According to the American Economic Liberties Project, approximately one in 10 workers have employment agreements that require them to repay routine job training costs if they leave their position before a specified period ends.
Beginning next year, these so-called “stay-or-pay” agreements would largely be prohibited in California under AB 692, legislation that was sent to Governor Gavin Newsom on Sept. 23.
Critics argue that stay-or-pay agreements restrict worker mobility by effectively trapping employees in jobs they cannot afford to leave due to financial penalties.
“Placing a de facto ‘exit fee’ on a worker who chooses to leave a job is deceitful and unethical,” Assemblymember Ash Kalra, D-San José, said when introducing the bill in March. “By ending these exploitative stay-or-pay contracts, AB 692 will empower workers to leave jobs where they may be facing poor working conditions, whether that means safety hazards, harassment, or otherwise toxic work environments.”
The basics
As of Jan. 1, when an employee-employer relationship ends, employment contracts may not:
- Require a worker to pay an employer, training provider, or debt collector for a debt.
- Authorize an employer, training provider, or debt collector to resume, initiate, or end forbearance on a debt.
- Impose any penalty, fee, or cost on a worker.
Notable exceptions
AB 692 includes several limited exceptions, provided employers comply with specific transparency and fairness requirements.
These exceptions include:
- A contract under a loan repayment assistance or forgiveness program offered by a governmental agency.
- A tuition reimbursement agreement for a transferable credential, so long as it is separate from the employment contract, not required for employment, specifies the repayment amount in advance, does not exceed the employer’s cost, provides a prorated repayment schedule that does not accelerate upon resignation, and does not require repayment if termination occurs for reasons other than misconduct.
- A contract related to enrollment in an apprenticeship program approved by the Division of Apprenticeship Standards.
- A signing or retention bonus agreement, provided certain conditions are met, including a separate repayment agreement, notice of the right to consult an attorney, prorated repayment without interest, a retention period of no more than two years, an option to defer the bonus until the retention period ends, and separation that is voluntary or due to misconduct.
- A housing lease, financing, or purchase agreement.
Remedies for workers
Effective Jan. 1, any contract that violates AB 692 would be void. Affected workers may pursue civil action, and employers found liable could owe actual damages or $5,000 per worker, whichever amount is greater, as well as injunctive relief and reasonable attorney’s fees and costs.
Organizations supporting AB 692 include the American Economic Liberties Project, California Employment Lawyers Association, California Federation of Labor Unions – AFL-CIO, California Nurses Association, and the Student Borrower Protection Center.
If you believe your employer has treated you unfairly, do not remain silent. Contact Keller Grover here for a free, confidential consultation. We can help you understand your rights, evaluate your options, and determine prudent next steps. With more than 25 years of experience litigating employment cases, Keller Grover has recovered billions of dollars for clients.