California’s AB 2143 Modifies Prohibition of No-Rehire Agreements 

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Ervin Cohen & Jessup LLP

Remember Assembly Bill 749 last year? Basically, AB 749, codified as Code of Civil Procedure section 1002.5, prohibited the use of no-rehire clauses in settlement agreements regarding disputes in which the worker had filed a complaint against the employer. It only provided a single narrow exception to allow no-rehire clauses if the employer made a good faith determination that the employee engaged in sexual harassment or sexual assault. Our article regarding AB 749 can be found here.

Employers have been largely dissatisfied with AB 749. They argue that AB 749 is overly restrictive and, worse, that it has the potential to open the door to further disputes between an employer and former employee who have otherwise resolved their differences. In an attempt to address some of these concerns, the legislature and Governor Newsom have given us Assembly Bill 2143

AB 2143 cleans up some of the overbreadth of AB 749 by adding an exception in which a no-rehire agreement is permitted.  Specifically, AB 2143 amends the statute to allow a no-rehire provision if the aggrieved party has engaged in “any criminal conduct.” However, in order for the existing sexual harassment/sexual assault exception and the new broader criminal conduct exception to apply, the employer must have documented its good faith determination of sexual harassment/sexual assault/criminal conduct before the aggrieved party filed the claim against the employer. 

AB 2143 also amends the statute to clarify that an employee must have filed his or her claim against the employer in good faith in order to be considered an “aggrieved party” entitled to the statute’s restriction against no-rehire clauses in settlement agreements. 

AB 2143 takes effect on January 1, 2021. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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