California employers that spent much of 2026 revising their sign-on bonuses, retention agreements, and other compensation arrangements in response to Assembly Bill 692 (AB 692) now face a somewhat unexpected development. On September 30, 2026, Governor Gavin Newsom signed Assembly Bill 1697 (AB 1697), postponing the application of California’s new restrictions on employment-related repayment obligations and expanding several statutory exceptions.
For employers that have already modified their agreements, the legislation raises an important practical question: should those changes remain in place, or does the amended law permit a different approach?
The answer depends on when the agreement was executed, how the compensation arrangement is structured, and whether the employer wishes to preserve or reintroduce repayment obligations going forward.
As originally enacted, AB 692 added Section 16608 to the California Business and Professions Code and Section 926 to the Labor Code, generally prohibiting contracts entered into on or after January 1, 2026, from requiring workers to repay debts, incur penalties, or assume other financial obligations because their employment or work relationship ends.
The law particularly affected traditional sign-on and retention bonus arrangements that required employees to repay an up-front payment if they left before completing a specified service period. It also reached certain training reimbursement...
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