Newsom Signed California Employment Law Update
The new legislation modifies stay-or-pay employment provisions and compliance requirements for California businesses.
Updated on Oct. 5, 2026 in Human Resources
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Governor Gavin Newsom signed Assembly Bill 1697, a measure that revises state regulations regarding stay-or-pay employment provisions. The law offers employers increased flexibility for retention and relocation incentives while establishing new notification standards.
Why it matters
The legislation aims to modernize recruitment and retention strategies in California by allowing businesses to recoup advanced payments and offering exemptions for specific financial sectors. It clarifies the framework for complex compensation agreements entered into by state employers.
The law permits the recoupment of up to 40 hours of advanced paid time off and allows for repayment proration over a maximum retention period of 2 years. Employees must be granted at least 5 business days to consult with legal counsel regarding these agreements.
The players
Gavin Newsom
Gavin Newsom serves as the 40th Governor of California and is responsible for signing state legislation into law.
The details
Under the new law, employers must execute a separate agreement for qualifying payments distinct from the primary employment contract. The legislation provides specific exceptions for compensation agreements involving securities broker-dealers, investment advisers, and insurance providers.
Timeline
September 30, 2026: Governor Gavin Newsom signed Assembly Bill 1697 into law.
January 1, 2027: Compliance requirements for the new law take effect for eligible contracts.
Market Landscape
The update reflects a shift toward providing California employers with more specialized tools to compete for talent in high-skill sectors. By carving out specific industries, the law differentiates competitive recruitment practices from standard retail or general labor staffing.
Employees entering new contracts after January 1, 2027, should be aware of mandatory notice periods regarding their right to consult counsel before signing repayment agreements. Employers are now required to separate these specific financial terms from general employment documentation.
The takeaway
Businesses should review their existing retention and relocation incentive programs to ensure alignment with the new statutory requirements before the 2027 deadline. Employees are encouraged to exercise their five-day consultation window to fully understand the terms of any advanced payment agreements.
What happens next
Compliance requirements for all applicable employment contracts will take effect on January 1, 2027.
Further reading
For more information on state workplace regulations, visit the Human Resources section.
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Do you support laws that limit how employers collect repayment for bonuses or training?
