Bill Would Ensure Workers Have Protections Against Employer-Driven Debt

September 10, 2025 | SACRAMENTO, Calif. — The California State Senate passed AB 692, a bill introduced by Assemblymember Ash Kalra that would prohibit employers from using the threat of debt collection—such as Training Repayment Agreement Provisions (TRAPs)—to lock workers into a job. The bill is now one step closer to Governor Newsom’s desk for a final signature and will add California to the list of 10 states that have taken bold legislative action to rein in the use of predatory TRAPs or “stay-or-pay” contracts this year alone.

This vote comes just days after the Trump-Vance Federal Trade Commission sold out workers when it voluntarily dropped its legal defense of the Commission’s 2024 non-compete rule, which would have banned exploitative non-compete agreements and TRAPs. California is the first state to take action to pass new policies that protect workers from this type of abusive practice since President Trump revoked a Biden-era executive order promoting competition last month. 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. 

“As President Trump caves to his billionaire donors and orders the federal government to roll back protections against predatory training debt schemes and stay-or-pay contracts, California lawmakers have drawn a line in the sand,” said Protect Borrowers senior policy advisor Chris Hicks. “We look forward to Governor Newsom signing this critical legislation and showing President Trump that he stands with nurses, retail workers, truck drivers, and millions of other workers across the Golden State—no one should ever be trapped at work in a free California.”

The bill is cosponsored by the California Nurses Association/National Nurses United, California Federation of Labor Unions AFL-CIO, California Employment Lawyers Association, American Economic Liberties Project, and Protect Borrowers.

Background

California joins a growing number of states that have taken action against stay-or-pay contracts, such as TRAPs. In 2025 alone, 10 states have taken action to protect workers from TRAPs:

  • Earlier this year, New York passed the Trapped At Work Act with bipartisan support, which prohibits all employers statewide from using TRAPs in the Empire State.
  • Colorado passed SB 25-083 with bipartisan support, which prohibits hospitals and healthcare staffing companies from charging medical professionals any damages for departing their jobs. 
  • Indiana passed SEA 475, which prohibits hospitals from imposing stay-or-pay contracts—contracts that work by charging departing workers a fee for quitting, including TRAPs—in physicians’ employment contracts if the terms require workers to remain at a facility for more than three years.
  • Wyoming passed SF0107, which prohibits employers from imposing stay-or-pay contracts that last longer than four years; and it also requires employers to prorate the amount that can be collected every year of employment.
  • Massachusetts held a hearing on SB 1038, a bill that includes language that would prohibit large corporations from using TRAPs and similar restraints on workers. SBPC’s deputy executive director and managing counsel, Persis Yu, testified in support of the bill.
  • Nevada, Ohio, Vermont, and Washington have all introduced bills that would prohibit or limit employers from using TRAPs and other contracts that charge employees fees for quitting.

As federal enforcers undo protections for workers from TRAPs and non-competes, state regulators are also filling the gap to combat corporations’ use of threats of debt collection to trap workers in their jobs.

  • Last month, Colorado AG Phil Weiser filed a lawsuit against PetSmart for forcing PetSmart pet groomers into an illegal training debt scheme. Just as BreAnn Scully claimed in July 2022, this suit claims that PetSmart lured would-be groomers into employment by promising “free” training and equipment, but then charged them as much as $5,500 if they departed within two years. According to the lawsuit, PetSmart continued to use TRAPs after state lawmakers outlawed their use.
  • Days before the PetSmart litigation was filed, the AGs of California, Colorado, and Nevada announced a multi-state settlement with HCA, the largest for-profit healthcare system in the country, for unlawfully requiring entry-level nurses to enter a years-long, abusive training debt scheme.
  • In May, New York AG Letitia James reached a settlement with Advance Care Staffing (ACS), a healthcare staffing company, to recover over $660,000 for foreign-recruited nurses who were subjected to exploitative stay-or-pay contracts. Her settlement comes on the heels of ACS being sued by a former nurse and the Biden Administration’s U.S. Department of Labor. 

Further Reading

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

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

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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.