AB 2143: California’s No-Rehire Ban in Settlements

California’s no-rehire clause ban makes it illegal for an employer to include a “no-rehire” provision in a settlement agreement that resolves an employment dispute. Under Code of Civil Procedure Section 1002.5, any such clause in an agreement signed on or after January 1, 2020, is void and unenforceable as against public policy. Two narrow exceptions apply, and both require documentation the employer created before the employee filed a claim.¹

What the Ban Covers

A settlement agreement resolving an employment dispute cannot bar the settling worker from seeking future employment with the same employer. The prohibition reaches further than the employing entity itself. It also covers the employer’s parent companies, subsidiaries, divisions, affiliates, and contractors. If a settlement tries to block future employment with any of those entities, the offending language has no legal force from the moment the agreement is signed.¹

Before this law, no-rehire language was standard boilerplate. An employee who reported wage theft, filed a harassment claim, or raised a discrimination complaint often had to agree never to apply at the company again as a condition of settling. In industries dominated by a handful of large employers and their affiliates, that permanently narrowed a worker’s career.

Who the Law Protects

The statute protects an “aggrieved person” — someone who has filed a claim against their employer through one of four channels: a lawsuit in court, a complaint with an administrative agency such as the Civil Rights Department, a proceeding in arbitration or another alternative dispute resolution forum, or the employer’s own internal complaint process.¹

The claim also has to have been filed in good faith, meaning the employee had a genuine, reasonable belief that their legal rights were violated. A frivolous claim filed purely to manufacture leverage falls outside the definition, and an employer facing that kind of claim can still negotiate a no-rehire clause into the settlement.

One boundary catches people off guard. The protection only applies once you’ve actually filed a claim. A standard severance agreement offered to a departing employee who has raised no complaint, lawsuit, or internal grievance does not fall under Section 1002.5. If you are handed a severance package with a no-rehire clause and you never initiated any formal claim, the statute does not void that clause. Understand this distinction before you sign any separation paperwork.

When a No-Rehire Clause Is Still Allowed

There is one scenario where an employer may include a no-rehire provision in a settlement: when the employer made and documented a good-faith determination, before the employee filed a claim, that the employee engaged in sexual harassment, sexual assault, or criminal conduct.¹

Every element of the exception matters:

The determination must be made in good faith and not as a pretext.
The finding must be in writing. A verbal or undocumented conclusion is not enough.
The written finding must predate the employee’s complaint, lawsuit, or grievance. If the employer only documents the misconduct after the dispute begins, the exception does not apply.

That timing requirement is the statute’s main safeguard against employers manufacturing a justification for a no-rehire clause once settlement talks are underway. The statute defines sexual assault by reference to specific Penal Code sections covering crimes such as sexual battery and rape. Sexual harassment carries the same meaning as under the Fair Employment and Housing Act. Criminal conduct has no separate definition in the statute, so it reaches any conduct that would qualify as a crime.¹

Poor performance, attendance problems, and policy violations do not qualify for a settlement-level no-rehire clause. Employer groups asked the legislature for a broader exception covering non-criminal misconduct, and the request was not adopted.²

The Law Does Not Force Anyone to Rehire You

A frequent misreading of Section 1002.5 is that it forces employers to rehire people who settle disputes. It does not. The statute expressly says it does not require an employer to continue employing or to rehire someone if there is a legitimate, non-discriminatory, and non-retaliatory reason for the termination or refusal to rehire.¹

The distinction is between what a settlement document can say and what happens later. The agreement itself cannot include a clause banning future applications. If you apply months or years later and the employer declines to hire you because of documented performance problems, consistent absenteeism, or other legitimate workplace reasons, that decision does not violate the statute. The employer just cannot lock that outcome into the settlement.

If Your Settlement Already Includes a Prohibited Clause

A no-rehire clause that violates Section 1002.5 is void as a matter of law. It has no legal force from the moment the agreement is signed. The employer cannot enforce it in court, and you are not bound by it whether or not you noticed the clause or objected to it during negotiations.¹

Because the statute declares the clause void against public policy, the invalidity cannot be waived through contract language. Even if you signed voluntarily and with full knowledge of the law, the clause is still unenforceable. The rest of the settlement stays intact; only the offending provision is stricken. If you discover a no-rehire clause in a settlement you signed after January 1, 2020, you can apply for jobs with that employer, its parent, its subsidiaries, its affiliates, or its contractors without legal consequence from that clause.

Agreements Signed Before January 1, 2020

The law applies only to agreements signed on or after January 1, 2020. If your settlement predates that cutoff, a no-rehire clause in it remains enforceable under the terms of the original agreement.¹ Check the date on the signature page before you assume the ban helps you.

1
California Legislative Information. California Code CCP 1002.5
2
California Senate Judiciary Committee. AB 2143 (Mark Stone) Senate Judiciary Committee Analysis