s employment shall be terminated and Employee shall have no recourse against Company or any Released Party.
Employers don’t want an employee who sued them to apply for work again, or to deal with a subsequent lawsuit or claim for failure to hire. Employers want to pay for peace, and not have to deal with the employee ever again. That desire for closure is now more complicated given AB 749.
So what can employers do? Thankfully there are some options.
First, employers can still include the typical No Future Employment provision in separation agreements that are not based on any legal claims filed or initiated by an “aggrieved party.” That term is defined as someone 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. Granted, the “internal complaint process” is a bit open-ended, so use caution.
Second, for agreements entered into on or after January 1, 2020, employers can amend the No Rehire provision to track the statutory language and clarify that the employee is not eligible for rehire due a legitimate non-discriminatory or non-retaliatory reason such as:
- Documented misconduct; or
- Documented poor performance; or
- Because the employer has made a good faith determination that the person engaged in sexual harassment or assault
Third, require the employee to agree to accurately include all prior employment history with the Company (or any Released Party) in any future application, and acknowledge that failure to do so will be grounds for termination. This will make it easier to check if the employee is eligible for rehire (if the file exists and includes appropriate documentation), and to terminate if a misrepresentation is made.