The Register, Issue 2: Your last paycheck is due on your last day

Two California rules decide how a job ends: when the last paycheck is due, and what you can be kept from doing next. Both are stricter than most people assume, and one of them changed this year.

What changed: most stay-or-pay clauses are banned from 2027

Correction, October 7, 2026: the emailed version of this issue said the stay-or-pay ban has applied since January 1, 2026. AB 1697, signed September 30, 2026, moved it to contracts entered on or after January 1, 2027. This page reflects the current law.

For contracts entered on or after January 1, 2027, an employment contract generally cannot require a worker to repay training costs or another debt when the job ends (Business and Professions Code 16608). AB 692 first set that date at January 1, 2026; AB 1697 moved it back a year and added exceptions, including qualifying retention bonuses. Repaying a sign-on or retention bonus is still allowed if it sits in a separate agreement, carries no interest, is prorated over no more than two years, applies only when the worker quits or is fired for misconduct, and the worker can choose to defer the bonus instead. Narrow exceptions remain, including certain tuition agreements and government loan forgiveness programs. A violation can cost the employer the greater of actual damages or $5,000 per worker. It sits alongside a rule California has held for more than a century: employee noncompetes are void, and since 2024, including one in a contract is unlawful.

For professionals

If you are fired or laid off, every dollar you have earned is due at the time you are let go, including unused vacation. If you quit with 72 hours of notice, it is due on your last day; without notice, within 72 hours. Your final check is owed whether or not you sign a severance agreement. And if an offer letter asks you to sign a noncompete or repay training costs or a bonus if you leave, the noncompete is void in California, and from 2027 most training-cost and debt repayment terms will be too. What still binds you, and what does not.

For companies

Have the final check ready before the termination meeting, not after it. A willful late payment keeps the employee’s daily wage running as a penalty for up to 30 days: an employee on $25 an hour and eight-hour days costs $6,000 in penalties alone. Then pull your offer letter and bonus templates and look for noncompete, non-solicit and repayment language. The final paycheck rules, step by step.

New at Urban Human Resources

• Six new California guides for small employers: final pay, meal and rest breaks under PAGA, leave, terminations and severance, noncompetes, and Cal-WARN layoffs, which added four new notice requirements this year. Start with the laws by headcount.
• Handed a severance agreement? If it limits what you can say about your workplace, California requires notice that you can consult an attorney and at least five business days to do it. If you are 40 or older and it releases age claims, federal law gives you 21 days to consider it (45 for a group layoff) and 7 days after signing to revoke. What to check before you sign.

One thing to do this week

Open the last offer letter you signed or sent and read it for three words: noncompete, repay, solicit. Five minutes tells you whether it needs to change.

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McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.