Just as we have seen before, the California legislature has again weighed in on the conditions of employment settlement agreements. Prior to January 1, 2020, California employers regularly included a “no-rehire” provision in settlement agreements. A “no-rehire” provision meant that the worker entering into the settlement agreement could not be considered for rehire. Effective January 1, 2020, Assembly Bill ("AB") 749 prohibited “no-rehire” provisions in settlement agreements, except under limited circumstances. The relevant Civil Code section 1002.5 states:


An agreement to settle an employment dispute shall not contain a provision prohibiting, preventing, or otherwise restricting a settling party that is an aggrieved person from obtaining future employment with the employer against which the aggrieved person has filed a claim, or any parent company, subsidiary, division, affiliate, or contractor of the employer.”

Governor Newson recently signed Assembly Bill (“AB”) 2143 into law, which adds a “good faith” provision to the definition of an “aggrieved person.” AB 2143 goes into effect on January 1, 2021. Prior to AB 2143, an “aggrieved” worker was defined as a person who “has filed a claim against the…employer in court, before an administrative agency, an alternative dispute resolution forum, or through the employer’s internal complaint process.” First, AB 2143 amends the law to require the aggrieved worker’s claim to have been filed in “good faith.” On the surface, this language seems helpful to employers who want to include a “no-rehire” provision, however the law leaves the definition of “good faith” murky and undefined.  

Second, prior to AB 2143, employers could include a “no-rehire” provision in a settlement agreement when the employer made a good faith determination that the aggrieved worker engaged in sexual harassment, sexual assault or criminal conduct. Now, AB 2143 requires the employer’s good faith determination on sexual misconduct or criminal conduct be documented.


Settlement agreements remain a useful tool to protect your Company against potential disputes with current or former workers. AB 2143 does not eliminate this tool however it does narrow the lane for employers to include no-rehire provisions in their settlement agreements. Nonetheless, AB 2143 emphasizes the importance of good documentation and appropriate investigation of workers’ complaints, especially those involving sexual harassment or assault. If you have any questions about how this new law impacts your Company’s best practices, contact the experts at The Saqui Law Group.

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