Alert / Risk Management
No-rehire/no-reapply language now prohibited in compromise and release settlements

Until recently, standard resignation agreements obtained during settlement negotiations of workers’ compensation claims could include language prohibiting employees from reapplying for employment.

California Assembly Bill 749, which became effective on Jan. 1, 2020, changes the language permitted in voluntary resignations as part of compromise and release settlements.

AB 749 Code of Civil Procedure 1002.5(a) reads: 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.

Employers can continue to seek voluntary resignations during negotiations. However, any language regarding inability to apply for future employment with a company or subsidiaries is now against the law. According to Subsection (B), the new law further states that an exception to the law applies “if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault.” The “no rehire” clause is also permitted as part of a severance package not related to an employment dispute.

This provision is meant to discourage employers from punishing victims of harassment or discrimination for coming forward.

Speak with your local labor law attorney to evaluate your applicant screening process before declining an applicant seeking reemployment after termination.

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