TL;DR: California’s stay-or-pay restriction applies to employment contracts entered into on or after January 1, 2027. A repayment clause may still work for a qualifying bonus, transferable credential tuition, or an approved apprenticeship contract, but each exception has specific conditions.
Say you offer a new journeyman a $5,000 sign-on bonus and require repayment if they leave during the first year. That clause may be allowed after January 1, 2027, but only if the bonus agreement follows the new rules.
AB 1697 moved the effective date to January 1, 2027
AB 692, passed in 2025, created California’s stay-or-pay restriction. It was originally scheduled to apply to contracts entered into on or after January 1, 2026.
AB 1697 changed that date. Assemblymember Ash Kalra’s bill was signed by Governor Newsom on September 30, 2026. The restriction now applies to contracts entered into on or after January 1, 2027.
The 2026 calendar year is a gap. The original provisions are inoperative during that year. Contracts entered into in 2026 are not covered by this restriction. Do not read more into that date than the statute says. The law applies to contracts entered into on or after January 1, 2027.
That means you have a short window to identify the agreements your shop uses and decide what must change before the new date. Look at offer letters, employee agreements, handbook language, tuition or course forms, and sign-on bonus paperwork.
The law uses the term “worker” broadly. It means a natural person permitted to work for or on behalf of an employer, including employees and prospective employees. If you have questions about whether a 1099 helper is properly classified, review the 1099 helper rules for electricians before deciding whether this rule applies.
A repayment clause becomes a prohibited penalty unless an exception applies
Under Business and Professions Code Section 16608, an employer cannot require a worker to repay a “debt” or impose another penalty, fee, or cost when employment ends unless an exception applies.
That reaches more than a document titled “repayment agreement.” A payback term in an offer letter, a handbook, or a separate form can still create a problem if it requires money back after termination and does not fit an exception.
The question is not simply whether your shop paid money for the worker. The question is whether the repayment demand fits one of the statutory exceptions.
A course payment may involve a credential. A sign-on payment may be a bonus. Training may involve an apprenticeship. Those categories do not all follow the same rules.
Do not assume the law covers every item a shop might buy for a worker. This article does not address tools, vehicles, uniforms, or PTO advances. Ask an employment attorney about anything not listed here.
Three exceptions can preserve a repayment clause after January 1
An approved apprenticeship contract is treated differently
A contract related to enrollment in an apprenticeship program approved by the Division of Apprenticeship Standards is an exception.
The approval is the key fact. Your shop’s informal promise that says, “We train you, you stay two years,” is not the same thing. An informal training arrangement does not become an approved apprenticeship contract because you call it an apprenticeship.
If you want to train a new hire as an apprentice and recover costs through a repayment arrangement, confirm the program’s approval by the Division of Apprenticeship Standards. Have the actual contract reviewed before relying on the exception.
Transferable credential tuition has six limits
Repayment for a transferable credential may be allowed, but the exception is narrow.
The repayment amount cannot exceed what the employer paid for the transferable credential the worker received. The credential cannot be required for the worker’s current job. The repayment terms must be in a separate agreement from the employment contract.
The repayment must be prorated over the worker’s service time. The agreement cannot require accelerated payment just because the worker leaves.
The clause also cannot be triggered by ordinary layoffs. The statute contains misconduct language that should be read in the chaptered text before you rely on it. Do not use a form that treats every separation as a repayment event.
If your shop pays for a certification exam or renewal, identify what the worker actually receives and whether the credential is transferable. The California electrician certification and retest changes may matter if you are paying for an apprentice’s or trainee’s certification exam. The rules for California electrician certification renewal may also be relevant to costs your shop covers.
A bonus can be repayable, but the payment must fit the new definition
AB 1697 widened the bonus exception.
The old rule limited the exception to a bonus paid at the outset of employment. AB 1697 removed that requirement. A discretionary or unearned monetary payment that is not tied to specific job performance can be repayable whether you pay it at hire or during employment.
That can include a sign-on payment, a retention payment, or a recruiting payment. A flat payment made on day one is the kind of payment this exception describes.
A commission or production bonus is different. A bonus tied to specific job performance is outside this exception. Do not relabel a performance payment as a retention bonus and assume the exception applies.
The bonus repayment terms must be in a separate agreement from the employment contract. Before signing, the worker must be told they may consult an attorney and must receive at least five business days to do so.
If the worker separates early, any repayment must be interest-free and prorated over the remaining retention period. The retention period cannot exceed two years from the date the worker received the payment.
The worker must also have the option to defer receipt of the payment until the retention period ends. If the worker chooses that option, the worker owes nothing back.
Repayment applies only if the worker leaves voluntarily or is terminated for misconduct. A layoff cannot be treated as an early departure that automatically creates a repayment bill.
These terms need to appear in the agreement before you treat the payment as repayable. A sentence in an offer letter is not a substitute for the separate bonus agreement required by the exception.
A violation can cost more than the bonus
Labor Code Section 926 provides a private right of action and remedies for a violation.
A worker may seek actual damages or $5,000 per worker, whichever is greater. The worker may also seek injunctive relief, reasonable attorney’s fees, and costs.
A worker representative can bring the claim on behalf of themselves and similarly situated workers. That means one disputed form can create exposure beyond the person who signed it.
Do not hold a worker’s final paycheck to recover a disputed amount. Do not deduct the payback from the final paycheck. Ask an employment attorney about any proposed deduction and about the wording of the actual agreement.
The cost of getting the clause wrong is not limited to the amount you intended to recover. The statutory amount, fees, costs, and a claim involving similarly situated workers can change the calculation quickly.
Rebuild agreements signed on or after January 1
Start with an inventory. List every agreement that contains a payback clause, including:
- Offer letters
- Employment agreements
- Handbook provisions
- Tuition or course forms
- Sign-on bonus paperwork
- Retention or recruiting payment agreements
Separate the documents by contract date. For a contract entered into in 2026, AB 1697 does not change how it is treated today beyond the date stated in the law. For anything signed on or after January 1, 2027, either rebuild the document to fit an exception or remove the payback clause.
For a qualifying bonus, use a separate signed agreement. State that the worker may consult an attorney. Give the worker at least five business days to do so before signing. Keep the payment interest-free and prorated. Cap the retention period at two years from receipt.
Consider offering the deferral option. If the worker chooses to receive the money at the end of the retention period, the worker cannot owe it back.
For credential tuition, confirm that the credential is transferable and not required for the current job. Keep the repayment terms separate from the employment contract. Make the amount no greater than your cost, prorate it over service time, and do not accelerate the amount after an early separation.
For apprenticeship training, verify approval by the Division of Apprenticeship Standards. Do not use an informal two-year stay promise as a substitute.
Review the hiring budget while you are doing this. The costs of starting an electrical business in California include the costs you may be considering when you offer a bonus, pay for a course, or recruit a new electrician. The budget does not change the legal requirements, but it tells you which agreements deserve review first.
Have an employment attorney review the actual agreements. This is not legal advice.
The phone log shows whether the new hire has work to do
Reviewing the Wirewoman dashboard call log, the new-hire stretch is where the pattern shows up. The shop’s phones keep ringing whether or not the new tech has been dispatched yet. Each call appears with its time and the caller’s stated problem, so an owner can see what work is arriving during the weeks the new hire is still ramping up.
A signing bonus only pays off if the new tech has work to go to. Wirewoman answers the shop’s phone 24/7, sends the job summary by SMS within 30 seconds, books to the calendar, and logs every call to a dashboard.
That gives you something concrete to show a new hire on day one: a booked schedule and the SMS job summary, rather than a promise that work will appear. If the phone is the bottleneck, review the signs your electrical business needs front-office help.
Before January 1, list every payback clause, sort the agreements by contract date, and send the post-January 1 forms to an employment attorney. Use a separate bonus agreement when the bonus exception fits. Give the five business days. Offer deferral. Do not recover a disputed amount from the final paycheck.
