CA Amends Prohibition on No-Rehire Provisions in Settlements of Employment Disputes
On September 11, 2020, Governor Newsom signed AB 2143 into law. This bill, which takes effect January 1, 2021, makes some modest changes to a law that was enacted last year to generally prohibit the use of no-rehire provisions in settlement agreements of employment-related disputes. Last year’s law, which is codified as Code of Civil Procedure section 1002.5, states that an agreement to settle an employment dispute may not contain a provision prohibiting or restricting a settling party who is an aggrieved party (an employee who has filed a complaint against the employer in court, before an administrative agency, in arbitration, or internally with the employer) from obtaining future employment with an employer against who the aggrieved party has filed the claim, or with its affiliated entities. The law provides an exception if the employer has made a good faith determination that the aggrieved party engaged in sexual harassment or sexual assault, in which case a no-rehire provision is permissible. AB 2143 amends the statute to also allow an exception, permitting a no-rehire provision, if the aggrieved party has engaged in criminal conduct. However, in order for the sexual harassment/sexual assault/criminal conduct exception to apply, the employer must have DOCUMENTED the good faith determination of sexual harassment/sexual assault/criminal conduct BEFORE the aggrieved party filed the claim against the employer. AB 2143 also amends the statute to make clear that an employee must have filed his/her claim against the employer in good faith in order to be considered an “aggrieved party” who is entitled to the protections of the statute’s restriction against no-rehire provisions in a settlement agreement.
Employers are reminded to consider this law, as amended, in drafting settlement agreements in employment disputes. Employers also should remember that nothing in the statute requires an employer to either retain or rehire an unfit employee (even if the reason for the unfitness has nothing to do with sexual harassment, sexual assault, or criminal conduct.) It just limits employers’ ability to include a no-rehire provision in a settlement agreement of an employment dispute.