Limits on stay-or-pay contracts in California
The new law is part of the California Labor Code restricting non-compete agreements
Newly enacted AB 692 adds section 16608 to the California Business and Professions Code. Beginning Jan. 1, California employers generally will not be allowed to include in an employment contract, or condition employment on, a term:
- requiring a worker to repay a debt to the employer, training provider, or debt collector if the worker’s “employment or work relationship with a specific employer” ends;
- authorizing the employer, training provider, or debt collector to resume, initiate collection of, or end forbearance on a debt if the worker’s “employment or work relationship with a specific employer” the specific “employment ends;” or
- imposing a penalty or fee on the worker if the worker’s “employment or work relationship with a specific employer” ends.
The term “worker” under the statute “includes, but is not limited to, an employee or prospective employee.” Combined with the statute’s references to “employment or work relationship,” it is unclear whom besides employees and prospective employees the statute protects. An earlier version of the measure defined “worker” to include “independent contractor, freelance worker, extern, intern, apprentice, or sole proprietor.” That language was dropped, but an orphaned definition of “freelance worker” remains.
Click here to read the full article written by SCMV Shareholder Dan Eaton and published in The San Diego Union-Tribune.