When terminating an employment relationship, a separation agreement can be a prudent strategy for managing the risk of a subsequent lawsuit. Such an agreement typically offers monetary or other consideration in exchange for a waiver or release of all claims, including claims of harassment and discrimination.
A waiver or release, however, generally cannot lawfully discharge future claims, including claims based upon denials of applications for re-employment. To manage this risk, it is common for separation agreements to include “no rehire” clauses. Such a clause can include an agreement by a former employee to (1) refrain from applying for or seeking employment, reemployment or reinstatement, (2) waive any right to such employment, reemployment or reinstatement, or (3) termination of employment if rehired.
Recent developments have nevertheless raised two important questions for employers as to “no rehire” clauses: (1) Are such clauses legal? (2) Should employers include such clauses in separation agreements?