No-rehire Clauses: Employers Take Care!
| Publication year | 2022 |
| Author | BRITTANY H. ROTHE-KUSHEL, ESQ. |
BRITTANY H. ROTHE-KUSHEL, ESQ.
LOS ANGELES, CALIFORNIA
A no-rehire clause requires former employees to refrain from applying for or seeking employment or reemployment and to waive any such right. However, California employers generally need to avoid using "no-rehire" language in employee separation agreements, voluntary resignations and general releases.
In October 2019 Governor Newsom signed into law Assembly Bill 749, which added section 1002.5 to the California Code of Civil Procedure. This section affects settlement agreements, including those in California workers' compensation and employer disputes. Under this section, employers are prohibited from including no-rehire provisions in resolving employment disputes with any individual considered to be an "aggrieved person."
Code of Civil Procedure section 1002.5 applies to all agreements settling employment disputes entered into on or after January 1, 2020. Under this section, employers are, in most cases, prohibited from using "no-rehire" language in employee separation agreements, voluntary resignations and general releases.
Labor Code section 1002.5 applies to any employee who has filed a claim in these circumstances:
- Against the employer in court;
- Before an administrative agency;
- In an alternative dispute resolution forum; or
- Through the employer's internal complaint process
Notably, if an employee complains internally and a subsequent severance agreement is reached with the employee without litigation ensuing, the employer is still barred from placing a no-rehire provision in the severance agreement. In addition, including such a provision would render the separation agreement "retaliatory," likely subjecting the employer to a wrongful termination lawsuit.
Prior to the effective date of CCP section 1002.5, it was customary for employers to include no-rehire provisions in settlement agreements. The legislative intent of the bill behind CCP section 1002.5, AB 749, authored by Assembly members Mark Stone (D-Monterey), Lorena Gonzalez (D-San Diego) and Eloise Reyes (D-San Bernardino), was to empower victims of discrimination or sexual harassment who reported the offense and were later terminated from employment and were refused an option to be rehired.
The bill was passed into law as Code of Civil Procedure section 1002.5, which says, in part:
(a) An agreement to settle an employment dispute...
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