Assembly Bill No. 692 (“Bill”) went into effect on January 1, 2026. The new Bill adds Section 16608 to the Business and Professions Code and Section 926 to the Labor Code. The new law prohibits the use of “stay-or-pay” agreements entered into on or after January 1, 2026. “Stay or pay” is shorthand nomenclature for provisions within an employment agreement which require employees to re-pay the employer and/or another entity for expenditures incurred by the employer in reliance on the expected ongoing employment relationship (such as for extensive training or course work) if the employee does not continue his or her employment with that particular employer.
For employment agreements created since January 1, 2026, it is unlawful to require a worker to execute as a condition of employment, or to include within an employment contract, any terms that, upon termination of the worker’s employment: (A) require the worker to pay an employer, training provider, or debt collector for a debt; (B) authorize the employer, training provider, or debt collector to resume or initiate collection of or end forbearance on a debt; (C) impose any penalty, fee, or cost on a worker.
Employees who have signed such an agreement since January 1, 2026, may file for themselves or other employees against the employer and recover the greater of actual damages sustained by the employees or $5,000 per employee, plus injunctive relief, attorney’s fees and costs and costs of suit.
The new law makes explicit...
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