Ninth Circuit Holds That “No Rehire” Provision In Employment Settlement Agreement Is Invalid.
In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), a divided Ninth Circuit Court of Appeals invalidated a “no rehire” provision in an employment settlement agreement whereby the Plaintiff, Donald Golden, M.D., waived his right to work for defendant at any time in the future. The Court found this provision, commonly found in settlement agreements of employment claims, to be an unlawful restraint on Plaintiff’s professional practice as a physician under Business & Professions Code § 16600.
Golden was a doctor affiliated with Defendant, Emergency Physicians Medical Group, a large consortium of over 1,000 physicians that manages or staffs emergency rooms, inpatient clinics, and other facilities in California and other states. Golden sued Defendant in California Superior Court in Alameda County alleging racial discrimination along with other state and federal claims after his staff membership was terminated at one of Defendant’s facilities. Defendant removed to federal court based on original subject-matter jurisdiction under 28 U.S.C. § 1331.
The parties ultimately reached a settlement in open court. Plaintiff agreed, inter alia, to a “no-employment provision” in which he waived his right to work for Defendant or any facility Defendant may acquire in the future. Golden later refused to sign a formal settlement agreement and tried to avoid the settlement. The district court enforced the settlement.
Reversed and remanded. Business & Professions Code § 16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” It is well established that this section invalidates covenants not to compete, but is not limited to only non-compete clauses. Here, section 16600 applied to the “no employment” (also known as a “no rehire”) provision in Golden’s settlement agreement because it constituted a “restraint of a substantial character” on Golden’s ability to pursue his profession as a medical doctor.
To read the full decision of the Court, click here: Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015)