California's Stay-or-Pay Ban (AB 692): Signing Bonuses, Training Costs, and What You No Longer Owe

Can your California employer make you repay a signing bonus or the cost of training if you quit? As of January 1, 2026, a new law called AB 692 bans most of these “stay-or-pay” arrangements. But there is a critical catch: the law only applies to agreements you signed on or after that date. If you signed before 2026, your old repayment clause is generally still enforceable. So the honest answer to “what you no longer owe” is: it depends heavily on when you signed and how the clause is written.

Here is what AB 692 changed, what it still allows, and how to figure out where you stand.

At a glance

• AB 692 took effect January 1, 2026 and bans most “stay-or-pay” terms, meaning contract clauses that make you repay money or pay a penalty just because your employment ends.
• It is not retroactive. It applies only to agreements entered into on or after January 1, 2026. Clauses in earlier contracts are generally still enforceable.
• Narrow exceptions survive, including a tightly conditioned signing-bonus repayment and tuition for a transferable credential. Most ordinary training-cost paybacks are now barred.
• A prohibited term is void, and including one is unlawful. Affected workers can sue for the greater of their actual damages or $5,000 each, plus attorneys' fees.

Can my employer make me repay a signing bonus if I quit in California?

For a signing-bonus agreement you entered on or after January 1, 2026, generally no, unless the arrangement fits AB 692's narrow exception for sign-on bonuses. That exception has strict conditions, described below, and if any of them is missing, the repayment term is unenforceable. If you signed your bonus agreement before 2026, the old rules still apply and the clause may still be enforceable. When you signed is the first question to answer.

What is AB 692, and what does it ban?

AB 692 is a California law, effective January 1, 2026, that restricts “stay-or-pay” provisions in employment contracts. It builds on the state's 2024 ban on most noncompete agreements and sits in the same part of the law, Business and Professions Code section 16600 and following. The idea behind it is employee mobility: the Legislature decided that making workers pay to leave places unfair financial pressure on them and discourages them from changing jobs.

For agreements entered into on or after the effective date, AB 692 makes it unlawful to include a term that does any of the following when your employment or work relationship ends:

• Requires you to pay the employer, a training provider, or a debt collector for a “debt.”
• Lets the employer, training provider, or debt collector start or resume collection, or end forbearance, on a debt.
• Imposes any penalty, fee, or cost on you because you separated, such as a “quit fee,” retraining charge, or liquidated damages.

The law defines “debt” broadly to include money or property owed for employment-related or education-related costs, which sweeps in the training repayment agreement provisions, often called TRAPs, that require you to pay back the cost of job training if you leave early. It also defines “worker” broadly, covering current and prospective employees.

What does AB 692 still allow?

The ban is broad, but it has several narrow exceptions. Repayment terms can still be valid in these situations:

Government loan repayment or forgiveness programs

Contracts under a federal, state, or local loan-assistance program.

Approved apprenticeships

Programs approved by California's Division of Apprenticeship Standards.

Residential property

Contracts to lease, finance, or buy a home.

A narrow signing-bonus exception

A sign-on or discretionary bonus can carry a repayment term, but only if all of the conditions below are met.

Tuition for a transferable credential

An employer can seek repayment of tuition it paid for a degree from an accredited outside institution that is not required for your current job, but only under specific conditions.

The signing-bonus exception, in detail

A 2026-or-later signing-bonus repayment term is valid only if all of these are true. The repayment terms are in a separate written agreement, not buried in your main contract. You were told you had the right to consult a lawyer and given at least five business days to do so before signing. The repayment carries no interest, cannot run longer than two years, and is prorated based on how long you stayed. You had the option to defer receiving the bonus until the end of the retention period, so there is no repayment risk at all. And repayment can be triggered only if you resign voluntarily or are terminated for misconduct. If your employer fired you without misconduct, a valid clause generally cannot make you repay.

The transferable-credential tuition exception, in detail

Repaying tuition can still be required only if the agreement is separate from your employment contract, does not make earning the credential a condition of your job, states the repayment amount in advance and caps it at the employer's actual cost, prorates the amount without an accelerated schedule, and does not require repayment if you are terminated, except for misconduct.

What happens if my employer's clause breaks the rules?

For agreements covered by AB 692, a prohibited stay-or-pay term is void and unenforceable, and including it is itself unlawful. The law gives affected workers a private right of action. You, or a representative acting for a group of similarly situated workers, can sue for injunctive relief and recover the greater of your actual damages or $5,000 per worker, plus reasonable attorneys' fees and costs. That means a clause that would once have cost you thousands to walk away may now be unenforceable, and pursuing it against you may expose the employer instead.

Does AB 692 apply to my contract?

Start with the date you signed. If your agreement was entered into on or after January 1, 2026, AB 692 applies and the prohibited terms are void. If you signed before 2026, the law does not reach back to undo your clause, though other legal arguments may still exist depending on how the provision is written. Whether a specific clause is banned, fits an exception, or was validly grandfathered is exactly the kind of question worth reviewing rather than guessing, especially before you pay anything an employer says you owe.

What to do if your employer says you owe money for leaving

Before you pay, take a breath and gather the facts:

• Find the agreement that contains the repayment clause and note the date you signed it.
• Keep any demand letters, invoices, or messages claiming you owe money, and do not ignore deadlines in them.
• Do not assume the demand is valid just because it is on letterhead. After 2026, many of these clauses are unenforceable.
• Talk to an employment lawyer promptly, because responding correctly and on time matters. Do not calendar a deadline from a guide.

Frequently asked questions

Can my employer make me repay a signing bonus if I quit in California?

For agreements signed on or after January 1, 2026, generally not, unless the bonus arrangement meets AB 692's strict exception (separate agreement, right to consult counsel and five business days, no interest, prorated, two-year cap, deferral option, and repayment only for voluntary quit or misconduct). Agreements signed before 2026 are generally still enforceable.

Are training repayment agreements (TRAPs) legal in California?

For agreements entered on or after January 1, 2026, most are now barred. The main surviving path is tuition for a transferable credential under specific conditions. Ordinary “pay us back for your training if you leave” clauses are generally prohibited.

Does AB 692 apply to contracts I signed before 2026?

No. The law is not retroactive. It applies only to agreements entered into on or after January 1, 2026. Earlier clauses may still be enforceable, though how a clause is written can raise other issues worth reviewing.

Can I be charged a penalty for quitting?

Not under a 2026-or-later agreement. AB 692 specifically bars terms that impose a penalty, fee, or cost on you simply because your employment ends, such as a “quit fee.”

What can I recover if my employer used an illegal stay-or-pay clause?

For covered agreements, you may be able to obtain an order voiding the term and recover the greater of your actual damages or $5,000, plus attorneys' fees. Whether the law applies depends on your facts.

Were you told you owe money for leaving a job?

If an employer is demanding that you repay a signing bonus, training costs, or a “quit fee,” do not assume it is valid, especially for anything you agreed to in 2026 or later. It is worth having the clause and the demand reviewed before you pay. We represent employees, only employees, across California, and most of our work is in Los Angeles. We handle these matters on a contingency-fee basis, and the first consultation is free.

Call (424) 255-8376 or contact us for a free, confidential consultation.

The Law Offices of Jonathan J. Delshad is a Los Angeles based employment law firm representing employees across California in wrongful termination, discrimination, retaliation, harassment, and wage and hour matters. Representing employees is the core of the firm's practice. Mr. Delshad serves as Editor-in-Chief of the California Wrongful Termination Law Review and trained at Latham & Watkins. Recognition includes Super Lawyers (2022 to 2025), Best Lawyers (since 2017), and an Avvo 10.0 “Superb” rating. Reviewed for California employment law accuracy. Last updated: July 3, 2026.

Attorney advertising. This article is educational only and is not legal advice. Reading it does not create an attorney-client relationship, which exists only under a signed engagement agreement. Every case is different, and outcomes depend on the specific facts. Deadlines can run early, so consult a lawyer promptly about your situation.