AB 749: “NO REHIRE” TERMS IN SETTLEMENT AND SEVERANCE AGREEMENTS

Posted in: Employment Law by Dowling Aaron on

Assembly Bill 749 (“AB 749”) is another #MeToo-inspired bill meant to increase protections for employees. The bill addresses “no rehire” provisions which are common in employment settlement agreements and in severance agreements. A “no rehire” term requires an employee settling claims against an employer to agree to never apply to work at the employer in the future. The term often includes language that the employee agrees that if they do apply, the employer may deny the application. Some agreements go further and require the employee to agree that if they are somehow hired back, they agree to immediate termination.

It has become standard practice in employment litigation to include a “no rehire” term in settlement agreements. As of January 1, 2020, settlement agreements can no longer contain any provision that prohibits, prevents, or otherwise restricts an employee from obtaining future employment with that employer. This includes any parent companies, subsidiaries, divisions, affiliates, or contractors. If an employee signs an agreement with such a term, courts will not enforce it. However, there is an exception when the employer has a good faith belief the employee engaged in sexual harassment or sexual assault. Note that AB 749 does not prohibit requiring the employee to resign as part of a settlement.

AB 749 can also apply to severance agreements. The law states that for it to apply, the employee must have previously 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. This implies that a severance agreement without a pending claim would not be subject to AB 749. However, the law is new, and courts have not yet interpreted this term. Future litigation may clarify AB 749’s application to severance agreements.

COUNSEL TO MANAGEMENT:
Consult with an employment attorney before executing any settlement or severance agreement, because they raise many potential issues, and the laws are frequently changing. If you have any questions about AB 749 or need advice about a severance agreement, contact the employment law experts at The Saqui Law Group, a Division of Dowling Aaron Incorporated.

By: Kellen Crowe

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