{"id":99746,"date":"2025-10-02T20:08:07","date_gmt":"2025-10-02T20:08:07","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/99746\/"},"modified":"2025-10-02T20:08:07","modified_gmt":"2025-10-02T20:08:07","slug":"california-seeks-to-ban-stay-or-pay-employment-clauses-ogletree-deakins-nash-smoak-stewart-p-c","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/99746\/","title":{"rendered":"California Seeks to Ban \u2018Stay or Pay\u2019 Employment Clauses | Ogletree, Deakins, Nash, Smoak &#038; Stewart, P.C."},"content":{"rendered":"<p class=\"has-text-align-center\">[co-author: Leah Shepherd]<\/p>\n<p class=\"has-text-align-center\">On September 11, 2025, the California Legislature passed a <a href=\"https:\/\/leginfo.legislature.ca.gov\/faces\/billNavClient.xhtml?bill_id=202520260AB692\" rel=\"nofollow noopener\" target=\"_blank\">bill<\/a> that would ban \u201cstay or pay\u201d terms in employment contracts, which require employees to pay their employer back for certain costs if they leave the job. Governor Gavin Newsom has not signed it yet.<\/p>\n<p class=\"has-text-align-center\" style=\"text-align: center;\"><strong>Quick Hits<\/strong><\/p>\n<ul class=\"wp-block-list\">\n<li>California lawmakers recently passed a <a href=\"https:\/\/leginfo.legislature.ca.gov\/faces\/billTextClient.xhtml?bill_id=202520260AB692\" rel=\"nofollow noopener\" target=\"_blank\">bill<\/a> prohibiting contracts that require workers to pay the employer, training provider, or debt collector for certain expenses if the worker\u2019s employment with the employer ends.<\/li>\n<li>The bill does not apply to tuition repayment requirements and retention bonuses that meet certain conditions.<\/li>\n<li>If signed by the governor, the bill will take effect on January 1, 2026.<\/li>\n<\/ul>\n<p>Historically, some employers have offered to pay for employee training, school tuition, or other benefits, on the condition that the employee remain employed for a specified period of time. Under such arrangements, employees who leave the company before the promised period of employment may be contractually obligated to repay the employer\u2019s costs.<\/p>\n<p>Although such agreements are legal in many contexts, some employee advocates have contended that such agreements are unfair, in that employees may perceive that they are restrained from seeking other employment due to the repayment obligation. California\u2019s attorney general issued a <a href=\"https:\/\/oag.ca.gov\/news\/press-releases\/attorney-general-bonta-issues-warning-against-unlawful-employer-driven-debt#:~:text=SACRAMENTO%20%E2%80%93%20California%20Attorney%20General%20Rob,Californians%20from%20these%20predatory%20practices.%22\" rel=\"nofollow noopener\" target=\"_blank\">legal alert<\/a> in 2023, criticizing certain \u201cemployee-driven debt products.\u201d<\/p>\n<p>Assembly Bill (AB 692) would prevent employers from including some forms of repayment obligations in written or oral employment agreements. Under this bill, employment contracts entered into on or after January 1, 2026, could not lawfully:<\/p>\n<ul class=\"wp-block-list\">\n<li>require workers \u201cto pay an employer, training provider, or debt collector for a debt if the worker\u2019s employment\u201d with the employer ends;<\/li>\n<li>\u201c[a]uthorize[] the employer, training provider, or debt collector to resume or initiate collection\u201d of a debt if the worker\u2019s employment with the employer ends; or<\/li>\n<li>\u201c[i]mpose[] any penalty, fee, or cost on a worker if the worker\u2019s employment or work relationship\u201d with the employer ends.<\/li>\n<\/ul>\n<p>Among other prohibited recoveries, the bill would prohibit employers from recovering immigration or visa-related costs.<\/p>\n<p>The bill would not apply to these situations, among other exceptions:<\/p>\n<ul class=\"wp-block-list\">\n<li>agreements entered into before January 1, 2026;<\/li>\n<li>\u201c[a] contract entered into under any loan repayment assistance program or loan forgiveness program provided by a federal, state, or local governmental agency\u201d;<\/li>\n<li>\u201c[a] contract related to enrollment in an apprenticeship program approved by the [state] Division of Apprenticeship Standards\u201d; or<\/li>\n<li>tuition repayment for a transferable credential that \u201cis offered separately from any employment contract\u201d and does not require repayment to the employer if the worker is terminated, except if the worker is dismissed for misconduct. In this case, the contract must not require obtaining a transferable credential as a condition of employment. It must specify the repayment amount before the worker agrees to the contract.<\/li>\n<\/ul>\n<p>A retention bonus is permissible if these conditions are met:<\/p>\n<ul class=\"wp-block-list\">\n<li>it \u201cis not tied to specific job performance\u201d;<\/li>\n<li>\u201c[t]he terms of any repayment obligation are set forth in a separate agreement from the primary employment contract\u201d;<\/li>\n<li>employees are \u201cnotified that they have the right to consult an attorney regarding the agreement\u201d and allowed five business days to obtain legal advice before signing the agreement;<\/li>\n<li>\u201c[a]ny repayment obligation for early separation from employment is not subject to interest accrual and is prorated based on the remaining term of any retention period, which shall not exceed two years from the receipt of payment\u201d;<\/li>\n<li>employees can \u201cdefer receipt of the payment to the end of a fully served retention period without any repayment obligation\u201d; and<\/li>\n<li>\u201c[s]eparation from employment prior to the retention period\u201d was by employee choice or the result of employee misconduct.<\/li>\n<\/ul>\n<p>If enacted, the bill would grant employees the right to sue for violations. It would not apply to independent contractors, freelance workers, interns, or apprentices.<\/p>\n<p class=\"has-text-align-center\" style=\"text-align: center;\"><strong>Unintended Consequences?<\/strong><\/p>\n<p>The bill does not address what specifically constitutes an \u201cemployment contract\u201d that would be subject to the restrictions. For example, it does not address employer loans to facilitate stock option exercises, the purchase of restricted stock, or other equity-incentive related agreements. If enacted, employers may want to analyze whether their current grant practices require changes. In addition, the bill does not address the tax impact that removing provisions requiring repayment upon termination may have on loans to employees, which could result in additional taxes on employees.<\/p>\n<p>As written, the bill could impact an employer\u2019s ability to enforce clawback policies in California, particularly those that go beyond what is legally required under federal law, like the Dodd-Frank Wall Street Reform and Consumer Protection Act. Employers may want to consider evaluating their clawback policies to determine whether they require modification to avoid a potential conflict with the bill\u2019s requirements.<\/p>\n<p class=\"has-text-align-center\" style=\"text-align: center;\"><strong>Next Steps<\/strong><\/p>\n<p>If AB 692 is enacted, employers that violate it could be subject to monetary damages in the amount of the worker\u2019s actual damages or $5,000, whichever is greater.<\/p>\n<p>Employers in California may wish to prepare new employment contracts that comply with AB 692 to be signed after January 1, 2026.<\/p>\n","protected":false},"excerpt":{"rendered":"[co-author: Leah Shepherd] On September 11, 2025, the California Legislature passed a bill that would ban \u201cstay or&hellip;\n","protected":false},"author":2,"featured_media":99747,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[176],"tags":[79,18,19,17,227],"class_list":{"0":"post-99746","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-jobs","8":"tag-business","9":"tag-eire","10":"tag-ie","11":"tag-ireland","12":"tag-jobs"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/99746","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=99746"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/99746\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/99747"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=99746"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=99746"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=99746"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}