Severance Agreement No Rehire

California Gov. Gavin Newsom signed Bill A.B 749 in October 2019 and came into effect on January 1, 2020. The law prohibits employers from including a non-rehiring provision in labour agreements, but it does so with a few exceptions. This new restriction of labour agreements could allow former workers to claim that they have not been reinstated in retaliation for the complaint previously filed against their employer. Under the new California law, these provisions will soon no longer apply. From January 1, 2020, transaction agreements will no longer be able to contain provisions prohibiting, preventing or otherwise preventing a worker from retaining a future job with that employer. The same is true for all parent companies, subsidiaries, divisions, related or contracting companies. Such a provision, which remains in a transaction agreement established on or after that date, is cancelled. Although California was one of the first states to pass such laws, it probably won`t be the last. Although the EEOC has been warning employers since at least 2006 that “no Rehire” clauses could be considered retaliation against workers who are charged with harassment or discrimination, federal jurisprudence has tended to apply these clauses on a regular basis.

However, invoking the #Metoo movement, which highlighted some of the more monstrous problems of the “No Rehire” provisions, Vermont passed, effective July 2018, a law prohibiting such provisions. A little over a year later, California followed suit. The new law also prohibits the use of a “non-rehire” scheme when a worker has asserted a right in the context of an employer`s “internal redress” procedure. This term is not specifically defined. As a result, employers should follow their appeal procedures and decide whether such procedures can be considered or considered “internal redress procedures.” An “aggrieved party” within the meaning of the law is a person who has taken legal action, before an administrative agency, in an alternative dispute resolution forum or in the context of the employer`s internal appeal against the employer. Therefore, the law does not appear to limit an employer`s ability to include a non-re-employment provision in a standard severance contract until the worker has brought an action against the employer and/or the severance pay is not proposed for the resolution of a dispute. It also adds another chapter on California`s long-standing aversion to trade restrictions. Non-employment provisions, particularly those that include subsidiaries of an employer or other related companies, are considered to be a significant burden on a worker`s ability to work in their chosen occupation. The new law expressly prohibits no-Rehire provisions in transaction contracts concluded “on January 1, 2020 or later.” Therefore, to the extent that this is feasible, employers may consider settling pending cases or claims in the current calendar year, while the non-employment provisions under California law are still applicable.

However, employers should always review local laws when they include such provisions. The large state of California has just introduced Assembly Bill No. 749, which would prohibit employers from having such a non-re-hire provision in a severance or transaction contract.