Vermont Bans 'No Rehire' Clauses

​Vermont is the first state to outlaw "no rehire" clauses in agreements which bar workers who settle discrimination and harassment cases from working for that employer again.

The provision is part of a law addressing sexual harassment protections for employees that went into effect last month. The law, inspired by the #MeToo movement according to its sponsor:

• Improves and streamlines sexual harassment reporting, and creates a hotline and web portal for the reporting of sexual harassment complaints to the Vermont Human Rights Commission or the Attorney General's Office.
  
• Bans nondisclosure agreements that preemptively prohibit employees from reporting sexual harassment and prohibits the use of no rehire clauses in settlement agreements that critics say punish the victim. 
  

No rehire agreements typically extend to a company's parent organization and affiliates as well.

"It's basically saying, 'See you later, you can never work for me or any of my affiliates again,' " said state Rep. Sarah Copeland-Hanzas, the chief author of the bill. "So, if you're in a specialty field in a small state, that might mean you can never work again."

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Including no rehire clauses in separation agreements is fairly common across the country, said Susan Gross Sholinsky, an attorney in the New York City office of Epstein Becker Green. She said the clause is meant to protect the company from being sued again in the future by a former employee who claims retaliation for not being rehired. Former employees could potentially reapply for a job and allege retaliation for prior legal claims if they are not rehired, and a no rehire provision is not included in the settlement agreement.

When signing an agreement with a no rehire clause, the employee typically agrees that employment has ended and promises not to seek reemployment with the company. In some cases, the employee agrees that their employment may be terminated immediately without any legal recourse if they are rehired by the company or any related entity.

In 2016, the Equal Employment Opportunity Commission (EEOC) issued guidelines warning companies against practices that could be seen as retaliating against employees who file discrimination or harassment claims, which could include no rehire clauses.

"There are EEOC interpretations, and some employment lawyers have started advising their employer clients that use of no rehire clauses could be considered retaliatory against plaintiffs," said Cary Brown, executive director of the Vermont Women's Commission, a nonpartisan state agency advancing rights and opportunities for women and girls.

"We're following that line of thinking and looking at this [law] as way to ensure fairness, particularly in a small state like ours," Brown said. "The repercussions could be significant to somebody signing one of these agreements and then finding their local employment options severely curtailed. There are only so many jobs people can choose from, and only so many employers available. A lot of our employers are retail and restaurant chains and franchises."

For example, one famed Vermont company, ice cream maker Ben & Jerry's, is owned by Unilever, a U.K.-Dutch consumer goods conglomerate with over 400 brands, she said.

Brown said her agency is working on an education and outreach project scheduled for next year that will provide compliance training resources for Vermont employers.