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New 2026 Protection for Employees — No Indentured Servitude.
The employer paid Sally’s first month of rent as an incentive to take a position. Nice, except the employer presented the “incentive” as a debt to be repaid with interest if Sally quit her employment within one year, and Sally signed the repay agreement on being hired.
Alonza was hired into a a car dealership as a mechanic. If Alonza met certain hourly production quotas each month he was paid a bonus. But, if his production at the end of the year did not meet the cumulative 12 month bonus goal, the employer would claw-back the paid monthly bonuses.
Jake was trained as a cold caller to secure appointments for a sales pitch to buy insurance. The training was a full week to be taken pre-hire at an independent training company, and Jake was required to show proof of satisfactory completion before being hired, as the company only hired “certified” cold callers. The company assured Jake that it would pay the cost of his training if he was hired, and if he stayed with the company on good terms for six months, that is, if he met quota. Jake completed the training, and the company hired him, and as it promised, paid the trainer. Jake was also required to agree to repay the debt if his employment ended early. Jake’s mother took ill, and Jake had to quit to care for her. The company sent Jake a collections letter for the balance, reminding Jake that he signed a “loan agreement.”
Marissa was a high paid executive for a medical corporation with a hefty sign-on bonus. The sign-on bonus agreement provided that if she left her employment for any reason within three years, she would have to repay the entire bonus.
Each of these agreements were consummated after January 1, 2026 and each is illegal. Neither Alonzo, Jake or Marissa are required to repay their “debts” under the California Business and Professions Code [Assembly Bill 692]. This is affectionately called the “Stay-or-Pay” law.
California Business and Professions Code 16608 is the source of this new protection against “stay or pay” employment agreements. The key wording is:
(b) (1) Except as provided in paragraph (2), for contracts entered into on or after January 1, 2026, it shall be unlawful to include in any employment contract, or to require a worker to execute as a condition of employment or a work relationship a contract that includes, a contract term that does any of the following:
(A) Requires the worker to pay an employer, training provider, or debt collector for a debt if the worker’s employment or work relationship with a specific employer terminates.
(B) Authorizes the employer, training provider, or debt collector to resume or initiate collection of or end forbearance on a debt if the worker’s employment or work relationship with a specific employer terminates.
(C) Imposes any penalty, fee, or cost on a worker if the worker’s employment or work relationship with a specific employer terminates.
Bottom line for employees — you’re no longer indentured servants. If you are hounded by your employer to repay their “incentive,” or advance payment, you can sue to recover attorney’s fees and costs, as well as avoid repayment.
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January 2026 Blog Article by Frank Pray:
California Strengthens Protections for Employees Who Speak Up About Workplace Violations
If you’re an employee in California and you speak up about something you believe is illegal at work—such as wage theft, unsafe conditions, or other violations—the law protects you from retaliation. In recent years, those protections have become significantly stronger, making it easier for employees to prove retaliation when it happens.
What’s Changed?
A Stronger Presumption of Retaliation (90 Days)
As of 2024, if an employer takes a negative action—such as firing, demotion, or discipline—within 90 days after an employee complains about a possible legal violation, the law now presumes the action was retaliatory. This is known as a rebuttable presumption. It means the employer must prove the action was taken for a legitimate reason unrelated to the complaint.
An Easier Burden for Whistleblowers
In 2022, the California Supreme Court clarified the standard for whistleblower retaliation claims under Labor Code section 1102.5. An employee only needs to show that their complaint was a contributing factor in the employer’s adverse action. The complaint does not need to be the sole or main reason. Once this showing is made, the burden shifts to the employer to prove—with clear and convincing evidence—that it would have taken the same action anyway.
Special Rules for Health Care Workers (120 Days)
Health care workers receive additional protection. If an adverse action occurs within 120 days after a complaint, the law presumes retaliation unless the employer proves otherwise.
What Does This Mean for You?
The Burden Now Shifts to the Employer
Timing matters more than ever. If negative action closely follows a complaint, the law may start on your side, requiring the employer to justify its conduct.
You’re Protected for Speaking Up
These protections apply whether you complain internally, report violations to a government agency, or participate in an investigation.
The Law Covers Many Types of Complaints
Retaliation protections extend beyond wage issues to safety concerns, discrimination, harassment, and other legal violations.
What Should You Do If You Suspect Retaliation?
- Keep records of your complaint and any negative actions taken afterward
- Pay close attention to timing
- Consider consulting the California Labor Commissioner or an employment attorney
In Summary
California law now gives employees a stronger starting position when retaliation follows a workplace complaint. If you were punished for speaking up about illegal conduct, the law may presume the employer acted unlawfully—and require them to prove otherwise.
If you believe you’ve experienced retaliation, you may wish to seek legal advice or contact the California Labor Commissioner’s office.
