California’s stay or pay statute, Assembly Bill 692, was enacted to stop employers from charging workers a debt, fee, or training cost because they leave a job. The law adds Business and Professions Code section 16608 and Labor Code section 926. Public safety members face a narrower question. Does the statute change the cases that allowed some departments to bill officers who transfer after the academy?
AB 692 does not overrule those decisions. It sits on top of them. Agreements already signed remain subject to the older authorities. Agreements executed after the statute’s operative date face a prohibition those authorities never supplied.
BACKGROUND
Agencies long tried to slow lateral movement by making academy graduates repay a share of training costs if they left before a set term of service. Oakland used a prorated figure tied to five years and placed the term in the memorandum of understanding and the conditional offer. The First District in City of Oakland v. Hassey (2008) 163 Cal.App.4th 1477 held that such a clause was not an unlawful restraint under Business and Professions Code section 16600 because the officer remained free to work elsewhere. The court treated the obligation as contractual reimbursement rather than a covenant not to compete. It refused to decide Labor Code section 2802 because the issue arrived too late, and it barred collection through the final paycheck.
The Fourth District later reached the section 2802 question Hassey left open. In In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498, Los Angeles required every recruit to attend its academy and repay prorated costs after an early departure to another agency. The court drew a disticntion. Basic POST certification is a statewide licensure prerequisite obtainable from more than one provider, so those hours are not standing alone an expense of discharging the duties of employment with a particular city. Department specific hours that the agency itself requires and delivers are expenses covered by section 2802 . A contract that waives that protection is void under Labor Code section 2804. Because Los Angeles bundled both categories and offered no apportionment, the entire acknowledgment failed.
The First District in USS POSCO Industries v. Case (2016) 244 Cal.App.4th 197 later upheld repayment of a voluntary and transferable private training program. That opinion helps optional coursework. It is a poor fit for a required police academy. The Ninth Circuit in Gordon v. City of Oakland (9th Cir. 2010) 627 F.3d 913 separately held that Oakland’s arrangement was not an FLSA kickback if the officer received at least the minimum wage in the final workweek. That federal holding does not control section 2802 or section 16608.
THE STATUTE
AB 692 makes it unlawful, for contracts entered on or after its operative date, to require payment of a debt if the relationship ends, to authorize collection upon termination, or to impose any penalty, fee, or cost because the relationship ends. Debt is defined broadly enough to reach education related costs. A violating term is treated as void under section 16600. A worker may sue for actual damages or five thousand dollars per worker, whichever is greater, together with fees and injunctive relief. The remedies are cumulative and expressly preserve section 2802 and the Unfair Competition Law.
The transferable credential exception reaches tuition for a degree from an accredited third party institution that is not required for the current job and that meets strict separate contract, cost cap, and proration conditions. POST basic training is a statutory prerequisite to exercising peace officer powers. Attendance is ordinarily a condition of hire. A classic in house academy clause does not fit the exception.
AB 1697, enrolled and presented to the Governor on September 3, 2026, would move the contract date from January 1, 2026 to January 1, 2027. Until the Governor acts, the original date remains on the books. If the delay is signed, 2026 contracts fall back under the pre statute cases.
WHAT CHANGES AND WHAT DOES NOT
Hassey held that a separation triggered academy repayment was not an unlawful restraint under section 16600. AB 692 reaches the opposite result by statute for new contracts. After the operative date, a department cannot rest a new acknowledgment on Hassey’s section 16600 reasoning. Optional college coursework that actually meets the transferable credential conditions may still be structured. A required academy cannot be rescued by calling it a loan.
The statute is prospective. Legacy papers signed before the operative date remain governed by Hassey, the Acknowledgment Cases, and USS POSCO. Recovery that isolates documented POST basic costs from an officer who leaves voluntarily may still be argued on those older instruments. Recovery that reaches academy wages or department mandated hours beyond POST remains barred by sections 2802 and 2804. Collection through the final paycheck remains independently unlawful. Because AB 692’s remedies are cumulative with section 2802, the 2015 decision continues to invalidate the department specific slice of any clause, old or new.
The statute speaks of an “employer” in general terms. The leading cases all involved municipal departments, which supports coverage. AB 1697 discusses collective bargaining calendars as a reason for delay. It does not enact a general memorandum of understanding exemption.





