For years, California businesses have used “stay-or-pay” agreements as a safety net. The logic was simple: if we invest thousands in your signing bonus, relocation, or training, you should stay long enough for us to see a return. If you leave early, you pay us back.

But under AB 692, that safety net is largely gone.

Effective January 1, 2026, California heavily restricts or outright bans contracts requiring employees to repay certain “debts” upon leaving a job. Regulators increasingly view these provisions as unlawful restraints that discourage employees from leaving their jobs.

What Agreements Could Create Problems?

If your employment contracts, offer letters, or handbooks require employees to repay costs related to any of the following, your business may be exposed to significant liability:

• Internal training programs or “quit fees”
• Relocation expenses
• Visa and immigration processing costs
• Unstructured retention bonuses

The True Cost of an Outdated Template

Many business owners do not realize they are exposed because they are relying on older templates or agreements that simply have not kept up with California law.

Under AB 692, prohibited provisions may be considered completely unenforceable, and employees may be able to pursue statutory penalties, actual damages, and attorney’s fees.

Because these claims can quickly escalate into class-action disputes, outdated onboarding documents may create far more exposure than employers realize.

The Good News: Some Exceptions Still Exist

AB 692 is not a blanket ban, but the exceptions are narrow.

Certain sign-on bonuses and tuition reimbursement agreements may still be enforceable if they meet very specific legal requirements, including proper structure, prorated repayment terms, and interest-free provisions.

Take Action

Sometimes the biggest issue is what stayed in an agreement long after Sacramento changed the rules.

If your business uses training agreements, signing bonuses, or repayment policies, now is a good time to revisit them. A quick review today may help prevent a much bigger problem later. Contact our office today to schedule a quick contract compliance review.

Are your job postings and compensation practices aligned with SB 642?

Taking a closer look now may help prevent unnecessary exposure later on.
Contact Chase Law Group

WWW.CHASELAWMB.COM
310-545-7700

_{Please note that this article is for informational purposes only and should not be considered legal advice and does constitute an attorney-client relationship. It is recommended to consult with an attorney directly for specific guidance pertaining to your business and its practices.}