On September 11, 2025, the California legislature approved a bill (AB 692) prohibiting many forms of “stay-or-pay” agreements as part of the state’s continued efforts to protect employee mobility. The new law will bar common arrangements that require an employee to reimburse employers for costs like relocation expenses and work-related training programs if the employment ends before an agreed upon time, with exceptions for tuition and upfront discretionary bonus repayments as long as employers follow certain restrictions prescribed by the new law. Unless Governor Gavin Newsom vetoes this bill before October 13, the bill will become law and will apply to agreements entered on or after January 1, 2026.
What Does AB 692 Prohibit?
All employers are prohibited from requiring a worker to sign, as a condition of employment, a contractual provision that does any of the following:
“Penalty, fee, or cost” includes, but is not limited to, a replacement hire fee, retraining fee, replacement fee, quit fee, reimbursement for immigration or visa-related costs, liquidated damages, lost goodwill, and lost profit.
Exceptions
There are two main exceptions to the general prohibition.
Tuition Repayment Exception
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