This article continues our Friday’s Five series highlighting the major new California employment laws taking effect in 2026. In recent weeks, we’ve covered several significant bills impacting employers — from expanded employee rights and new recordkeeping requirements to pay transparency updates and workplace enforcement changes.

This week, we turn to Assembly Bill 692 (Kalra) — California’s latest move to strengthen worker mobility and curb restrictive employment practices. Effective January 1, 2026, AB 692 targets so-called “stay-or-pay” or training repayment agreement provisions (TRAPs) — a growing trend among employers seeking to discourage workers from leaving early by requiring repayment of training or relocation costs.California’s legislature continues its trend of expanding employee mobility protections. With AB 692, effective January 1, 2026, employers can no longer rely on “stay-or-pay” or training repayment agreement provisions (TRAPs) to discourage employees from leaving their jobs early.

Here are five key takeaways for employers:

1. AB 692 Closes the Loophole Around Non-Compete Alternatives

While California has long banned non-compete agreements under Business & Professions Code section 16600, some employers turned to “stay-or-pay” agreements — clauses requiring employees to repay training or relocation costs if they leave before a certain time. These TRAPs operated in a legal gray area, sometimes enforced, sometimes struck down as unconscionable. AB 692 eliminates that uncertainty by expressly prohibiting them altogether

2. New Code Sections Make Repayment Clauses Unlawful

The bill adds Business & Professions Code section 16608 and Labor Code section 926, making it illegal for an employer to require repayment of training expenses, relocation costs, or other hiring-related fees if an employee quits or is terminated. This prohibition applies broadly — even if the agreement was signed voluntarily

3. Limited Exceptions Exist

AB 692 allows only narrow exceptions:

• Government-sponsored loan forgiveness or tuition programs
• Agreements for transferable educational credentials, such as degrees or professional certifications, if strict criteria are met
• State-approved apprenticeship programs
  These exceptions ensure legitimate educational arrangements remain valid while eliminating coercive repayment schemes

For example, the transferable-credential tuition programs exemption is likely one that most employers could utilize — but only if every one of the following five conditions is met:

1. Separate contract
   The tuition-repayment agreement must be offered separately from the employment contract — it can’t be bundled with an offer letter or onboarding paperwork.
2. Not a condition of employment
   The employee cannot be required to obtain the credential as a condition of getting or keeping their job.
3. Clear, capped cost disclosure
   The contract must state the total repayment amount up front, and that amount cannot exceed the employer’s actual cost of the credential.
4. Prorated repayment schedule
   If the employer requires a minimum service period, any repayment obligation must be prorated — proportionate to the time already served — and cannot include an accelerated payment schedule if the worker resigns.
5. No repayment if terminated without misconduct
   The worker cannot be required to repay the tuition amount if they are terminated, except when the termination is for legally defined misconduct under Unemployment Insurance Code §1256.

4. Severe Penalties for Violations

Employers that violate AB 692 can face statutory damages of at least $5,000 per employee, plus attorney’s fees, costs, and injunctive relief. In short — a single improper agreement could become a costly class or PAGA-style lawsuit

5. Action Steps for Employers

• Audit offer letters and training agreements for any repayment or “clawback” provisions.
• Update relocation and reimbursement policies to ensure they don’t condition repayment on continued employment.
• Train HR and management teams about the new restrictions before 2026.
• Consult counsel before implementing tuition-assistance or credential-based programs to ensure compliance with the law’s narrow exceptions.

Bottom line:
AB 692 is another reminder that California strongly protects employee freedom to change jobs. Employers should remove any “stay-or-pay” provisions from their onboarding materials and agreements before January 1, 2026.

The post What Employers Need to Know About California’s New Ban on “Stay-or-Pay” Agreements — AB 692 appeared first on California Employment Law Report.

Over 15 million workers rely on SNAP. That sentence should be chilling enough on its own. But more distressing is that the average recipient only receives $6 per day from SNAP. The maximum is a little over $9 a day, or $282 month. The more people in a household, the lower the benefit amount per…

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What is going on with the Department of Labor’s social media? The images in the DOL’s social media posts, shown below, present an extremely idealized white version of America, ignoring the fact that 43% of the country is not white. Many have likened the images to 1930s-1940s German propaganda. The reality is that America’s workers…

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The most obscene of obscene pay proposals has brought unions and Democratic officials together to launch a campaign urging investors to vote it down. Reuters reports: “Tesla critics hope to block the stratospheric compensation proposed for CEO Elon Musk but face an uphill fight. Investors in the electric vehicle maker will decide on November 6 whether…

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The World Series is a great time to sit back, grab a few snacks and drinks, and cheer on your favorite union MLB team. Use our exclusive list below of union-made products and support good union jobs with your wallet! Happy watching from all of us at Labor 411  

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The following was reprinted from AFSCME’s blog. Following a wave of successful organizing drives among cultural institutions in Los Angeles County, workers at the Los Angeles County Museum of Art (LACMA) announced that they are forming a union, LACMA United, through AFSCME District Council 36.   The new union would represent over 300 workers and include curators,…

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When I was recently asked to answer a reporter’s questions about pay equity, I jumped at the chance because I remembered an issue from my first full-time job that still irks me today. Thankfully the law in the US and especially in California has evolved on this issue quite a bit. Today an employee can go to Human Resources and ask about pay issues and has legally protected rights associated with those inquiries.

Also Human Resources should be trained on how to answer such questions honestly so the employee knows why they are being paid less. In my experience there almost always is a legitimate business reason, such as experience, education, seniority, location, or particularized skill set. The employee is entitled to know.

Read the full Newsweek article with my quotes here.

The pressure was turned up today on lawmakers as the largest federal workers union demanded an end to the government shutdown. NBC News reports: “The country’s largest union representing federal workers is calling for lawmakers to pass a short-term spending measure to immediately end the government shutdown, urging Democrats to abandon their current position and…

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It’s time to update those handbooks for 2026 and while there are numerous new laws California employers must comply with, not all of them are, what I call, “handbook worthy.” Here are three changes I’m making to this year’s handbooks to stay compliant and ensure policies are clear for all employees.

First, under the new Civil Rights Department regulations that took effect October 1, 2025, it’s prohibited for employers to use automated-decision systems (ADS) such as AI tools in hiring, promotion or other employment-related decisions if those systems discriminate against applicants or employees based on protected characteristics under the Fair Employment and Housing Act (FEHA). Employers must retain ADS-related data (including screening data, outcomes, vendor reports) for at least four years and vendors of such tools may be treated as “agents” of the employer, making the employer liable. Because of this, our handbooks’ non-discrimination/EEO policy will be expanded to say that any use of software, algorithm or automated tool in recruitment, promotions, performance or termination decisions must be carefully vetted to ensure no disparate impact; that employees may ask about use of such tools; and that the company will maintain appropriate documentation and oversight.

Second, AB 406 expands upon last year’s AB 2499 legislation reorganizing California’s crime victim time off and accommodations law.  This law prohibits employers from retaliating against or terminating an employee who is a victim or a family member of a victim taking time off in order to attend judicial proceedings related to that crime. AB 406 creates a different definition of “victim” which includes being subjected to one of 14 different crimes. It also revises notice requirements under California’s jury duty law, requiring reasonable advance notice, unless the “advance notice is not feasible.”  

Third, given the passage of SB 648, amending Labor Code section 351, which empowers the state labor commissioner to investigate and issue citations and fines for tip theft, we recommend ensuring all tip policies and pools are clear and in writing. Handbook policies should clarify that tips left by patrons (including credit-card tips) are the sole property of the employee, that the employer or its managers may not deduct credit-card processing fees or take any portion of the tips, and that tips paid via credit card must be paid to the employee no later than the next regular payday following the date the patron authorized the payment.

These updates are meant to keep handbook language aligned with California’s evolving employment-law landscape and reduce legal risk for the upcoming year.

Governor Newsom just signed Senate Bill 617 into law on October 1, 2025, expanding California’s Worker Adjustment and Retraining Notification (Cal-WARN) Act.  As a reminder, the WARN Act requires employers to give 60-days’ notice before a mass layoff, plant closure, or relocation. In addition, employers must notify employees and both state and local representatives. This helps workers prepare for job loss, find new jobs, or train for new opportunities.  
This new law adds important content and coordination requirements for employers conducting mass layoffs, relocations, or terminations in California.

Here are five key takeaways for employers:

1. New Required Disclosures in Cal-WARN Notices

Under SB 617, employers must now include specific information in their 60-day advance notices for any mass layoff, relocation, or termination.
The notice must state whether the employer plans to coordinate services for affected employees through:

• The local workforce development board (LWDB),
• Another entity, or
• No entity at all.

Regardless of coordination, the notice must also include:

• The email and phone number for the relevant LWDB, and
• The following required statement:

“Local Workforce Development Boards and their partners help laid off workers find new jobs. Visit an America’s Job Center of California location near you. You can get help with your resume, practice interviewing, search for jobs, and more. You can also learn about training programs to help start a new career.”

2. CalFresh Information Must Be Included

Employers must now include a description of California’s statewide food assistance program (CalFresh) in every Cal-WARN notice.
This means providing:

• A short description of CalFresh,
• The CalFresh benefits helpline, and
• A link to the CalFresh website.

This new requirement is intended to ensure that displaced employees are aware of public assistance resources during a transition.

3. Employers Must Provide Their Own Contact Information

Each notice must include a functioning employer email and telephone number for employees and agencies to contact.
This seems minor, but it’s a new explicit requirement — and a simple item that could create compliance risk if omitted.

4. Coordination of Services Must Happen Within 30 Days

If an employer chooses to coordinate services through a local workforce development board or another entity, those services must be arranged within 30 days from the date the notice is issued.
This means employers need to identify the LWDB and plan any “rapid response” sessions early in the process — not at the last minute.

5. Effective January 1, 2026

The new law takes effect on  January 1, 2026.  In addition to the new content, remember that Cal-WARN continues to apply to employers with a “covered establishment” that employs or has employed in the preceding 12 months, 75 or more full and part-time employees. Generally, Cal-WARN applies when:

• Plant closure affecting any amount of employees.
• Layoff of 50 or more employees within a 30-day period regardless of the percentage of workforce.
• Relocation of at least 100 miles affecting any amount of employees.

Failure to comply can result in back-pay liability and civil penalties.

Final Thoughts

SB 617 doesn’t change when Cal-WARN applies, but it does change how employers must communicate with employees and agencies during a layoff or closure.

Join Us for Our Upcoming Masterclass

Zaller Law Group will be hosting a masterclass on October 30, 2025, covering the new employment laws facing California employers in 2026, including SB 642 and other key updates signed by Governor Newsom.
We’ll break down what these changes mean in practice and provide actionable steps to stay compliant heading into the new year. Registration for the masterclass is here.

The post California Employers: What SB 617 Means for Cal-WARN Notices Starting January 1, 2026 appeared first on California Employment Law Report.