Take the time to understand the implications of anti-rehire clauses ⋆ LegalMattersCanada

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Can take different forms

She says anti-rehire provisions can take different forms so it is important to understand their purpose and use.

In one recently reported case, for example, a nurse who was fired from her hospital job filed a grievance and was offered a $3,541 ‘retirement allowance’ to withdraw her complaint, CTV News states. She would also be required to make no further claims against the Huron Perth Healthcare Alliance and would not seek reinstatement or apply for jobs within the organization in the future, according to the report. The woman did not sign the offer.

While the nurse was fired for cause, anti-rehire clauses have also been used in instances where an employer is not alleging any wrongdoing, Low says.

“What I find interesting is the notion that you can be asked to sign one of these provisions at the end of an employment relationship, even if you have been terminated on a without cause basis, such as an economic restructure,” she says. “In a no-fault termination, the employee did not do anything wrong. They had to be let go for reasons beyond their control and received a severance package.

“But under the terms of the offer, the employer is saying that person can never apply to work there ever again,” Low adds. “That employer will never rehire them. When I see those terms, I am inclined to do a deeper dive to ascertain exactly what that means.”

The clause could be used in situations where “there was underlying misconduct that might not have hit the for-cause threshold but would compel the employer to no longer wish to ever employ that person again,” she says.

“However, I would still push back on that term because I genuinely don’t think that it is appropriate to try and limit someone’s future employment opportunities at the time of termination and severance,” says Low.

May seem fair and reasonable

She says the clause may be used in a “settlement proposal that seems fair and reasonable” but still does not take into account some extenuating circumstances. For instance, Low says, there are situations where it is possible to be terminated from a department in a large organization and be hired by another.

“It can happen, especially in large financial institutions where one sector might not know what the other ones are doing,” she says. “In situations involving large corporations, the termination and settlement agreement could put the onus on the employee to advise the company if they have been hired by another department. And if the employee does not do that, the company might seek to recapture some of the settlement.”

Even if a terminated employee has no intention of applying for reinstatement they should think twice before signing an anti-hire clause, Low says.

“Sometimes employees, even if they are terminated on a without cause basis, are so angry about being dismissed that they are convinced a no-rehire clause has very little value to them because they will never, under any circumstances, work for that company again,” she says. “But the economy shifts, circumstances evolve.

“I don’t think you should bind your hands at this moment in time against something that you might want to do in the future unless there is an extremely compelling reason to do so.”

Low explains that a savvy employee may be able to benefit from an anti-hire clause.

“If you are asked to sign a clause containing no rehire language or a generalized prohibition against future employment and there’s no basis for it, if it is just a general term that is being included in the severance agreement, I would absolutely be pushing back,” she says. “Agreeing to such a term can have some value as far as I’m concerned. There might be an opportunity to seek further compensation in exchange for agreeing to that type of clause.”

Finding the value can be a challenge

Of course, the difficult part can be finding its value, Low says.

“What price tag do you put on it? That can be tricky,” she says. “We know that most contractual terms can be amended on consent. Even if you sign this sort of prohibition that says you will never apply and you won’t get rehired, situations change, company leadership is recast. Then there is the issue of what happens to the compensation received.”

Low says getting legal advice can help answer such questions.

“For instance, your termination and settlement agreement may state that you are getting a year of salary with a non-rehire provision,” she says. “There may be a clause stipulating that if you are rehired by the organization, then the payments will end or, alternatively, the corporation will seek to recapture any amounts in excess.

“It would then be my job to finagle those types of provisions so it is not anti-rehire but effectively anti-double dipping and negotiate whether or not you actually do have to repay the compensation received for signing that clause.”

Anti-rehire clauses should not be a deterrent

Low says even if you received a benefit for signing an anti-rehire clause it should not deter you from applying for positions in the company down the road.

“There are steps I can take, such as converting that compensation into a hiring bonus,” she says.

You may also want to seek advice if you have received a severance and will be returning to your former company, say Low

“If the employer wants to start the employment relationship new, you would have to be paid at least all of your Employment Standards Act (ESA) entitlements,” she says. “If not, your tenure would be reinstated under the ESA.”

A termination can be traumatic so it is important not to act in the heat of the moment and consider what you are agreeing to, Low says.

“As long as these anti-rehire clauses are properly drafted, they are entirely enforceable,” she says. “It is in your best interest to have any severance offer reviewed so that you know exactly what you can and cannot do, such that you are not in violation of the settlement terms.”