The Ever-Changing Landscape of “Stay or Pay” Employment Contracts: New Restrictions in California and Existing Restrictions in Every State
November 20, 2025
Employers should take note of a new California law taking effect January 1, 2026, that restricts entering into contracts that require a worker to stay with the employer or pay for certain expenses advanced by or on behalf of the employer.
Assembly Bill 692, passed by the California Legislature on September 11, 2025, and signed into law by Governor Gavin Newsom on October 13, 2025, makes it unlawful for an employer to require an employee or prospective employee to execute, as a condition of employment, a contract that includes any terms that require an employee or prospective employee to pay an employer, training provider or debt collector for a debt if the employee terminates their employment.
In other words, with a few notable exceptions below, employers no longer can require employees who leave or applicants who do not join the company to repay costs paid for by the employer. The new law covers, for example, certain sign-on bonuses, retention bonuses, tuition reimbursement payments, training fees and repayment for immigration, visa or relocation expenses, which some employers require employees and applicants to repay if they do not stay with the company for a certain period or time or ultimately fail to join.
