Prohibition of Non-Rehire Clauses in Settlement Agreements

Prohibition of Non-Rehire Clauses in Settlement Agreements

It has been commonplace to include provisions in employment settlement agreements that restrict or prohibit the settling employee from obtaining future employment with the settling employer after settlement, as part of reinforcing a clean relationship break. But new legislation now prohibits any employment settlement agreements entered on or after January 1, 2020 from containing non-rehire clauses as to a person who has made a court, agency, or internal complaint against his or her employer (i.e., the aggrieved employee). The new law contains an exception for non-rehire clauses in the case of a person who the employer has determined in good faith committed sexual harassment or sexual assault. Also, employers remain free not to continue to employ or rehire anyone (including an aggrieved employee) for a legitimate, non-retaliatory/discriminatory reason, but the employer cannot use a non-rehire clause in an employment settlement agreement to prohibit the settling employee from even reapplying. The law stipulates that inclusion of a prohibited non-rehire clause in an employment settlement agreement is automatically void and against public policy.