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November 25, 2025
Effective January 1, 2026, California employers will be restricted from entering contracts that require a worker to stay with the employer for a defined period or else pay for certain expenses advanced by the employer.
The Governor of California signed Assembly Bill 692 into law on October 13, 2025, making it unlawful for an employer to require an employee or prospective employee (collectively referred to as “employee”)—as a condition of employment—to execute a contract with terms that require the employee to repay the employer for a debt if the employee terminates employment.
Historically, some employers have required employees to contractually agree that they must repay the employer for certain out-of-pocket costs if the employee does not stay with the employer for a certain period or if the employee fails to join the employer. These costs include such things as sign-on bonuses, retention bonuses, tuition reimbursement, training fees, relocation expenses, and immigration/visa expenses. Other than some notable exceptions listed below, the days of requiring repayment soon will be gone in California.
The exceptions are:
Violations of this new law will be considered acts of unfair competition, and an impacted employee or applicant may bring a civil action on behalf of themselves and other similarly situated employees. A violation is subject to a monetary penalty of actual damages, or $5,000, whichever is greater. Successful litigants also can recover attorney’s fees.
Contracts with repayment obligations entered before January 1, 2026, shall remain enforceable. Employers with employees in California, however, should review their existing offer letters, contracts, and bonus programs to ensure they comply with the new law going forward.
The author of this article, Andrew DeLucia, is a member of the Bars of Pennsylvania and New Jersey. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, New Jersey, California or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
