In an effort to protect victims who come forward with workplace discrimination or sexual harassment claims, the state of Vermont has recently outlawed "no rehire" clauses, which are commonly included in separation agreements following claim settlement.
The ban is part of a larger harassment protection law that was passed by the state last month. Vermont is leading the way as the first state in the country to deem these clauses illegal. The new law, which was spurred on by the #MeToo movement, also includes a phone line and website to report harassment claims and bans nondisclosure agreements that prohibit harassment claim reporting.
Original Intention of the "No Rehire" Clause
Adding a "no rehire" clause to separation agreements is a common practice across the country. The original intention of the clause was to protect the employer from future allegations of discrimination.
The concern is that a former employee could apply for a job with the company again and then allege that they weren't hired due to retaliation for the previous legal issues. By signing an agreement with a "no rehire" clause, the terminated employee agrees not to seek employment with the employer or any of its affiliates again, thereby removing the potential for future problems.
Proponents of the bill say that these clauses unfairly punish the victim by restricting future employment options. Agreements that restrict employment with affiliated companies could severely limit job options for a terminated employee. In some specialized fields, this agreement could cripple a victim's ability to find a job in his or her local area. This is particularly a concern when the employer is a large franchise, chain, or conglomerate.
Some clauses take this a step further, stating that if the victim was rehired by the employer or by one of its affiliates, employment could immediately be terminated without any legal recourse.
The EEOC Weighs In
The Equal Opportunity Employment Commission (EEOC) issued guidelines in 2016 warning employers against participating in any practices that could be seen as discriminating against plaintiffs. It's possible that "no rehire" clauses could fall under this definition. Following the issuance of these guidelines, some employment lawyers have started advising their clients against including these clauses in termination agreements.
While the clauses have not yet been deemed illegal in the state of Florida, employers are well advised to keep a close eye on the national landscape. If faced with a discrimination or harassment claim, always seek qualified legal advice and proceed with caution.