With Governor Newsom’s Signature, Nurses, Pet Groomers, and Millions of Other Workers Are Free from Predatory Employer-Driven Debt

October 13, 2025 | WASHINGTON, D.C. — Today, California Governor Gavin Newsom signed AB 692 into law, legislation introduced by Assemblymember Ash Kalra that prohibits employers from using the threat of debt—such as Training Repayment Agreement Provisions (TRAPs)—to lock workers into a job. With this law now enacted, California is home to the strongest set of protections from stay-or-pay contracts in the country.

Behind this groundbreaking legislation, workers from across California mobilized in support of AB 692, demanding lawmakers ban employers from trapping them in debt. A coalition of labor, competition, and consumer advocates fought for three years to advance changes to California law to ban these predatory contracts—a coalition led by the California Nurses Association/National Nurses United, the California Federation of Labor Unions, the California Employment Lawyers Association, Towards Justice, American Economic Liberties Project, and Protect Borrowers. These organizations worked in partnership with California Attorney General Rob Bonta to win this critical new law.

“TRAPs and other types of exploitative stay-or-pay contracts only have one purpose: to lock workers into bad jobs with poor working conditions. California is ending this predatory practice and ensuring that workers across the state no longer have to fear a crushing financial penalty just because they had the audacity to quit their job. We commend Governor Newsom for signing AB 692 into law,” said Protect Borrowers Senior Policy Advisor Chris Hicks. “As President Trump caves to his billionaire donors and turns his back on workers struggling against this exact type of exploitation, California has shown that it will protect workers from employers who would use debt as a tool of coercion in the workplace.”

The new law comes amidst an alarming rollback of federal efforts intended to protect workers from these exploitative employment contracts. In July, President Trump revoked a Biden-era executive order promoting competition. By revoking this guidance, it gave government agencies the green light to abandon efforts to protect workers from a slew of anticompetitive practices, like non-competes and TRAPs. In a matter of weeks, numerous agencies did just that, rescinding guidance memos on how imposing TRAPs on workers is unlawful, withdrawing from a court case to fight for rules that prohibited these types of contracts, and quietly settling or removing themselves from cases initiated by the Biden Administration. In response to this rollback of worker protections, state lawmakers like Asm. Kalra are stepping up to create new protections for workers against TRAPs.

Research has found that nearly 1-in-12 workers are bound by restrictive employment agreements that require them to incur thousands of dollars of debt for routine on-the-job training, regardless of the quality or necessity. This research shows that the use of TRAPs has become increasingly prevalent in certain industries, including aviation, healthcare, long-haul truck driving, and retail. 

Governor Newsom’s signature empowers workers across the country as they grow the movement to ban TRAPs. New York passed the “Trapped at Work Act” earlier this year, which is currently awaiting Governor Hochul’s signature. In Minnesota, Ohio, and Vermont bills that aim to ban employers from using TRAPs across all workforces and industries are gaining momentum, moving through committee hearings and picking up bipartisan support.

Background on California’s Efforts to Protect Workers from TRAPs

California is the first state to take action to pass new policies that protect workers from this type of abusive practice since the Federal Trade Commission withdrew from defending its non-compete rule in federal court, which would have prohibited most TRAPs and stay-or-pay contracts. In addition to California, states coast-to-coast took action to limit or ban the use of stay-or-pay contracts in 2025, including Colorado, Indiana, and Wyoming. 

The new law builds on previous work to safeguard workers from TRAPs in California. In 2020, California Nurses Association sponsored AB 2588, a bill also introduced by Asm. Kalra, in response to hospitals requiring newly hired nurses to sign TRAP contracts as a condition of employment. Signed by Governor Newsom in fall 2020, the law barred employers from requiring direct care workers, including nurses, to pay for employer-mandated training.

TRAPs gained national attention when BreAnn Scally filed a class action lawsuit in the Superior Court of the State of California against PetSmart, her former employer, for their use of TRAPs in July 2022. Ms. Scally’s case, Scally v. PetSmart, was brought by Towards Justice and Jubilee Legal, with support from Protect Borrowers. This groundbreaking complaint alleged that Ms. Scally took a job at PetSmart because she believed PetSmart when it said it offered its employees “free paid training” to help them learn how to groom. Instead, PetSmart forced her and other workers into a TRAP that required them to repay the company $5,000 for on-the-job education and training if they quit, were fired, or were laid off within two years of beginning to work as a groomer. 

In July 2025, California AG Bonta, in partnership with the AGs of Colorado and Nevada, announced a multi-state settlement with HCA Healthcare for unlawfully requiring entry-level nurses to enter years-long, abusive TRAPs. The states’ investigation found that HCA violated California employment and consumer protection laws, as well as the federal consumer financial protection laws, by requiring nurses’ enter these TRAPs. HCA agreed to pay a total of $2,900,000 in penalties to the states, including providing full restitution to nurses who made payments on their TRAP debt to HCA.

Further Reading

SBPC report on TRAPs: Trapped at Work: How Big Business Uses Student Debt to Restrict Worker Mobility

Read more about how States are taking action to protect workers from TRAPs: As Trump Abandons Workers, Labor Day Reminds Us to Keep Protecting Workers 

SBPC toolkit on how states can stop TRAPs: Training Repayment Agreement Provision (TRAP) State Legislative Toolkit

A copy of the complaint in Scally v. PetSmart, filed in the Superior Court of the state of California, is available here.

Read Dave Jamieson’s coverage of Scally v. PetSmart in the Huffington Post: A PetSmart Dog Groomer Quit Her Job. They Billed Her Thousands Of Dollars For Training.

California Attorney General Bonta’s July 2023 Legal Alert about TRAPs and employer-driven debt: Attorney General Bonta Issues Warning Against Unlawful Employer-Driven Debt Arrangements

California Attorney General Bonta’s October 2024 Consumer Alert, including information on TRAPs: AG Attorney General Bonta Issues Consumer Alert Reminding California Workers of Their Rights

A copy of the California Attorney General’s complaint in California v. HCA Healthcare is available here.

Read more about Protect Borrowers work on TRAPs: Background on Training Repayment Agreement Provisions

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About Protect Borrowers

Protect Borrowers (formerly Student Borrower Protection Center) is a nonprofit organization led by a team of experts, lawyers, and advocates fighting to build an economy where debt doesn’t limit opportunity. We investigate financial abuses, take predatory companies to court, and push for policies to protect working people from debt traps. We aim to deliver immediate relief to families while building power, driving systemic change, and fighting for racial and economic justice.

Learn more at protectborrowers.org or follow us on social @BorrowerJustice.