Loosened Restrictions on "No Re-Hire" Provisions in Employment Settlement Agreements

California Code of Civil Procedure section 1002.5, which went into effect on Jan. 1, 2020, prohibits "no-rehire" provisions in settlement agreements.  These "no-rehire" provisions prevent, prohibit or otherwise restrict employees from obtaining future employment with the employer or a related entity. These provisions are prohibited from settlement agreements when an employee has filed a claim against an employer in either court or an administrative agency, or made a complaint through some form of alternative dispute resolution (ADR) or employer internal complaint process. This prohibition against "no-rehire" provisions does not apply to severance agreements. There is also an exception to this prohibition when an employer has made a "good faith determination" that the former employee engaged in sexual harassment or sexual assault.

However, AB 2143 was recently enacted which slightly modifies California Code of Civil Procedure section 1002.5. Specifically, it requires that the aggrieved former employee must have filed the claim in good faith in order for the prohibition against "no-rehire" provisions to apply.

It also expands this "no-rehire" exception to allow no-rehire provisions when the former employee engaged in any criminal conduct, rather than limiting the exception to sexual harassment or sexual assault.

Finally, AB 2143 clarifies that, in order to qualify for the "good faith determination" exception, an employer's determination must have been made and documented before the aggrieved person filed the claim or complaint. 

For further information or consultation, contact Allan P. Bareng at ABareng@BoothLLP.com.

The full text of AB  2143 can be found here: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB2143