“No Re-Hire” Clause in my Severance Agreement – Why??

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Question: My employer was purchased by a competitor, and a large group of us were chosen for layoff. As part of the severance offer, I have to sign an agreement. One of the sections of the severance agreement has the title “No Re-Hire; No Application.”

It says that I will never again “seek to regain employment by the Company or any company that is affiliated with the Company.”

I haven’t done anything to deserve this, and so I am wondering why they would take that attitude toward me. It’s bad enough to lose a job, but this seems insulting. Have you ever seen this before?

Elgin, Illinois

Answer: Dear Fiona: This is not the first time I’ve received almost this exact question. It seems like more of a kick in the pants than a reasonably gentle “goodbye.” Hopefully my explanation shines a bit more light on the otherwise troubling clause.

1. A “No Rehire” clause in a severance agreement is not meant to be about you, your performance, your conduct, or anything else related to you. The first time I saw a “No Rehire” clause in a severance agreement was probably about 10 years ago. I remember asking my client, “What in the world did you do?”

Now I would estimate that about 50% of severance agreements have them. They are becoming nearly “standard,” not meant to punish or humiliate, although that is often the resulting effect. Rather, they are meant to protect the employer from a perceived risk that might arise in the future, having nothing to do with you.

2. This is what a “No Re-Hire” clause in a severance agreement is intended to prevent: Employee “Bob” is fired, downsized or laid off, and signs a severance agreement that includes a release and waiver of all legal claims. “Bob” is then paid his severance amount, and the check clears. Two weeks later, “Bob” applies for a job – again – at the same company and does not get hired. “Bob” then sues the company, raising discrimination, retaliation or some other legal claim that arose after he signed his release, and thus not covered by the release. This is what a “No Re-Hire” clause is intended to prevent.

Does it ever happen? Not that I have seen in my 36 years in doing this work. Might it happen? I guess so.

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3. Think about this: Can a married couple who divorce later decide to re-marry each other? Of course they can. Well, a former employer and former employee can, likewise, simply do the same. Please understand that any two people (or companies) who reach an agreement can later jointly decide to amend, supplement, extend or even terminate, that agreement. So, if it turns out that in the future your employer decides they want you back, and you want to go back, there’s nothing to stop you and them from “remarrying.”

We offer a 94-Point Master Severance Negotiation Checklist to make sure you don’t miss any severance-related issues or fail to spot problems in severance agreements. Sure reduces anxiety! To obtain a copy, just [click here.] Delivered by Email – Instantly!

4. If you now think you might want to work for the company again, or perhaps one of its subsidiaries or affiliates, there are several modifications you might request be made to the “No Rehire Clause.” One is to request the insertion of a limited time period, perhaps three, six or, twelve months, to be placed on the “life” of the restriction. Another is for you to ask to be free to reply to any communication from the Company or its representatives who may contact you, seeking your interest in “coming back.”

Another might be that, since we often are not aware of what companies are “related” or “affiliated” with your employer, you might accidentally apply to one; so, you might ask that those companies that are “related to” or “affiliated with” (or whatever vague words may be used in the clause) your employer be listed. There are many others, as well. Frankly, though, I have not seen many people so interested in returning to a former employer that they have bothered to seek changes be made to this clause.

One of our most popular “Ideal Packages” of forms, letters and checklists is entitled “Ultimate Severance Package” consisting of four Model Letters/Memos for severance negotiation, as well as our “94-Point Severance Negotiation Checklist.” To obtain a complete set, just [click here.] Delivered by PDF – Prints Instantly from Your Home Printer!!

Fiona, I hope this is helpful. Whatever you decide to do, do it with Sklover Working Wisdom. We are always here for you and others seeking perspective, guidance or assistance.

My Best,
Al Sklover

P.S.: If you would like to speak with me directly about this or other subjects, I am available for 30-minute, 60-minute, or 120-minute telephone consultations, just [click here.] Evenings and weekends can be accommodated.

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