California clarifies use of no-rehire clauses in settlement agreements

To address concerns in implementing an existing statute pro­hibiting no-rehire clauses in certain settlement agreements, California has enacted Assembly Bill (AB) 2143, expanding the exceptions but limiting application to circumstances in which the settling parties have acted in good faith.

Last year, California enacted Assembly Bill (AB) 749, banning the use of no-rehire clauses in settlement agreements resolving an employment dispute in which the worker had filed a com­plaint against the employer or any of its parent companies, sub­sidiaries, divisions, affiliates, or contractors. AB 749 sought to prevent the use of no-rehire provisions as a form of retaliation against employees who simply exercised their right to file a com­plaint against their employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process. The bill contained an exception permitting no-rehire clauses when the employer made a good-faith determination the complaining workers had themselves engaged in sexual harassment or sexual assault.

Criminal conduct included