Introduction:

Settlement agreements, also known as severance agreements or compromise agreements, are a common way for companies to resolve employment disputes with their former employees. These agreements can contain various clauses, including a "no rehire" provision, which may prevent employees from being rehired by the same company in the future. In California, the legality of such provisions is currently a hotly debated topic.

What is a "No Rehire" Provision?

A "no rehire" provision is a clause in a settlement agreement that prohibits an employee from seeking employment with the same company in the future. This clause may be included as a way to protect the company from potential future disputes with the employee, but it can also be used as a way to retaliate against the employee or to prevent them from seeking other job opportunities within the company.

Are "No Rehire" Provisions Legal in California?

In California, the legality of "no rehire" provisions is currently a contested issue. In 2019, the state passed Assembly Bill 749, which prohibits "no rehire" provisions in settlement agreements that resolve claims of employment discrimination, harassment, or retaliation. This means that if an employee settles a discrimination, harassment, or retaliation claim with a company, the company cannot include a "no rehire" provision in the settlement agreement.

However, the bill does not apply to settlement agreements that resolve other types of claims, such as breach of contract or wrongful termination. This means that "no rehire" provisions may still be included in settlement agreements that resolve these types of claims, as long as they do not violate other laws or public policy.

What are the Consequences of Including a "No Rehire" Provision in a Settlement Agreement?

If a company includes a "no rehire" provision in a settlement agreement that is prohibited by law, the company may face legal consequences. The employee may be able to sue the company for violating California law, which could result in monetary damages or other remedies.

In addition to potential legal consequences, including a "no rehire" provision in a settlement agreement can also harm the company`s reputation and relationship with its employees. Employees may view the provision as unfair or retaliatory, which could lead to decreased employee morale and loyalty.

Conclusion:

While "no rehire" provisions may seem like a way for companies to protect themselves from future disputes with employees, their legality in California is currently restricted. Employers should carefully consider the legal implications and potential consequences before including such a provision in any settlement agreement. Seeking legal advice before finalizing a settlement agreement is always recommended to ensure compliance with the law and to protect the interests of all parties involved.