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Does AB 749 Prohibit C&R’s with Resignations?

Does AB 749 Prohibit C&R’s with Resignations?

AB 749 was signed into law and takes effect on January 1, 2020. The law places certain restrictions on employment resignation agreements.  Some employers are asking if the law prohibits asking for a resignation and agreement not to re-apply as a condition of entering into a C&R Agreement.

It is important to note that the new Civ. Proc. Sec. 1001 created by AB 749 does not  prohibit a voluntary resignation or separation.  In other words, it is still legal to quit a job.  Further, subsection (b)(1)(A) provides that parties can still have an agreement to “[e]nd a current employment relationship.” Subsection (b)(2) also states that the new law does not require an employer to continue to employ a person if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship. Arguably, a mutual agreement to separate from employment and settle a Workers’ Compensation case by C&R (as opposed to continuing to be employed and to settle instead by Stipulations) is a legitimate non-discriminatory and non-retaliatory reason for terminating the employment relationship.

On the other hand, AB 749 does bar any provision of an agreement entered into on or after January 1, 2020, as part of a C&R or otherwise, prohibiting, preventing, or otherwise restricting the employee/applicant from obtaining future employment with the employer or any parent company, subsidiary, division, affiliate, or contractor of the employer. That provision in the agreement is void as a matter of law. CA Civ. Proc. Sec. 1002.5(a).  Because the provision is void, it should be avoided since it has no legal effect.  Additionally, AB 749 seems to create a public policy against such agreement provisions.  Therefore, they should not be included in any proposed agreements in order to avoid accusations of making unlawful requests in violation of public policy, which itself may be actionable under Labor Code section 132a, FEHA or elsewhere.

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