Seyfarth Synopsis: College football fans know that sometimes a game is won or lost after a late fourth-quarter replay review. Just when employers thought they knew the rules of California’s new “stay-or-pay” law under AB 692, the Legislature stepped in with a significant replay review of its own. On September 30, 2026, Governor Newsom signed AB 1697 into law, which delays AB 692’s applicability by a year, eliminates potential liability for 2026 “stay-or-pay” activity, clarifies existing and creates new exceptions. Read on for California’s revised “stay-or-pay” playbook.
As we previously discussed, last year, California enacted AB 692, one of the nation’s most aggressive restrictions on employee repayment obligations, training repayment agreements, retention incentives, and other arrangements that could require workers to repay money upon leaving employment. Mid-game, however, the Legislature reopened the playbook.
On September 30, 2026, Governor Newsom signed AB 1697, an urgency measure that immediately amends AB 692 in several significant respects.
For employers that spent the last year preparing for AB 692, California has effectively called a timeout. The game is still on, but the rules have changed.
First Quarter: The Legislature Delays Kickoff Until January 1, 2027
Most notably, AB 1697 delays enforcement of AB 692. The law now applies only to contracts entered into on or after January 1, 2027. The Legislature explained that the delay is intended to provide employers...
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