Washington, D.C. —Following news that California Governor Gavin Newsom has signed AB 692, a bill banning employer-driven debt agreements, “stay-or-pay” contracts, and training repayment agreement provisions (TRAPs) statewide, the American Economic Liberties Project released the following statement.
“Come the new year, this bill will instantly liberate tens if not hundreds of thousands of California workers from a form of indentured servitude that enriches shareholders and drives down wages and working conditions,” said Lee Hepner, Senior Legal Counsel at the American Economic Liberties Project. “It is patently absurd that it was ever legal for employers to require workers to pay a fee to leave their jobs. Beyond its direct and immediate effects, AB 692 heralds another successful collaboration between labor, anti-monopoly, and consumer protection advocates, an organizing achievement decades in the making. We’re grateful for the leadership of Assemblymember Ash Kalra, the bravery of affected workers who publicly testified against these agreements, and the fighting spirit of our partners in California.”
“It has been an honor to work with Economic Liberties in abolishing exploitative stay-or-pay contracts and stopping employers from creating debt to trap and intimidate workers,” said Assemblymember Kalra. “I am grateful Governor Newsom signed A.B. 692, ensuring workers are not coerced into employment debt agreements and can be empowered to leave bad jobs.”
Training Repayment Agreement Provisions (TRAPs) are contract terms in employment agreements that threaten workers with thousands of dollars in “debt” if they leave their jobs before a set period of time — often under the guise of compensating the employer for mandatory on-the-job training that primarily benefits the employer. These debt-based contracts have spread rapidly across the U.S. economy, appearing in industries ranging from health care and trucking to tech and aviation. Research from Protect Borrowers and Economic Liberties has documented that TRAPs now appear in jobs employing roughly one in three American workers, functioning as de facto noncompete clauses that trap people in low-wage or unsafe conditions and chill labor market competition.
California’s AB 692 is the first comprehensive state law to outlaw these practices. The bill prohibits employers from imposing or collecting debts tied to training or other “employment-related costs,” bars the use of any fees or penalties when a worker quits, and empowers both the Attorney General and Labor Commissioner to enforce the law. It builds on California’s long-standing ban on noncompete agreements and is a model for lawmakers across the country. Economic Liberties’ fantastic advocacy partners on this bill include California Nurses Association, Protect Borrowers, California Federation of Labor Unions, California Employment Lawyers Association and Towards Justice.
Read Economic Liberties’ brief, Better Wages and Working Conditions, here.
Learn more about Economic Liberties here.
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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.