Employment contracts: stay-or-pay provisions: contract date.

Removed the phrase 'at the outset of employment' from the exception in Section 16608(b)(2)(D) for discretionary or unearned monetary payments (including financial bonuses). This expands the exception to cover such payments made at any time during the employment relationship, not only at the start of employment. The other conditions still apply: separate agreement, right to consult an attorney with at least five business days, no interest accrual, prorated repayment over a retention period not exceeding two years, deferral option, and separation must be voluntary or for misconduct.

New Section 1 adds legislative findings declaring that the amendments prevent accrual of liability for acts occurring between January 1, 2026 and the effective date, and that any pending claim based on a violation during that period is moot.

New exception (F) to Section 16608(b)(2) carves out affiliation contracts between securities broker-dealers, insurance producers, or investment advisers (and their affiliates) and their registered or licensed agents/representatives. Conditions include a separate agreement, payment in addition to normal compensation, five business days to consult an attorney, and interest capped at the federal rate if it accrues after separation.

New exception (G) to Section 16608(b)(2) carves out repayment obligations for advanced paid time off payments upon voluntary separation. Conditions include clear disclosure separate from the employment contract, a cap of 40 hours of accrued PTO, and no interest accrual.

Existing exception (A) for government loan repayment/forgiveness programs is expanded by adding subparagraph (ii), which also excepts contracts under recruitment and retention programs funded by federal, state, or local government agency grants that offer recruitment or retention bonuses, provided repayment obligations comply with the grant and do not exceed required service obligations.

New subsection 16608(c)(2) states that the provisions as they existed on January 1, 2026 are inoperative from January 1, 2026 through December 31, 2026, creating a one-year enforcement moratorium before the new rules take effect on January 1, 2027.

New subsection 926(e) of the Labor Code mirrors the same inoperative period for that section: provisions as they existed on January 1, 2026 are inoperative from January 1, 2026 through December 31, 2026.

The training provider definition changes 'education program' to 'educational program' (minor wording correction). Section numbering is renumbered due to the insertion of the new Section 1 (urgency clause moves from SEC. 3 to SEC. 4).

The effective date for all stay-or-pay contract prohibitions under Business and Professions Code Section 16608 and Labor Code Section 926 was pushed back one year, from January 1, 2026 to January 1, 2027. This means contracts entered into between January 1, 2026 and December 31, 2026 would no longer be covered by the law.

A new Section 3 was added declaring the act an urgency statute under Article IV of the California Constitution, meaning it takes effect immediately upon the Governor's signature rather than waiting until July 1 of that year. The stated justification is protection of public peace, health, and safety.

The amendment to Labor Code Section 92, which made nonsubstantive changes to the subpoena and investigatory powers of the Labor Commissioner, was removed entirely from the bill. The bill now only amends Business and Professions Code Section 16608 and Labor Code Section 926.

The required vote to pass the bill was raised from a simple majority to a two-thirds supermajority, and fiscal committee review was added (changed from 'no' to 'yes').

Added an entirely new prohibition (Business and Professions Code Section 16608) making it unlawful to include stay-or-pay terms in employment contracts that require a worker to pay a debt, resume debt collection, or incur any penalty, fee, or cost upon termination of employment.

Added detailed definitions for contract, debt, debt collector, employer, freelance worker, misconduct, penalty/fee/cost, person, training provider, transferable credential, and worker to support the new prohibition.

Added five specific exceptions to the stay-or-pay prohibition: (1) government loan repayment/forgiveness programs, (2) transferable credential tuition repayment meeting strict conditions including proration and no accelerated payment, (3) approved apprenticeship programs, (4) discretionary sign-on bonuses with separate agreement, attorney consultation right, two-year maximum retention period, and deferral option, and (5) residential property lease/financing/purchase contracts.

Added a new civil remedy provision (Labor Code Section 926) allowing workers or worker representatives to bring civil actions for actual damages or $5,000 per worker whichever is greater, plus injunctive relief and attorney's fees.

The effective date for the stay-or-pay prohibition was set at January 1, 2027 (the diff shows a change from 2026 to 2027 in the amendment markup, indicating the introduced version had 2026 and the amended version moved it to 2027).

Fiscal committee review changed from 'no' to 'yes,' indicating the bill now has fiscal implications requiring committee analysis.