AB 692: Ban on “Stay or Pay” Provisions

Beginning January 1, 2026, employers will be prohibited from requiring employees to repay a debt, penalty, or fee, if their employment ends, except in limited circumstances and subject to strict criteria.

Discretionary bonuses with repayment requirements (e.g., sign-on, relocation, retention) can be entered into as long as the following are satisfied:

• Bonus is not tied to job performance
• Terms are in a separate agreement
• Retention period is 2 years or less
• Repayment only required if employee resigns or is terminated for misconduct
• Repayment is prorated based on remaining term and without interest
• Employee can defer payment until end of retention period (rather than receive it as an advance with repayment obligations)
• Employee notified of right to consult an attorney and given at least 5 business days to do so

Repayment of tuition costs for “transferable credential” is permissible with similar requirements.

New law may impact penalty, fee, cost or repayment structures in equity documents, incentive plans and loan or tuition repayment...