June 8, 2020

For decades it was standard in many California settlement agreements between employers and (former) employees to include what is known as a “no-rehire” provision, under which the employee agreed not to re-seek employment with the employer (or any place owned, operated or affiliated with the employer) in the future.  This became a problem with large companies, which were affiliated with, or owned, other large companies, since settling with one company had the effect of preventing employees from possible hiring at multiple large employers.  However, as of January 1, 2020, such provisions are illegal in California for settlement agreements entered into on or after that date, except in certain limited circumstances.

Assembly Bill 749 added section 1002.5 to the Civil Code, which now 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.  A provision in an agreement entered into on or after January 1, 2020, that violates this section is void as a matter of law and against public policy.”  [Civ. Code § 1002.5(a).]  An “aggrieved person” is one “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.”  [Civ. Code § 1002.5(c)(1).]

“No-rehire” provisions are allowed where the employer has in good faith determined the employee has engaged in sexual harassment or sexual assault.

This new law was influenced by the #MeToo movement, and was enacted because of the perception that “no-rehire” provisions were retaliation against employees who filed harassment, discrimination, and retaliation claims against their employers.

This law does not prevent employers from refusing to rehire an employee if there is a legitimate non-discriminatory or non-retaliatory reason for doing so.

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This article is based on the law as of the date posted at the top of the article.  This article does not constitute the provision of legal advice, and does not by itself create an attorney-client relationship with Eskridge Law.