Starting January 1, 2026, California Assembly Bill 692 (AB 692) will change the way employment contracts are written and enforced throughout the state.
The law targets stay-or-pay provisions and training repayment agreements, protecting Sacramento workers from financial penalties for leaving jobs.
If you have been asked to repay training costs or fees after leaving a job, contact an employment lawyer right away to protect your rights under AB 692.
What Is California AB 692?
AB 692 California law prohibits employers from requiring workers to:
- Repay training costs after quitting
- Pay financial penalties for ending employment
- Face debt collection tied to leaving a job
From January 1, 2026, employers will not be allowed to impose financial penalties on workers who leave their jobs. This law helps employees move freely between jobs and bans restrictions on trade.
Why Assembly Bill 692 Was Passed
Before AB 692, many employers used “stay-or-pay” contracts to keep workers from leaving. These agreements often made employees repay:
- Training costs
- Sign-on bonuses
- Relocation expenses
Lawmakers described stay-or-pay contracts as a form of economic pressure, especially in entry-level, healthcare, tech, and skilled labor jobs. AB 692 stops these contracts and lets workers leave their jobs without worrying about financial penalties.
Key Provisions of AB 692 California Law
For any qualifying agreement signed on or after January 1, 2026, California AB 692 makes it unlawful to include provisions that:
- Require Debt Repayment: Obligating a worker to repay an employer, training provider, or third-party debt collector after separation.
- Trigger Debt Collection: Allowing the initiation or resumption of collections once the worker leaves employment.
- Impose Exit Fees or Penalties: Fees, liquidated damages, or costs tied specifically to quitting, resignation, or termination.
Importantly, the law defines “worker” broadly, covering:
- Employees
- Prospective employees
- Interns and trainees
- Participants in job or training programs
Examples of Prohibited Employment Contract Clauses
Under AB 692 California employment contract restrictions, the following provisions are generally invalid for new agreements:
- Training Repayment Agreements (TRAPs): Mandatory repayment of employer-provided or required training costs.
- Clawback Provisions: Forced repayment of relocation, onboarding, or sign-on bonuses outside narrow exceptions.
- Separation or Replacement Fees: Charges triggered when a worker resigns or changes jobs.
These provisions are now presumed to function as unlawful restraints on worker mobility.
Limited Exceptions Under AB 692
While AB 692 is broad, it does allow narrow, carefully defined exceptions, including:
- Government Loan or Forgiveness Programs: Official state or federal loan repayment and forgiveness programs remain enforceable.
- Transferable Educational Tuition Repayment: Tuition reimbursement for general degrees or certifications (e.g., MBA, CPA) is allowed only if:
- The credential is transferable beyond the job
- Repayment is prorated
- Repayment is not accelerated
- Approved Apprenticeship Agreements: Certain registered apprenticeship programs are exempt.
- Signing or Retention Bonuses (Strict Requirements): Repayment may be allowed only if all statutory safeguards are met, including:
- Separate written agreement
- Clear notice of the right to consult an attorney
- Prorated repayment over no more than two years
- No obligation to repay before the retention period ends
Failure to meet any requirement voids the provision.
Enforcement, Penalties, and Legal Exposure
Violating California Assembly Bill 692 can expose employers to serious consequences, including:
- Statutory damages of at least $5,000 per affected worker
- Actual damages, if higher
- Injunctive relief preventing enforcement
- Attorney’s fees and costs payable to the worker
These penalties apply per worker, making noncompliance extremely costly for Sacramento-area employers.
Practical Guidance Under AB 692 California 2026
For Employers
- Audit offer letters and employment agreements immediately
- Eliminate standard training repayment language
- Ensure bonus agreements strictly comply with AB 692 requirements
- Consult employment counsel before using repayment provisions
For Workers
- You generally cannot be forced to repay training costs for quitting
- Debt collection threats may be unlawful
- Withholding final wages for training debt may violate California law
Why Speak with an Employment Lawyer?
AB 692 gives strong rights, but you must take legal action to enforce them.
A California employment attorney can help you:
- Review your employment contract
- Determine if a repayment clause is illegal
- Stop unlawful debt collection
- Recover damages and attorney’s fees
How Shimoda & Rodriguez Law, PC Can Help
At Shimoda & Rodriguez Law, PC, we have extensive experience representing California workers harmed by unlawful employment contract restrictions, wage violations, and retaliation.
AB 692 is a powerful tool for employees, but enforcement requires legal action. If your employer has attempted to impose a training repayment agreement, exit fee, or stay-or-pay clause, our team can help you:
- Evaluate whether your contract violates AB 692
- Stop unlawful debt collection efforts
- Pursue statutory damages and attorney’s fees
Concerned your employment contract violates California AB 692? Schedule a consultation with Shimoda & Rodriguez Law, PC to review your agreement and protect your rights.
FAQ
Can my employer make me repay training costs in California?
In most cases, no. Under AB 692, training repayment agreements are generally unenforceable.
What is a stay-or-pay contract?
A stay-or-pay agreement requires workers to pay money if they leave a job early. These are largely prohibited under AB 692.
Does AB 692 apply to all workers?
Yes. It covers employees, applicants, interns, and trainees.
Can my employer make me repay training costs if I quit?
Generally, no. California AB 692 prohibits many training repayment agreements that require employees to reimburse employers for training costs after resigning or changing jobs.
Does AB 692 apply to contracts signed before January 1, 2026?
The law primarily applies to agreements entered into on or after January 1, 2026. However, workers with older agreements may still have protections under other California employment laws.
Can an employer send my repayment to collections?
Not legally, if the agreement violates California Assembly Bill 692.
What should I do if I signed a repayment agreement?
You should speak with an employment lawyer to evaluate whether the contract is enforceable.