November 2019 Newsletter – School Districts
Legislature Prohibits “Non-Rehire” Clauses in Settlement Agreements
Beginning on January 1, 2020, all California employers will be barred from including “non-rehire” clauses in agreements that settle employment-related disputes. (Assembly Bill 749, 2019-2020). The stated motivation behind this new law was to prevent retaliation against employees who file employment-related claims either through the employer’s internal complaint process or before any administrative agency, the courts, or any alternative dispute resolution forum. This provision, which will be codified as section 1002.5 of the Code of Civil Procedure, will become part of the relatively new chapter of the Code of Civil Procedure, which addresses Confidential Settlement Agreements by prohibiting the inclusion of non-disclosure clauses in settlement agreements under certain circumstances, such as where sexual harassment or sexual assault has occurred.
The new Code of Civil Procedure Section 1002.5 begins by prohibiting the inclusion of “non-rehire” clauses in all agreements that resolve employment disputes. (Code Civ. Proc. § 1002.5 (a).) It then identifies an exception to the rule, whereby an employer that has made a good faith determination that the complaining employee engaged in sexual harassment or sexual assault, may enter into “an agreement [with the aggrieved employee] that prohibits or otherwise restricts that individual from obtaining future employment with the settling employer.” (Code Civ. Proc. § 1002.5 (b)(1)(B).) Additionally, Section 1002.5 expressly provides that employers are not required “to continue to employ or rehire a person if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person.” However, it does not provide an exception allowing a non-rehire clause for situations that do not include sexual harassment or sexual assault.
As expressed in the published notes of Senate Floor Analysis of AB 479, adding Section 1002.5 to the Code of Civil Procedure “was not intended to and should not prevent employers from declining to rehire former employees for any valid, non-retaliatory reason.” (Senate Floor Analysis of AB 479, dated 8/15/19, p. 4.) Moreover, “even in the absence of a no-rehire clause, an employer would be under no obligation to reemploy an individual whom it sincerely believes is unfit for the job.” (Id.)
Going forward, we note that since AB 479 did not include language that would make the new Section 1002.5 retroactive, its provisions only apply to agreements entered into on or after January 1, 2020, and only those that restrict future employment. Settlement Agreements that are finalized on or before December 31, 2019, may still include a non-rehire clause, so long as the employer has a legitimate, non-discriminatory or non-retaliatory business-related reason for including it.
Additionally, AB 479 does not prohibit including a non-rehire clause if the employer has made a good faith determination that the employee at issue has engaged in sexual harassment or sexual assault, as defined therein. Therefore, the overall effect of AB 749 on future employment matters is to remove any discussion, during the negotiation of settlement agreements, of refraining from seeking future reemployment in situations that do not involve allegations of sexual harassment or sexual assault.
Districts may wish to review make a careful review of employee matters that may be settled and strive to finalize those Settlement Agreements before December 31, 2019, so that a non-rehire clause may be included. Districts also may which to review their form contracts and any internal documents such as policies or procedures that touch on the subject of settlement agreements. Finally and perhaps most critically, because the decision to not reemploy an employee who complained will have to be made after the employee seeks reemployment and the decision to include a non-rehire clause depends on the District having made a “good faith determination” that the employee engaged in sexual harassment or sexual assault, the need for conducting timely and well-documented investigations and reports thereof becomes even more critical for California employers.
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