California regularly updates its employment laws to improve workplace protections and transparency. Two important laws taking effect on January 1, 2026, are AB 692, which limits “Stay or Pay” clauses in employment contracts, and SB 294, which establishes the Workplace Know Your Rights Act. These laws aim to protect employees from restrictive employment agreements and ensure workers understand their legal rights in the workplace.
Businesses operating in California should review their employment agreements, workplace policies, and employee training to ensure compliance with new laws.
AB 692: California Bans ‘Stay or Pay’ Clauses in Employment Contracts
Starting January 1, 2026, California will ban most “stay or pay” clauses in employment contracts. These are agreements where employees must repay the employer for bonuses, training, or other payments if they leave the company.
What AB 692 Means for Employees:
- Employees generally cannot be required to repay signing bonuses, relocation bonuses, or other debts when leaving a job.
- Certain exceptions apply, like repayment for signing bonuses if:
- The repayment terms are in a separate agreement.
- Employees are given 5 business days to consult an attorney.
- The repayment period is no more than two years.
- No interest is charged on the repayment.
- Repayment is prorated based on time worked.
- Employees can defer payment until the end of the repayment term.
- Repayment applies only if the employee leaves voluntarily or is terminated for misconduct.
What Employers Need to Know:
- Employers must review bonus and repayment agreements to ensure compliance with AB 692.
- Contracts that violate the law are void and unenforceable.
- Employees can take legal action to recover:
- Actual damages or $5,000 per worker (whichever is higher)
- Injunctive relief
- Attorney’s fees and costs
- Employees may also file class or representative actions, which cannot be forced into individual arbitration.
SB 294: Understanding California’s Workplace Know Your Rights Act
California’s Workplace Know Your Rights Act (SB 294) requires employers to give all employees a written notice about their workplace rights, new legal updates, and enforcement agencies.
Key points:
- Employers must provide this notice to new hires upon hire and current employees by February 1, 2026, then annually.
- Notices must be in the language normally used to communicate with the employee and can be shared using usual company channels.
- Employers must keep records of compliance for three years.
Emergency Contact Rule:
- Employees can designate an emergency contact.
- If an employee is arrested or detained at work or during work hours, and the employer knows about it, the employer must notify the designated contact.
- Failure to comply can result in penalties up to $500 per day per employee (max $10,000).
Protections for Workers:
- Employees cannot be retaliated against for exercising their rights under SB 294.
- Enforcement can come from the Labor Commissioner, a public prosecutor, or the employee. Workers may seek injunctive relief, penalties, and legal fees.
SB 294 ensures transparency, safety, and legal protection for employees across California.
Under the Workplace Know Your Rights Act, employers must inform workers about the following:
- Protection from retaliation
- Workers have the right to speak up about workplace issues without punishment. This includes concerns about pay, hours, health and safety, and other workplace protections. Workers are also protected when they file complaints, take part in investigations, or help others exercise their rights.
- Protections against unfair immigration-related practices
- Workers must be informed of certain protections related to their immigration status in the workplace. These include the right to receive required notices and protection from unfair or retaliatory actions, such as threats, discrimination, or misuse of employment eligibility verification practices.
- Emergency contact notification
- Workers have the right to name an emergency contact. If a worker is arrested or detained at work and the employer knows about it, the employer must notify that contact when required by law. Employers must allow workers to name an emergency contact by March 30, 2026.
- Union and group activity rights
- Workers have the right to join or organize a union. They also have the right to act together with co-workers to raise concerns about pay, hours, health and safety, or other working conditions. Workers can choose whether to take part in these activities without fear of retaliation.
- Rights during law enforcement interactions
- Workers must be informed about basic constitutional rights during law enforcement interactions in the workplace, such as rights related to questioning, searches, detention, and legal assistance.
- Workers’ compensation rights
- Workers have the right to medical care and other workers’ compensation benefits if they experience work-related injuries or illnesses. The notice explains how workers can report injuries and get these benefits.
What Should California Employers Do Now?
With new employment laws taking effect in 2026, California employers should start preparing early to ensure compliance and avoid potential penalties.
- Update workplace policies
Employers should review and update employee handbooks and policies to reflect new legal requirements, especially under the Workplace Know Your Rights Act (SB 294), which requires employers to provide employees with written notice of their workplace rights. - Review employment agreements
Employers should review bonus, relocation, and repayment agreements to ensure they comply with AB 692 Ban on Stay‑or‑Pay Clauses, which restricts contracts that require employees to repay incentives when leaving a job. - Improve record-keeping
Employers should maintain clear records showing compliance with employee notices, training requirements, and workplace policies. - Seek legal guidance if needed
Consulting employment counsel can help businesses understand the new rules and update contracts and policies before the laws take effect.
California’s 2026 employment laws reflect the state’s continued focus on worker protections, transparency, and employee mobility. The ban on training repayment agreements limits practices that could restrict workers from changing jobs, while the new notice requirement ensures employees understand their workplace rights. Employers should review their policies and employment documents now to ensure compliance before January 1, 2026.