CaliforniaCalifornia delays ban on debts and fees when work ends
Starting with contracts made on or after January 1, 2027, employers cannot include terms that charge workers debts or fees when their work ends, except in specified cases.
What it does
California shifts the ban on debts and fees tied to ending work to contracts made from January 1, 2027. Pending claims under that ban for violations alleged between January 1 and the law’s September 30, 2026, effective date become moot.
For contracts made from 2027, employers may seek repayment of hiring or retention bonuses from government grant programs. Repayment must follow the grant’s rules and cannot require more service than the grant requires.
For contracts made from 2027, employers may seek repayment for up to 40 hours of paid time off advanced at a worker’s request if the worker chooses to leave. Terms must be disclosed separately, without interest.
Securities brokers, insurance sellers, and investment advisers may use separate repayment agreements for payments beyond regular pay that are discretionary or unearned and offered to attract or keep licensed or registered agents. Agents get at least five business days to seek legal advice, and interest after leaving is capped.
Argument forThe 2027 start could give employers more time to remove debt and fee terms from contracts before the ban applies.
Argument againstWorkers with contracts made in 2026 could lack this ban’s protection if those contracts charge them when their work ends.
More detail
California shifts its ban on debts and fees triggered when work ends to contracts made on or after January 1, 2027. The ban covers contract terms that make workers pay debts or fees, or restart debt collection, when a job or other work relationship ends. Pending claims under these rules for violations alleged between January 1, 2026, and the law’s September 30, 2026, effective date become moot. The law took effect September 30, 2026; the ban applies to contracts made on or after January 1, 2027.
Employers may include repayment terms for hiring or retention bonuses offered through government grant programs. This exception covers employees in hiring or retention programs funded by federal, state, or local government grants. Repayment must follow the grant’s rules and cannot require more service than the grant requires. The exception applies to contracts made on or after January 1, 2027.
Employers may seek repayment for paid time off advanced to workers who choose to leave. This exception covers workers who receive pay for time off before earning that time and then choose to leave. The employer must disclose the repayment terms separately when the worker asks for the advance. Repayment cannot exceed 40 hours of paid time off or include interest. The exception applies to contracts made on or after January 1, 2027.
Certain financial firms may use repayment agreements for payments offered to attract or keep their agents. The exception covers registered or licensed agents and representatives of securities brokers, insurance sellers, or investment advisers, including the firms’ affiliates. The payment must be beyond regular pay and be discretionary or unearned. Repayment terms must be in a separate agreement. Agents must get at least five business days to seek legal advice. Any interest after leaving cannot exceed the applicable federal rate. The exception applies to contracts made on or after January 1, 2027.
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Where it stands
- Introduced
- Passed Assembly
- Passed Senate
- To Governor
- Became Law
Looking ahead
No hearings or votes scheduled.
History
- 2026
- Sep 30Chaptered by Secretary of State - Chapter 889, Statutes of 2026.Latest
- Sep 30Approved by the Governor Gavin Newsom.Became Law
- Sep 3Enrolled and presented to the Governor at 4 p.m.To Governor
- Aug 26Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 68. Noes 6. Page 6568.).Major
- Vote recorded AB 1697 Kalra Concurrence in Senate Amendments. Result: pass.Lower
- Aug 25In Assembly. Concurrence in Senate amendments pending.
- Vote recorded 3rd Reading AB1697 Kalra By Laird Urgency Clause. Result: pass.Upper
- Aug 25Read third time. Urgency clause adopted. Passed. Ordered to the Assembly. (Ayes 38. Noes 0.).Passed Senate
- Aug 24Read second time. Ordered to third reading.Minor
- Aug 21Read third time and amended. Ordered to second reading.Major
- Aug 4Read second time. Ordered to third reading.Minor
- Aug 3From committee: Be ordered to second reading pursuant to Senate Rule 28.8.Minor
- Jun 24From committee: Do pass and re-refer to Com. on APPR. (Ayes 13. Noes 0.) (June 23). Re-referred to Com. on APPR.Minor
- Jun 23
- Vote recorded Do pass, but first be re-referred to the Committee on [Appropriations]. Result: pass.Upper
- Jun 10From committee: Do pass and re-refer to Com. on JUD. (Ayes 5. Noes 0.) (June 10). Re-referred to Com. on JUD.Minor
- Vote recorded Do pass, but first be re-referred to the Committee on [Judiciary]. Result: pass.Upper
- May 27Referred to Coms. on L., P.E. & R. and JUD.Minor
- May 18In Senate. Read first time. To Com. on RLS. for assignment.Minor
- Vote recorded AB 1697 Kalra Third Reading Urgency. Result: pass.Lower
- May 18Read third time. Urgency clause adopted. Passed. Ordered to the Senate. (Ayes 61. Noes 5. Page 5086.).Passed Assembly
- Apr 23Read second time. Ordered to third reading.Minor
- Apr 22From committee: Do pass. (Ayes 9. Noes 2.) (April 22).Minor
- Vote recorded Do pass. Result: pass.Lower
- Apr 14Re-referred to Com. on APPR.Minor
- Apr 13Read second time and amended.Major
- Apr 9From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 6. Noes 1.) (April 8).Major
- Apr 8
- Vote recorded Do pass as amended and be re-referred to the Committee on [Appropriations]. Result: pass.Lower
- Mar 17Re-referred to Com. on L. & E.Minor
- Mar 16From committee chair, with author's amendments: Amend, and re-refer to Com. on L. & E. Read second time and amended.Major
- Mar 16Referred to Com. on L. & E.Minor
- Feb 4From printer. May be heard in committee March 6.
- Feb 3Read first time. To print.Introduced
Economy & Jobs