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AB-692 • 2026

Employment: contracts in restraint of trade.

Employment: contracts in restraint of trade.

Labor
Enacted

This bill passed the Legislature and reached final enactment based on the latest official action.

Sponsor
Kalra
Last action
2025-10-13
Official status
Chaptered by Secretary of State - Chapter 703, Statutes of 2025.
Effective date
Not listed

Plain English Breakdown

The official source does not specify the exact civil penalties or relief that violators may face, only that they are liable for specified civil penalties and relief.

Employment Contracts: No Restraint on Trade

This law makes it illegal to include certain terms in employment contracts that restrict workers from engaging freely in their professions, trades, or businesses after leaving a job.

What This Bill Does

  • Makes it unlawful for employers to include specific clauses in work agreements starting January 1, 2026.
  • These clauses include ones where an employee has to pay back money to the employer if they leave their job.
  • Declares such contracts as void and contrary to public policy.
  • Allows workers or their representatives to sue employers who break these rules in court.

Who It Names or Affects

  • Workers entering employment contracts on or after January 1, 2026
  • Employers creating work agreements

Terms To Know

void
A contract that is not valid or enforceable by law.
public policy
The principles and goals that the government aims to achieve for the benefit of society as a whole.

Limits and Unknowns

  • Does not specify what happens if someone breaks this rule before January 1, 2026.
  • Does not explain how much money in fines employers might have to pay for breaking the rules.

Bill History

  1. 2025-10-13 California Legislative Information

    Chaptered by Secretary of State - Chapter 703, Statutes of 2025.

  2. 2025-10-13 California Legislative Information

    Approved by the Governor.

  3. 2025-09-23 California Legislative Information

    Enrolled and presented to the Governor at 4 p.m.

  4. 2025-09-11 California Legislative Information

    Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 46. Noes 20. Page 3340.).

  5. 2025-09-10 California Legislative Information

    In Assembly. Concurrence in Senate amendments pending.

  6. 2025-09-10 California Legislative Information

    Read third time. Passed. Ordered to the Assembly. (Ayes 25. Noes 11. Page 2815.).

  7. 2025-09-08 California Legislative Information

    Read second time. Ordered to third reading.

  8. 2025-09-05 California Legislative Information

    Read third time and amended. Ordered to second reading.

  9. 2025-09-02 California Legislative Information

    Read second time. Ordered to third reading.

  10. 2025-08-29 California Legislative Information

    Read second time and amended. Ordered returned to second reading.

  11. 2025-08-29 California Legislative Information

    From committee: Amend, and do pass as amended. (Ayes 5. Noes 2.) (August 29).

  12. 2025-08-18 California Legislative Information

    In committee: Referred to suspense file.

  13. 2025-07-17 California Legislative Information

    Read second time and amended. Re-referred to Com. on APPR.

  14. 2025-07-16 California Legislative Information

    From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 11. Noes 2.) (July 15).

  15. 2025-06-26 California Legislative Information

    Read second time and amended. Re-referred to Com. on JUD.

  16. 2025-06-25 California Legislative Information

    From committee: Amend, and do pass as amended and re-refer to Com. on JUD. (Ayes 4. Noes 1.) (June 25).

  17. 2025-06-18 California Legislative Information

    Referred to Coms. on L., P.E. & R. and JUD.

  18. 2025-06-09 California Legislative Information

    In Senate. Read first time. To Com. on RLS. for assignment.

  19. 2025-06-05 California Legislative Information

    Read third time. Passed. Ordered to the Senate. (Ayes 47. Noes 21. Page 2112.)

  20. 2025-05-29 California Legislative Information

    Read third time and amended. Ordered to third reading. (Page 1788.)

  21. 2025-05-27 California Legislative Information

    Read second time. Ordered to third reading.

  22. 2025-05-23 California Legislative Information

    Read second time and amended. Ordered returned to second reading.

  23. 2025-05-23 California Legislative Information

    From committee: Amend, and do pass as amended. (Ayes 10. Noes 3.) (May 23).

  24. 2025-05-23 California Legislative Information

    Assembly Rule 63 suspended. (Ayes 51. Noes 16. Page 1644.)

  25. 2025-05-07 California Legislative Information

    In committee: Set, first hearing. Referred to APPR. suspense file.

  26. 2025-04-22 California Legislative Information

    From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 3.) (April 22). Re-referred to Com. on APPR.

  27. 2025-04-22 California Legislative Information

    Coauthors revised.

  28. 2025-04-03 California Legislative Information

    From committee: Do pass and re-refer to Com. on JUD. (Ayes 5. Noes 0.) (April 2). Re-referred to Com. on JUD.

  29. 2025-03-27 California Legislative Information

    Coauthors revised.

  30. 2025-03-11 California Legislative Information

    Re-referred to Com. on L. & E.

  31. 2025-03-10 California Legislative Information

    From committee chair, with author's amendments: Amend, and re-refer to Com. on L. & E. Read second time and amended.

  32. 2025-03-10 California Legislative Information

    Referred to Coms. on L. & E. and JUD.

  33. 2025-02-15 California Legislative Information

    From printer. May be heard in committee March 17.

  34. 2025-02-14 California Legislative Information

    Read first time. To print.

Official Summary Text

AB 692, Kalra.
Employment: contracts in restraint of trade.
Existing law declares every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind to be void, except as expressly provided. Existing law provides for a system of labor standards enforcement administered by the Labor Commissioner.
This bill would, for contracts entered into on or after January 1, 2026, make it 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, specified contract terms, including a term that 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. The bill would declare these contracts as contracts that restrain a person from engaging in a lawful
profession, trade, or business, and as void and contrary to public policy, except as provided.
This bill would authorize a worker who has been subjected to the above-described prohibited conduct regarding a contract or its terms or a work representative to bring an action on behalf of that worker, other persons similarly situated, or both, in any court of competent jurisdiction. The bill would make a person who violates these provisions liable for specified civil penalties and relief.

Current Bill Text

Read the full stored bill text 
Download Bill PDF