Severance Agreement Says No Rehire: Is That Enforceable in California?

You're reading through your severance agreement and there it is: a clause that says you can never be rehired by the company. Maybe it covers the parent company, all subsidiaries, and all affiliates. Maybe it extends to any company they do business with. You're already losing your job. Now they want to make sure you can never come back, even years from now under different management. Here's the good news: California changed the rules on this.

AB 749 Changed Everything

In 2020, California passed Assembly Bill 749, which added Code of Civil Procedure Section 1002.5. The law is straightforward: an agreement to settle an employment dispute cannot contain a no-rehire provision. If your severance agreement includes one, that provision is void as a matter of law. Not voidable. Void. It has no legal effect, regardless of whether you signed it.

This applies to any settlement agreement arising out of a claim filed in court, before an administrative agency, or through the company's internal complaint process. If your severance agreement resolves any kind of workplace dispute, whether it's discrimination, harassment, retaliation, wage claims, or wrongful termination, the no-rehire clause cannot be enforced against you.

When the Exception Applies

There is one narrow exception. If the employer made a good-faith determination, documented in the agreement, that you engaged in sexual harassment or sexual assault, a no-rehire provision is permitted. Outside of that specific finding, the clause is unenforceable. Your employer can't just assert it. They have to document the basis.

This exception is narrower than most people think. It doesn't cover general performance issues, insubordination, policy violations, or even non-sexual harassment. It is limited to sexual harassment or sexual assault with a documented good-faith finding.

Why Employers Still Include Them

If these clauses are void, why do they keep showing up in severance agreements? A few reasons. Some companies haven't updated their templates since 2019. Some are hoping you don't know the law. Some include them as a negotiation placeholder: they put in a broad no-rehire clause knowing an attorney will push back, which gives them something to "concede" during negotiation.

Whatever the reason, you should not sign an agreement with a no-rehire clause without addressing it. Even though the clause is void by law, having it in a signed document creates ambiguity. A future hiring manager might see the clause and assume it's binding. An automated HR system might flag your application. It's cleaner to negotiate it out entirely.

What You Can Negotiate

The strongest approach is to remove the no-rehire clause completely. But you can also negotiate for specific language that affirmatively states you are eligible for rehire. This is especially valuable if you work in an industry where your former employer is a major player.

In Los Angeles, this comes up frequently in entertainment, healthcare, aerospace, and tech. If Disney, Kaiser, Boeing, or a major studio is telling you that you can never come back, that restriction could affect a significant portion of the local job market. Even though it's unenforceable, cleaning it up protects your future.

You can also negotiate for neutral or positive rehire coding in the company's HR system. What the database says about you matters when a recruiter runs your name two years from now.

The Broader Point About Severance Terms

A no-rehire clause is just one provision in a larger document. Every part of a severance agreement is negotiable. The release of claims, the confidentiality clause, the non-disparagement provision, the severance amount itself. Employers expect negotiation. The document you received was drafted by their attorneys with room built in for counter-offers.

If they included a clause that California law already prohibits, what else is in that agreement that might not serve your interests? An employment attorney can review the entire document and identify every provision worth changing.

California Protections That Apply

Beyond AB 749, California provides several protections relevant to severance negotiations. Non-compete clauses are void under Business and Professions Code Section 16600. Non-disparagement clauses cannot prevent you from discussing harassment, discrimination, or illegal conduct under SB 331. If you're over 40, the Older Workers Benefit Protection Act gives you 21 days to review an individual agreement or 45 days in a group layoff, plus 7 days to revoke.

Final pay, including all accrued PTO, is due on your last day per Labor Code Sections 201 through 203. These are non-negotiable obligations your employer owes you regardless of the severance agreement.

Get the Clause Removed

If your severance agreement includes a no-rehire clause, get it taken out. The law is on your side, but a clean agreement is better than relying on a legal challenge later. If you're in the Los Angeles area and reviewing a severance package, our employment team offers free consultations. We can review the full agreement, identify problematic provisions, and negotiate on your behalf. If we can't improve the package, you don't pay.

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