Section Review

Introduction

Employment lawyers are familiar with this scenario: an employee quits, and the employer codes them as “not eligible for rehire” in their human resources software. If that employee does not want to work there, the employer may not want them back. This is all the more true if the employer has paid severance to the departing employee. Agreement provisions prohibiting a former employee from applying for future employment at the same or a related entity may not appear problematic at first glance. A departing employee may not even be interested in working for their former employer in the future, especially where the separation was acrimonious in some way. But what if the departing employee has alleged discrimination or retaliation in violation of state or federal law? What if the departure was not entirely voluntary but was a negotiated exit intended to resolve legal claims? Could a lifetime ban on reemployment by the same company — no matter its size or geographic reach — be retaliatory itself? In this article, we will explore these questions and make suggestions for how employee-side attorneys can resist the imposition of these clauses.

Rationales for No-Rehire

No-rehire/no-reapply (“No-Rehire”) provisions have become standard in separation agreements proffered to departing employees and are often insisted upon in order for the employees to obtain severance. These clauses take various forms, which typically include a combination of conditions: (1) banning the departing employee from applying for or accepting future employment at the same company or its affiliates, parent, subsidiaries, successors, etc.; (2) affirming that, if the departing employee does apply for or get hired for future employment at such entity, this contractual provision establishes a lawful basis for failing to hire them or for terminating their employment; and/or (3) affirming that any decision to terminate or not to hire the departing employee in the future is legitimate, not discriminatory and not retaliatory. No-Rehire clauses also often require the employee to waive any right to future reemployment, should any such right exist (which it rarely does). 

The most common argument in favor of No-Rehire clauses is that they “help avoid future retaliation claims based on an employer’s decision not to rehire a terminated employee.” Stefani C Schwartz, Nicholas D. Bliablias and Jody T. Walker, “Drafting Enforceable Severance Agreements,” 291 N.J. Lawyer 63, 64 (Dec. 2014). However, this notion that No-Rehire clauses prevent future retaliation claims misses a glaring point: insistence on No-Rehire clauses in separation agreements may itself constitute retaliation against the employee for raising employment law claims against the employer.

Employers may feel entitled to insist upon these clauses because they are paying out severance and believe that those payments give them the ability to avoid any future entanglement with their departing employee. Additionally, employers may assert that they do not want to rehire someone who was a difficult employee, even setting aside any legally protected activity in which the employee may have engaged. These employers want carte blanche to make that future decision without risking a retaliation suit.

A limited number of large employers dominate the Massachusetts labor market in certain industries or niches within them, especially in industries where mergers and acquisitions are frequent. In such circumstances, No-Rehire provisions may cause significant impediments to an individual’s future employment and career growth. Moreover, individual workers should not bear the burden of restricted career options in order to protect their well-resourced employers from theoretical legal exposure. Employees do not have a right to work anywhere, and the more attenuated in time any future application for employment may be, the less possible it would be for an individual to prevail on a retaliation claim based solely on temporal proximity to their separation. In contrast, if there is other evidence of retaliation, a former employee should have the same ability to pursue such a claim as anyone else.

No-Rehire provisions circumvent the unenforceability of prospective releases of claims and insulate employers from potentially valid retaliation claims in the future. Therefore, we urge employee-side attorneys to resist these claims in negotiating separation and settlement agreements.

Strategies for resistance

Courts are reluctant to undermine lawful contracts. Indeed, there have been few cases nationwide — our research found none in Massachusetts — in which courts even have considered the enforceability of No-Rehire provisions. Where cases have arisen, federal courts have tended to allow their enforcement. See, e.g., Jencks v. Modern Woodmen of America, 479 F.23d 1261, 1266-67 (10th Cir. 2007) (employee’s waiver of any right to reemployment or reinstatement in a settlement agreement was a sufficient legitimate, nondiscriminatory reason for employer’s refusal to hire her subsequently); Cafarella v. Mass. Institute of Technology, 2023 WL 7224677, at *4 n.1 (D. Mass. Nov. 2, 2023) (where settlement efforts had failed because of employer’s insistence on a No-Rehire clause, the court noted that such insistence “does not itself constitute an adverse employment action where [plaintiff] has no right to a settlement”).

However, there is support elsewhere for opposing No-Rehire clauses. For example, both the Equal Employment Opportunity Commission (EEOC) and the Massachusetts Commission Against Discrimination (MCAD) look unfavorably on their inclusion in settlement agreements. See EEOC, Settlement Standards and Procedures, https://www.eeoc.gov/settlement-standards-and-procedures (last visited Jan. 4, 2024) (“[N]o individual can be required as a condition of obtaining relief on a Commission claim to agree to refrain from seeking future employment with the defendant.”); Deirdre Hosler, “Practice Tips for Navigating the Post-Probable Cause Process at the Massachusetts Commission Against Discrimination,” 67 BOSTON BAR J. 1 (Feb. 9, 2023), https://bostonbar.org/journal/practice-tips-for-navigating-the-post-probable-cause-process-at-the-massachusetts-commission-against-discrimination/ (last visited Jan. 18, 2024) (“Given that the public interest is of paramount concern in any mediation or conciliation, the MCAD disfavors the following settlement terms as a matter of public policy: … No re-application / rehire clauses.”). 

As another example, the plaintiffs’ bar has seen success challenging these clauses in settlements of Fair Labor Standards Act (FLSA) claims. Since courts must review settlement agreements covering FLSA claims to determine that the proposed settlement “is a fair and reasonable resolution of a bona fide dispute over FLSA provisions,” No-Rehire clauses are subject to scrutiny in the FLSA context to which they are not subject in the settlement of other employment law claims. Singleton v. AT&T Mobility Servs., LLC, 146 F. Supp. 3d 258, 260 (D. Mass. 2015), quoting Lynn’s Food Stores, Inc. v. United States Dep’t of Labor, 679 F.2d 1350, 1355 (11th Cir.1982); accord, Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015). In those circuits that require court approval of FLSA settlements (including the First Circuit), “courts generally disfavor no-rehire provisions because they are viewed as punishing the plaintiff for exercising his rights under the FLSA.” Allen v. Farah Petion Ins. Agency LLC, 2023 WL 3975313, at *4 (M.D. Fla. Apr. 17, 2023), report and recommendation adopted, 2023 WL 3981409 (M.D. Fla. Apr. 24, 2023); see also Altamirano v. 535 W. 163rd St. HDFC, 2023 WL 5048115, at *1 (S.D.N.Y. July 25, 2023) (noting that “No Future Employment” clauses are seldom approved because they are “highly restrictive provisions in strong tension with the remedial purposes of the FLSA”) (quotation and alteration omitted). 

We urge employee-side lawyers to fight against the inclusion of No-Rehire clauses in separation and settlement agreements, to the greatest extent authorized by their clients, because preventing their inclusion in the first instance is the most effective way to prevent their enforcement. Members of the plaintiffs’ employment bar in Massachusetts have long eschewed No-Rehire provisions and have developed creative ways of narrowing, if not eliminating, them when employers insist and individual clients are willing to push back. Inserting a temporal limitation or a limitation based on certain types of positions or departments, or positions reporting to specific supervisors, can be successful means of narrowing a No-Rehire clause’s scope. At a minimum, it is worthwhile to narrow these clauses to ensure that they do not apply to individuals’ efforts to work for a parent, subsidiary or affiliate entity that has such relationship at the time of separation but not at the time of hire or, conversely, does not have that relationship at the time of separation but later becomes acquired or merged into the employer. See Ellen J. Messing and James S. Weliky, “Drafting Severance Documents: A Plaintiff’s Attorney’s Perspective,” at 12-13, in Leibowitz, A.G., Drafting Employment Documents in Massachusetts (Massachusetts Continuing Legal Education, 2002).

In addition to importing FLSA and EEOC arguments into our efforts to resist No-Rehire clauses at the outset, employee-side attorneys may argue that the language in Mass. Gen. Laws. c. 149, § 19, which bars waiver of wage claims through special contracts, implicitly bars employers from insisting on No-Rehire clauses: “No person shall, by intimidation or force, prevent or seek to prevent a person from entering into or continuing in the employment of any person.” This has not yet been widely pursued in Massachusetts courts but could prove fruitful. 

Legislative advocacy may be another worthwhile avenue. Some states, seeing the inherent inequity in No-Rehire clauses, have moved to limit their use. In 2018, Vermont passed a law banning their inclusion in settlement agreements relating to workplace sexual harassment. Vt. Stat. Ann. tit. 21, § 495h(h)(1). Oregon followed suit in 2019 by passing the Workplace Fairness Act, which similarly bans No-Rehire provisions in workplace sexual harassment or discrimination settlements unless the employee specifically requests its inclusion. Or. Rev. Stat. Ann. § 659A.370(2). Also in 2019, California passed an even stronger statutory limit on No-Rehire provisions, banning their inclusion in settlement agreements of any employment dispute. Cal. Civ. Proc. Code § 1002.5(a). 

Conclusion

We urge employee-side lawyers not to accept these provisions as a matter of course. Rather, with their client’s authorization, they should push to eliminate them entirely or, at a minimum, narrow them as much as possible. Plaintiffs’ attorneys should stand firm in negotiations and make clear that employers’ insistence on the inclusion of No-Rehire clauses is itself retaliatory and de facto punishment against their former employee for asserting their rights under the employment laws.

With special thanks to Kathleen A. Berney and Rebecca G. Pontikes for their review and astute feedback on earlier drafts of this article.