No Rehire Clauses Prohibited In CA Settlements

December 31, 2019
California passed a bill that prohibits employers from including no rehire clauses in settlements for discrimination or harassment suits.
Backgrounds Online | December 31, 2019


California passed a bill that prohibits employers from including no rehire clauses in settlements for discrimination or harassment suits.

No Rehire Clauses Were Once Common

When an employee files a work-related discrimination or harassment lawsuit, the case is sometimes settled out of court. Currently, settlements are likely to include a no rehire provision. This means the lawsuit is closed via a mutual agreement and the aggrieved person signs a document that says they are not eligible for any future position within the company.

One issue with this practice is that large corporations own numerous businesses. Therefore, a person who signs a no rehire clause will be disallowed from working at any location owned by the parent company. This can be very limiting to the person who was allegedly victimized in the workplace.

California Assembly Bill 749

Governor Gavin Newsom signed California Assembly Bill 749 (AB749) to prohibit employers from adding no rehire clauses to harassment and discrimination settlements. This law does not apply to employees who were abusive. It is intended to protect workers who were harassed or discriminated against while on the job.

Assemblyman Mark Stone spoke in favor of the bill. He said: “The no-rehire clause punishes the victims of discrimination or sexual harassment from continuing employment while the offender remains in the job. Eliminating this provision will have a meaningful impact for victims.”

AB749 states the following: An agreement to settle an employment dispute shall not contain a provision prohibiting, preventing, or otherwise restricting a settling party that is an aggrieved person from obtaining future employment with the employer against which the aggrieved person has filed a claim, or any parent company, subsidiary, division, affiliate, or contractor of the employer.
It does not:
· Prohibit employers from ending an existing “employment relationship.”
· Require an employer to rehire a person if there is a valid “non-discriminatory or non-retaliatory reason for terminating the employment relationship.”

This bill goes into effect on January 1, 2020. Read the full text.

What Employers Should Know

Employers in California should be aware of AB749 and prepared for compliance as of 2020. If an employer attempts to add a no rehire clause to a settlement for any harassment or discrimination suit after the bill is active, they will be in violation and could be subjected to legal repercussions.

We often recommend that every organization create and maintain written hiring and background screening policies. California employers may wish to read AB749 and amend their policies to be compliant when this bill goes into effect. Have your legal counsel review your policies before they are finalized and shared with people who are involved in the hiring process.

When Hiring Or Rehiring

Anytime you bring on employees, contractors or volunteers – whether hiring them for the first time or rehiring an individual – it is essential to run background checks. These reports can show you if a person has a serious criminal record, empower you to see if they have the employment and education history they need to succeed and supply facts that help you make informed decisions while creating a safe workplace.

When you need background checks for employment purposes, please contact us. Our experienced team can help you create customized screening packages for any type of position. We are available Monday through Friday from 5am to 6pm to assist you.