Attorney General Bonta Issues Warning Against Unlawful Employer-Driven Debt Arrangements

SACRAMENTO – California Attorney General Rob Bonta today issued a legal alert to remind all employers of the state-law restrictions on employer-driven debt. Employer-driven debt is a term referring to debt incurred by individuals through employment arrangements. This can include arrangements where an employer provides training, equipment, or supplies to a worker, but requires the worker to reimburse the employer for these expenses if the worker leaves their job before a certain date.

"Employer-driven debt can harm workers, consumers, and competition. California is committed to safeguarding our workers and our future through strong labor and consumer protection laws," said Attorney General Rob Bonta. "Employer-driven debt practices have raised serious concerns, potentially impacting workers' rights and exposing them to financial risks. We remind all employers in the state that these practices may violate California law. We will uphold the rights and protections of workers and consumers, and we will take any and all legal action necessary to protect Californians from these predatory practices."

The growth of employer-driven debt products can stifle competition in the labor market and force workers to remain in jobs sacrificing mobility, better wages and opportunity, and competition for labor. These debt products are prevalent across the market, including in healthcare, trucking, aviation, retail, and service industries.

The Attorney General’s office reminds employers that employer-driven debt may violate a number of California laws, including labor laws and consumer protection statutes. For instance, the Labor Code requires that employers bear the cost of necessary expenditures incurred by employees as a direct result of discharging their duties. This includes costs for mandatory job training unless the training is necessary to legally practice the workers’ profession. In addition, the Rosenthal Fair Debt Collection Practices Act prohibits an employer or its agent from engaging in unfair or deceptive acts or practices when attempting to collect on employer-driven debt. Any abusive employer-driven debt practices may violate the California Consumer Financial Protection Law. A violation of these or other statutes may constitute an independent violation of California’s Unfair Competition Law, which prohibits unlawful, unfair, or fraudulent business practices. Additionally, the U.S. Consumer Financial Protection Bureau issued a recent report illustrating the risks workers face from employer-driven debt. Workers and consumers who believe their rights have been violated may file a complaint at oag.ca.gov/report.

The legal alert can be found here.