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ARTICLE · 04 NOVEMBER 2026

California Updates “Stay Or Pay” Law

Fox Rothschild LLP
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California likes to promote employee mobility and last year took steps to prevent “stay or pay” provisions in the employment context. Accordingly, AB 692 prohibited certain contracts that required a worker to repay an employer when the employment relationship or work ended.

United StatesEmployment and HR
Nancy Yaffe
Nancy Yaffe
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California likes to promote employee mobility and last year took steps to prevent “stay or pay” provisions in the employment context. Accordingly, AB 692 prohibited certain contracts that required a worker to repay an employer when the employment relationship or work ended.

As originally enacted, the law applied to contracts entered into on or after January 1, 2026. As a result many employers updated their offer letter templates, employment agreement templates, terms for signing bonuses, relocation benefits, tuition reimbursement programs, and even promissory notes to prevent “claw-back” of funds advanced to employees for specified purposes, and to ensure compliance with AB 692. 

As originally drafted, the law provided an exception in the following two circumstances:

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