Can Your Employer Make You Repay a Signing Bonus or Training Costs in California?

If your employer is demanding repayment of a signing bonus or training costs after your departure, California law may be on your side. As of January 1, 2026, AB 692 significantly restricts when employers can enforce these kinds of repayment obligations, and contracts that do not meet the new statutory requirements may be void entirely.

What Is a Stay or Pay Agreement?

A stay or pay agreement is a clause in an employment contract that requires you to repay certain costs if you leave your job before a set period of time. Common examples include:

• Signing bonuses you received when you were hired
• Training costs your employer paid for
• Tuition reimbursement tied to continued employment
• Relocation expenses covered upfront

These clauses are sometimes called clawback provisions known as TRAPs (training repayment agreement provisions). They have long been used by employers across industries, including tech, healthcare, and finance, to discourage employees from leaving too soon.

Until recently, many of these agreements were enforceable in California. That has changed.

What California’s New Law Actually Says

California Assembly Bill 692 (AB 692) makes it unlawful for employers to include most stay or pay provisions in employment contracts. Employers can no longer require workers to repay a debt, allow a debt collector to pursue that debt, or impose any penalty or fee, simply because the employment relationship ended.

The law defines “debt” broadly. It covers money or its equivalent tied to employment-related costs, education-related costs, and more.

This applies to any employment contract signed on or after January 1, 2026. Agreements signed before that date are not affected by the new law.

What Happens If an Employer Violates the Law?

If your employer includes a prohibited repayment clause in a contract after January 1, 2026, that clause is void and unenforceable. Beyond that, you may have the right to sue. Under AB 692, workers can seek the greater of their actual damages or $5,000 per violation, plus injunctive relief and attorney’s fees. 

Are There Any Exceptions?

Yes. AB 692 does allow limited repayment provisions under specific, narrow circumstances.

Signing Bonuses

A signing bonus repayment clause may still be valid in California if all of the following are true:

• The repayment terms are in a separate agreement from your offer letter or employment contract
• You were given at least five business days to consult an attorney before signing
• The repayment amount is prorated over a retention period of no more than two years, with no interest
• You were given the option to defer receiving the bonus until the end of the retention period (meaning no repayment obligation at all)
• Repayment is only triggered if you voluntarily resign or are terminated for misconduct

That last point is important. If you are laid off, or if your employer ends your employment for reasons other than misconduct, they generally cannot require you to repay the signing bonus under a compliant agreement.

Training Costs and Tuition

Employers may still require repayment of tuition costs in limited cases, but only if the education is for a transferable credential (a degree from an accredited institution that is not required for your current job), the agreement is separate from your employment contract, the repayment amount is prorated and capped at the employer’s actual cost, and you would not owe anything if you are terminated without misconduct.

Standard on-the-job training, certifications required for your role, or any training that is mandatory as a condition of employment generally cannot be subject to repayment under the new law.

What About Older Agreements?

If you signed a repayment agreement before January 1, 2026, AB 692 does not apply. Those agreements could still be enforceable. However, California has other employee protections that may still apply to repayment agreements entered into before January 1, 2026 , and the terms may be challenged on different grounds. 

What grounds could a pre-2026 agreement be challenged on?

Even without AB 692, California law offers several ways to challenge an older repayment agreement, depending on its terms:

• Restraint of trade (Business & Professions Code § 16600). If the repayment obligation is large enough to effectively trap you in your job, it may function as an unlawful de facto noncompete.
• Unlawful wage clawback (Labor Code § 221). Employers can’t take back wages that have already been earned, or deduct repayment from your final paycheck.
• Employer expense-shifting (Labor Code § 2802). If the training was required for your job or primarily benefited the employer, the employer, not you, must bear that cost.
• Minimum wage violations. A repayment demand that effectively drops your pay below minimum wage can violate state and federal wage law.
• Unconscionability. A take-it-or-leave-it clause demanding repayment of inflated amounts far above the employer’s actual costs may be too one-sided to enforce.
• Unenforceable penalty (Civil Code § 1671). A flat repayment amount that doesn’t reflect the employer’s actual loss, the same sum whether you leave in month 2 or month 23, may be struck down as a penalty.

What This Means If Your Employer Is Demanding Repayment

If you are being asked to repay a signing bonus or training costs, there are several questions worth asking:

• When did you sign the agreement? If it was on or after January 1, 2026, it may be unenforceable.
• Was the repayment clause in a separate agreement, or buried in your offer letter? An agreement that does not meet the technical requirements of AB 692 could be void.
• Were you laid off or let go for reasons other than misconduct? If so, your employer may not have the right to demand repayment, even under a compliant agreement.
• Does the amount include interest or exceed what was originally paid? That could also make the clause unenforceable.

These details matter. The facts of your specific situation will shape whether you have a strong position to push back.

At TONG LAW, we support employees across the San Francisco Bay Area, Oakland, and Sacramento who are navigating complex employment situations like this one. Attorney Vincent Tong has experience on both the employer and employee side of these disputes, which means he understands how these agreements are drafted and where they may fall short. If you have received a demand letter or are unsure about a repayment clause in your contract, a case review could help you understand your options.

Frequently Asked Questions About Bonus and Training Costs

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

It depends on your contract. Under AB 692, a signing bonus repayment clause signed on or after January 1, 2026, is only enforceable if it meets strict conditions, including being in a separate agreement, being prorated, carrying no interest, and allowing a consultation period with an attorney. Additionally, repayment may only be triggered under specific circumstances. It is enforceable if the worker voluntarily resigns or is terminated for misconduct. However, repayment cannot be required if the worker is laid off or terminated without misconduct.

Is a training repayment agreement enforceable in California? 

Most are not, as of January 1, 2026. Employers can no longer require repayment for standard job training or required certifications. A narrow exception exists for tuition tied to a transferable credential, but it comes with significant restrictions.

What are the exceptions to AB 692 for signing bonus repayment? 

The main exceptions cover signing bonuses that meet specific procedural requirements, tuition for transferable credentials, approved apprenticeship programs, and government loan forgiveness programs. Each comes with its own conditions that must be met exactly as written in the law.

What happens if my employer sues me for a signing bonus in California? 

If your agreement was signed after January 1, 2026, and does not meet the requirements of AB 692, it may be void and unenforceable in court. You could also potentially countersue for damages of up to $5,000, plus attorney’s fees. The outcome depends on the specific facts of your case.

Questions About a Repayment Clause? Here’s How We Can Help.

If you are negotiating an offer or reviewing a contract with a repayment clause, understanding what is and is not enforceable can change what you ask for.California’s new employee debt repayment law may protect you, but the details of your contract and the circumstances of your departure will determine what your options are.

Contact TONG LAW for a case review. We represent employees in Oakland, Sacramento, and throughout the San Francisco Bay Area. You can reach us at (855) TONG-LAW or submit your information through our contact form to get started.

This post is for informational purposes only and does not constitute legal advice.