AB 749: Restrictions on the Use of "No-Rehire" and "No Future Employment" Clauses in Settlement Agreements

AB 749: Existing law provides that every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is void to the extent that the contract restrains that person.

This bill would prohibit an agreement to settle an employment dispute from containing a provision that prohibits, prevents, or otherwise restricts a settling party that is an aggrieved person, as defined, from working for the employer against which the aggrieved person has filed a claim or any parent company, subsidiary, division, affiliate, or contractor of the employer.

The bill would also clarify that an employer and an aggrieved person are free to agree to end a current employment relationship, or to prohibit or otherwise restrict the aggrieved person from obtaining future employment with the employer, if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault, as defined. The bill would further clarify that an employer is not required to continue to employ or rehire a person if there is a legitimate nondiscriminatory or nonretaliatory reason for terminating or refusing to rehire the person.

The bill would provide that a provision in an agreement entered into on or after January 1, 2020, that violates this prohibition is void as a matter of law and against public policy.