What You Need to Know

• Delayed Effective Date: The law’s clawback restrictions now apply only to contracts entered into on or after January 1, 2027, giving employers more time to comply.
• Expanded Bonus Timing Flexibility: Employers no longer need to pay certain bonuses at the “outset of employment” in order to reserve the right to a limited clawback of non-performance bonuses (e.g., sign-on, retention, and recruiting).
• New Financial Services Exception: Securities broker-dealers, insurance providers, and investment advisers may now require full repayment of certain discretionary payments made to their agents or representatives who are registered with the U.S. Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA), or licensed under applicable California law, including interest accruing up to the Internal Revenue Service (IRS) applicable federal rate.
• PTO Advancement Repayment: Employers may recover advances of up to 40 hours of paid time off (PTO) when employees voluntarily separate before earning the advanced leave, provided the repayment obligation is separately disclosed.