In 2020, the California state legislature enacted a new law prohibiting “no-rehire” provisions in settlement agreements. No re-hire provisions prevent an employee from obtaining future employment with the employer or a related entity. Importantly, this law does not apply to standard severance agreements; it only applies to settlement agreements when an employee has filed a claim against the employer in court, before an administrative agency, or through some form of ADR or employer internal complaint process.

Notably, there was one exception to the law: if the employer made a “good faith determination” that the former employee engaged in sexual harassment or sexual assault, the employer could include a no re-hire provision.

Just recently, the legislature passed AB 2143 to clarify the law in the following ways:

• The prohibition against “no-rehire” provisions in settlement agreements does not apply where the former employee did not file their complaint in good faith.

• To qualify for the current “no-rehire” exception related to sexual harassment or sexual assault, the employer must have made and documented a good faith determination, before the aggrieved person filed the claim, that the former employee engaged in sexual harassment or sexual assault.

• To expand the “no-rehire” exception by permitting no re-hire provisions when the former employee engaged in any criminal conduct.  In other words, the exception is no longer limited to sexual harassment or sexual assault.

If you have not done so already, we encourage you to review your settlement agreements to ensure they are compliant with Section 1002.5 and update any internal policies to reflect the clarifications about those provisions in AB 2143.

Author: Caitie Emmett, Associate

The Maier Law Group is a boutique employment and data privacy firm that specializes in conducting workplace and Title IX investigations, providing executive coaching, training employees, mediating both courtroom and workplace disputes (between two conflicting employees), and advising and counseling employers on HR and data privacy issues.

This article has been prepared for general informational purposes only and does not constitute advertising, solicitation, or legal advice. If you have questions about a particular matter, please contact the Maier Law Group directly at info@maierlawgroup.com.