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Bill would ban employer 'stay‑or‑pay' debt agreements that bind workers, backers say
Summary
AB 692 would void employer debt agreements that require workers to repay training or other costs if they leave their job. Supporters cited cases across industries where such contracts trapped workers; business groups urged caution and pointed to existing statutes they say address the issue.
Assemblymember Correa (presenting AB 692) told the committee the bill would "end the exploitative practice of employers coercing workers into debt agreements" often described as "stay or pay" contracts. The measure would prohibit employer debt agreements that require workers to repay employers if they leave, and void such agreements as unlawful contracts.
Supporters including the California Nurses Association and the American Economic Liberties Project described examples across health care, pet grooming, IT recruiting and aviation where workers faced thousands of dollars in alleged training debts after leaving employment. Lee Hepner of the American Economic Liberties Project cited a 2022 PetSmart case and other lawsuits where employees alleged trainers were the primary beneficiary of the training and the contracts restricted labor mobility.
Nurses testified that the practice is common in healthcare and that new graduates and immigrant nurses are particularly vulnerable. "These stay or pay contracts have also had a chilling effect on the workplace, discouraging workers from speaking out against unsafe or unfair working conditions for fear of being fired and forced to pay off the debt," a union witness said.
Opponents including the California Chamber of Commerce said existing Labor Code Section 2802 and related case law already require employers to reimburse employees for required training and expenses and urged the author to work on narrower, targeted clarifications rather than a broad prohibition.
The committee voted to refer AB 692 to the Judiciary Committee for further consideration.
