When employers offer new hires a sign-on bonus or existing employees a retention bonus, they typically structure the bonuses as an upfront payment subject to a conditional repayment obligation if the employee’s employment ends prior to a specified retention date.

However, effective Jan. 1, 2026, California Assembly Bill 692 (codified at Business & Professions Code section 16608 and Labor Code section 926) limits an employer’s ability to impose repayment obligations for these upfront sign-on and retention bonuses, as well as certain other “stay-or-pay” practices (such as tuition and loan assistance programs), which are not detailed in this blog post.

Will AB 692 Apply Retroactively to Agreements Executed Before Jan. 1, 2026?

No, it will apply only to agreements executed on or after Jan. 1, 2026.

What Limitations Does AB 692 Place on Repayment Obligations for Sign-On Bonuses?

A sign-on bonus – again, a bonus paid upfront to a new hire at the outset of employment conditioned on continued employment through a future retention date – must meet all of the following conditions for its repayment obligation to comply with AB 692:

1. Separate Agreement: The repayment obligation terms are set forth in a separate agreement from the primary employment contract (e.g., offer letter or employment agreement);
2. Five Day Review Period with Attorney: The employee is notified that they have the right to consult an attorney regarding the agreement and provided at least five business days to...

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