Training repayment agreement provisions, known as “TRAPs,” refer to clauses in employment contracts that require the worker to pay for training programs if the worker leaves their job within a certain amount of time. These provisions are gaining popularity especially in light of many state and federal proposals to ban noncompete agreements that temporarily prohibit departing employees from joining or starting competing enterprises.

A report by the Student Borrower Protection Center in 2022 estimated that three industries heavily reliant on the clauses – healthcare, trucking, and retail – employ one third of US workers. A 2022 survey of registered nurses (RNs) found that nearly 40% of RNs who started their career in the past decade were subject to a TRAP for new graduate residency programs.

The California Legislature approved Assembly Bill 695, an act to add Section 16608 to the Business and Professions Code, and to add Section 926 to the Labor Code, relating to employment. AB 695 was approved and signed into law by Governor Newsom on October 13, 2025.

This new law, which takes effect on January 1, makes 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 that require a worker to assume a debt if the employment is terminated, except as provided; provides that the unlawful contract is a contract in restraint of trade and is void; and provides for a private right of action.

Proponents of these “stay-or-pay” provisions argue that they are necessary to lessen the costs of turnover, and are a more narrowly tailored and fairer substitute for noncompete clauses, given that TRAPs only apply if the worker leaves before the employer’s investment has been recouped. However, opponents argue that these programs shift onto workers the costs of basic on-the-job training, and limit their mobility and bargaining power.

The California Nurses Association, Student Borrower Protection Center, California Employment Lawyers Association, California Federation of Labor Unions AFL-CIO, and American Economic Liberties Project, co-sponsors of this measure, state that, “In 2023, the Consumer Financial Protection Bureau (CFPB)’s comprehensive report on employer-driven debt included examples of TRAPs where workers were indebted to their employers between $4,000 and $30,000.

Through TRAPs, employers often shift onto workers the costs of on-the-job training, orientation, equipment, or other supplies necessary to perform their work duties. In other stay-or-pay contracts, employers force workers into contracts with income-share requirements, quit fees, liquidated damages provisions, or other financial arrangements that a worker must pay their employer if they leave their job before fulfilling a minimum work commitment.