California Assembly Bill 692 (AB 692) adds new restrictions on employment contract repayment clauses, commonly referred to as “stay-or-pay” provisions. Effective January 1, 2026, the law broadly prohibits employers from requiring employees to repay sign-on bonuses, training expenses or other employment-related benefits upon separation, except in limited circumstances.

The statute reflects the Legislature’s continued focus on employee mobility and wage protection and will require many employers to revisit compensation and incentive practices.

Although the statute does not apply retroactively, it governs new employment agreements and incentive arrangements beginning in 2026, making compliance planning critical.

What Is Prohibited
Under AB 692, employers may not include in employment contracts terms that:

• Mandate repayment of a debt to the employer, a training provider or a debt collector if the worker’s employment or work relationship ends;
• Authorize the employer or debt collector to initiate or resume collection of a debt, or to end forbearance on a debt, upon termination of employment; or
• Impose a penalty, fee or cost on a worker in connection with the termination of the employment or work relationship.

Statutory Exceptions Under AB 692
Although AB 692 broadly restricts “stay-or-pay” and repayment provisions, the statute sets forth several specific and narrowly drawn exceptions:

Retention Bonus Repayment
AB 692 permits limited repayment obligations for certain...

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