New California Law Bans Use of “No-Rehire” Clauses

Prior to 2020, settlement agreements between aggrieved employees and employers in California routinely included “no-rehire” or “no future employment” clauses when the employee no longer worked for the employer. These terms typically included language that the employee was not to apply for a position with the employer in the future, has no guarantee of future employment with the employer, and that the employer does not have to consider an application by the employee for future positions. However, a new state law provides that employers are no longer allowed to use “no-rehire” clauses in their settlement agreements. If you have an employment law issue in the Los Angeles area, call or contact an experienced California employment law attorney today.

Protections Under the New Law

Under new law AB-749, an aggrieved employee can no longer contain provisions that ban the worker from obtaining future employment with their employer or any affiliated companies, such as franchises or subsidiaries of the employer. In order to qualify as an aggrieved person under the new law, the employee must be someone who filed a claim against their employer through the company’s internal processes, in an alternative dispute resolution forum like mediation, before an administrative agency, or in court.

AB-749 affects all settlement agreements between employees and employers entered into after January 1, 2020. It specifically states that employment dispute settlement agreements shall not prohibit, prevent, or otherwise restrict a settling aggrieved employee from obtaining future employment with the employer whom the worker has filed a claim against. If a settlement agreement includes these terms the provision is considered void as a matter of law for violating public policy.

The new law protects employees’ right to work in a number of different settlement scenarios. For employees who work in a niche area where employment opportunities are scarce, it prevents a worker from being blackballed in the industry if their employer is one of only a few opportunities for work. This also protects employees who file claims against a large entity that has a multitude of franchises or subsidiaries. Prior to this law, an aggrieved worker could inadvertently sign away their right to work at a number of companies if they did not realize the scope of their employer’s business portfolio.

Exceptions to the Rule

The new law does provide some limited exceptions when an employer is allowed to restrict future employment opportunities for an aggrieved employee. If the employer has made a good faith determination that the employee engaged in sexual harassment or sexual assault they can include “no-rehire” or “no future employment” terms in a settlement agreement. In addition, the new law does not require that an employer re-hire or employ a worker if there is another non-discriminatory or non-retaliatory reason to deny the worker employment.

Talk to an Employment Law Attorney

If you believe that your employer violated your rights by including a “no-rehire” clause in your settlement agreement in 2020 it is important that you talk to a lawyer right away. Call or contact an experienced employment law attorney in your area now.