Are No Rehire Policies Legal in California? [2023]

What is a no-rehire policy?

A no-rehire policy, otherwise known as a “do not rehire” policy, is a policy implemented by an employer that states that certain individuals who have departed the company cannot be reemployed in the future. It basically means that if an individual’s employment is terminated or they leave the company voluntarily, the policy prevents them from being rehired by the same employer or any affiliates in the future.

A no-rehire policy can be applied to all employees or specific people, depending on the employer’s wishes. The policy may be based on various reasons, such as performance issues, misconduct, violations of company policies, or even part of a settlement agreement in a legal dispute.

No-rehire policies can have serious implications for employees, because they restrict their ability seek future employment with a previous employer. However, it is important to note that the legality and enforceability of such policies has been up for debate. In some cases, no-rehire policies may be challenged on the grounds of potential discrimination or retaliation, especially if they disproportionately affect certain protected groups or are used to prevent employees from exercising their rights or raising legitimate concerns.

No rehire example

At ABC Company, a no-rehire policy was implemented to ensure a stable workforce and protect the company’s interests. The policy stated that employees who were terminated for cause or resigned voluntarily would not be eligible for reemployment.

One such instance involved Cathy, a hardworking employee who had worked at the company for three years. Due to a restructuring, her position was eliminated, and she was terminated. While her departure was on good terms, the no-rehire policy meant that she could not come back to the company in the future.

Months later, a position opened up at ABC Company that fit Cathy’s experience and skills. She reached out to the company, excited about coming back to work, but they informed her she would not be considered for the position due to the no-rehire policy.

On January 1, 2020, California Assembly Bill 749 (AB 749) went into effect. This law impacts the use of no-rehire provisions in settlement agreements related to employment disputes. AB 749 aims to limit the scope of no-rehire provisions in settlement agreements related to employment disputes. AB 749 aims to limit the scope of no-rehire provisions that prevent employees from seeking future employment with the same employer.

Before AB 749, some settlement agreements included provisions that prohibited employees from seeking reemployment with the same employer or its affiliates in the future. These provisions could significantly limit an employee’s career opportunities and possibly create a retaliatory or discriminatory environment.

Under AB 749, these kinds of no-rehire provisions are generally void and unenforceable in California. The law prevents employers from including these kinds of provisions in settlement agreements that arise from any kinds of employment dispute, including claims of harassment, discrimination, and retaliation.

That said, it is important to note that AB 749 has certain limitations:

Valid separation agreement : The law does not restrict or invalidate the use of no-rehire provisions in valid separation or severance agreements where the employee has engaged in sexual harassment or other criminal conduct.
Good faith determination: Employers can still refuse to rehire an individual if the employer has made a good faith determination that the person engaged in sexual harassment or other criminal conduct.

The purpose of AB 749 is to promote fairness and prevent possible retaliation against employees who raise legitimate concerns or file claims against their employers. By limiting the use of no-rehire provisions, the law encourages employers to address and resolve employment disputes without unduly restricting an employee’s future job opportunities within the same company.

If an individual believes that an employer has violated the provisions of AB 749, they should consult with an employment law attorney who can provide guidance.

Why Do Companies Have a No-Rehire Policy?

Numerous companies used the no-rehire option to quickly turn down applications from workers who had filed complaints against them. In 2020, California’s Chamber of Commerce stated that this practice was already deemed illegal under California law. However, the creators of the new AB 749 law argued that the new bill was necessary to protect victims of harassment and discrimination in the workplace. Thus, the new law was passed in January of 2020.

What Does the No-Rehire Policy Require Companies to Do?

AB 749 requires that:

Companies in California must remove all no-rehire provisions from documents of employment.
California companies remove questions on employment applications that inquire whether a worker has previously worked for the company.
California companies revise their settlement and termination agreements, as all re-hire provisions in agreements are now legally void.

Both employers and employees need to note that no-rehire provisions are still legal if the worker:

Sexually harassed another worker.
Discriminated against another worker.
Was fired for a reason deemed legitimate and unrelated to a discrimination or harassment lawsuit.

Additionally, suppose an employer legitimately fired a person for non-discrimination or non-retaliatory. In that case, the company is not required to eliminate the no-rehire provision in those contracts.

Delilah and Garcia Automotive, Take Two

In September of 2020, Delilah reapplies to Garcia Automotive. There are two reasons for this. One, Delilah hears from an old friend and ex-coworker that CEO Bob Lesh fired Angel for violating Garcia’s sexual harassment policy multiple times.

Two, Delilah has been reading the newspaper every morning and is well-informed regarding the passing of AB 749 in early 2020. After she aces her interviews, Garcia Automotive tells Delilah that the no-hire provision included in her settlement is void under California law. The CEO, Bob Lesh, is happy to re-hire Delilah, and she is overjoyed to be fixing engines again.

What is the EEOC’s position on no-rehire policies?

The U.S. Equal Employment Opportunity Commission (EEOC) enforces federal laws related to workplace discrimination, including Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on factors like race, religion, color, sex, and national origin.

In the context of settlement agreements, the EEOC has expressed concern about the provisions that restrict an individual’s future employment opportunities as a form of retaliation or to perpetuate a discriminatory environment. The EEOC has taken the position that such provisions may violate federal anti-discrimination laws.

While the EEOC has not issued specific guidelines or regulations on no-rehire provisions, its stance is generally aligned with the principles of promoting fairness, preventing retaliation, and ensuring equal employment opportunities for individuals who have raised concerns or filed discrimination complaints.

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California Law: Are No Rehire Policies Legal in California?