If you signed an agreement promising to repay your employer for training costs, relocation expenses, or a sign-on bonus — and now you’re worried about leaving your job — California has your back. A new law called AB 692 makes most california training repayment agreement provisions unenforceable for contracts signed on or after January 1, 2026. And even if you signed yours earlier, you may still have strong legal protections.

These agreements — sometimes called “stay-or-pay” clauses or TRAPs (Training Repayment Agreement Provisions) — have trapped workers in jobs they wanted to leave for years. Employers used them as invisible handcuffs: quit before a certain date and you owe us $5,000, $10,000, sometimes more. That era is ending in California.

Here’s what you need to know.

What AB 692 Actually Bans

AB 692, codified as Section 16608 of the California Business and Professions Code and Section 926 of the Labor Code, declares most employment-related repayment clauses to be unlawful restraints on trade. That’s a strong legal designation — it means these provisions are void, not just discouraged.

Starting January 1, 2026, employers cannot require workers to repay costs for:

• Training and education provided by the employer or required for the job
• Relocation expenses the employer covered when hiring you
• Visa and immigration costs your employer paid on your behalf
• Sign-on bonuses (with narrow exceptions — more on that below)

The law is deliberately broad. It defines “employer” to include parent companies, subsidiaries, affiliates, contractors, and third-party agents. It also protects “workers” — not just traditional employees — which includes anyone participating in job training or skills training programs.

In short, if you were required to do the training as part of your job, your employer cannot make you pay for it when you leave.

Two Narrow Exceptions That Survived

AB 692 isn’t a total ban. Two narrow categories of repayment agreements are still allowed, but the conditions are strict.

Tuition for transferable degrees. If your employer paid for you to earn a degree from an accredited institution — and that degree wasn’t required for your current role — a repayment agreement may still be valid. The key word is “transferable.” The degree must have value beyond your current employer. A proprietary certification that only applies to your employer’s systems wouldn’t qualify. The law doesn’t define “degree” precisely, which means employers should interpret this narrowly.

Sign-on bonuses with strict guardrails. Employers can still offer sign-on bonuses with repayment terms, but only if:

• The agreement is separate from your offer letter or employment contract
• You receive at least five business days to review it before signing
• Repayment is prorated over time (no lump-sum clawbacks)
• No interest is charged
• The retention period is two years or less

If your employer buried a sign-on bonus repayment clause inside your offer letter and gave you 24 hours to sign, that doesn’t meet the standard.

What If You Signed Your Agreement Before 2026?

Here’s the critical question many workers are asking: Does AB 692 apply to me if I signed my training repayment agreement before January 1, 2026?

The direct answer is no — AB 692 is not retroactive. It applies to contracts signed on or after its effective date.

But that doesn’t mean your older agreement is automatically enforceable. California has long been one of the most protective states for workers, and several existing laws may invalidate your pre-2026 repayment clause:

• Business and Professions Code Section 16600 broadly prohibits contracts that restrain someone from engaging in a lawful profession. Courts have struck down stay-or-pay clauses that functionally operate like non-compete agreements.
• Labor Code Section 2802 requires employers to cover necessary business expenditures. If the training was required for your job, your employer may have been legally obligated to pay for it — and cannot shift that cost to you.
• Unconscionability doctrines allow courts to void contract terms that are unreasonably one-sided, especially when the employee had no real bargaining power.

Recent enforcement actions confirm that regulators are taking these older agreements seriously. In July 2025, attorneys general from California, Colorado, and Nevada reached a $2.9 million settlement with HCA Healthcare over allegedly unlawful training repayment agreements imposed on nurses. PetSmart settled a similar case for $225,000 involving groomer training costs. These weren’t AB 692 cases — they were brought under existing law.

If your employer is demanding repayment under an agreement you signed before 2026, don’t assume you have to pay. Talk to an employment lawyer in Los Angeles who can evaluate whether the agreement holds up under California’s existing protections.

What Happens If Your Employer Violates AB 692

AB 692 has real teeth. It creates a private right of action, meaning you can sue your employer directly — you don’t need to wait for a government agency to act on your behalf.

If your employer enforces an illegal repayment provision, you may be entitled to:

• Statutory damages of the greater of your actual damages or $5,000 per affected worker
• Injunctive relief — a court order stopping the employer from enforcing the clause
• Attorney’s fees and costs — your employer pays your legal bills if you win

The law also allows workers to bring claims on behalf of similarly situated coworkers. If your employer imposed the same illegal repayment clause on an entire department or training class, a single claim can cover everyone affected.

This matters because employers often count on workers not knowing their rights — or not thinking the amount is worth fighting over. AB 692 changes that math. With statutory damages and attorney fee recovery, even a $3,000 repayment demand becomes worth challenging.

If you believe your employer is violating your workplace rights — whether through illegal repayment demands, wrongful termination, or wage and hour violations — you have options.

Industries Where Training Repayment Agreements Are Most Common

If you work in one of these industries, you’re more likely to have signed a stay-or-pay agreement:

• Healthcare — hospitals and staffing agencies frequently required nurses, technicians, and therapists to repay training costs, sometimes exceeding $10,000
• Trucking and transportation — CDL training programs routinely included repayment clauses locking drivers into low-paying positions
• Technology — coding bootcamps and employer-sponsored certifications often came with strings attached
• Retail and services — companies like pet grooming chains and salon franchises charged workers for training that primarily benefited the business

AB 692 applies across all industries. If your employer required the training for your job, they cannot make you pay for it — period.

Frequently Asked Questions

Do I have to pay back training costs if I quit my job in California?
For agreements signed on or after January 1, 2026, the answer is almost certainly no. AB 692 prohibits employers from requiring workers to repay training costs, relocation expenses, visa costs, and most sign-on bonuses. For older agreements, existing California labor laws — including Labor Code Section 2802 and Business and Professions Code Section 16600 — may still make the repayment clause unenforceable.

Does AB 692 apply to agreements signed before 2026?
No, AB 692 only applies to contracts signed on or after January 1, 2026. However, pre-2026 training repayment agreements can still be challenged under California’s existing worker protections. Several recent enforcement actions and settlements confirm that older stay-or-pay clauses are vulnerable to legal challenge.

Can my employer deduct training costs from my final paycheck?
California law strictly limits what employers can deduct from your wages. Deducting training repayment costs from a final paycheck without your written authorization may violate California’s wage payment laws. If this happened to you, contact an employment attorney immediately.

What should I do if my employer is threatening to send my training repayment to collections?
Do not ignore the demand, but do not pay without getting legal advice first. Many training repayment agreements are unenforceable under California law. An employment lawyer can review your agreement, assess whether it’s valid, and respond to the collection threat on your behalf.

Does AB 692 protect independent contractors?
AB 692 uses the term “worker” rather than “employee,” which is broader than many employment statutes. However, the legislature removed express references to independent contractors during the drafting process, leaving some ambiguity. If you’re an independent contractor facing a repayment demand, consult with a lawyer to evaluate your specific situation.

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Take Action Today

If your employer is demanding repayment for training, relocation, or a sign-on bonus — or threatening to withhold your final paycheck or send you to collections — you don’t have to face it alone. California law is on your side.

Contact MPC Legal for a Free Case Review →

Our employment law team helps workers across Los Angeles and throughout California fight back against illegal workplace practices. There are no fees unless we win your case.

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This article is for informational purposes only and does not constitute legal advice. Every situation is different. If you need guidance about a specific training repayment agreement or employer demand, please consult with a qualified employment attorney.