Overview
A recent wave of state laws reflects a rethinking of the use of “stay-or-play” arrangements in employment agreements. Joining Connecticut, Colorado and other states, California and New York have recently enacted laws that narrow the circumstances in which an employer may require an employee to repay training costs, signing bonuses and other debts upon their separation from employment. Employers operating in these states should take care when documenting repayment arrangements to comply with these new requirements.
Background: The Federal Landscape and State Response
Recent state legislation follows the effective collapse of federal efforts to regulate practices and policies that are perceived to restrict employee mobility. In April 2024, the Federal Trade Commission (FTC) issued a sweeping rule that would have banned most employee noncompetition agreements as well as certain training repayment agreement provisions (so-called “TRAPs”). Federal courts blocked that rule before it could take effect, and, in September 2025, the FTC—under a new administration—withdrew its appeals defending the rule.
With federal action stalled, states have moved to fill the void. Most recently, California and New York have adopted legislation addressing training repayment agreements and similar stay-or-pay mechanisms.
California: AB 692
What the Law Does
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