Divyanshu G 
(C): Unsplash
Starting January 1, 2026, California’s landscape for employee training repayment changes drastically. For years, companies used “stay-or-pay” clauses—often called TRAPs (Training Repayment Agreement Provisions)—to lock workers into jobs by threatening massive debts if they quit early. Under the new California labor law (AB 692), these coercive contracts are largely banned, a move that could significantly impact workforce dynamics across the state, including employment conditions in both Richest vs Poorest Cities in California.
Understanding Employee Training Repayment
In case you had signed an agreement under which you must re-pay your employer the expenses of training, equipment, or even onboarding in the event of resigning, AB 692 probably rescinds it.
The End of TRAPs in California
Applicable to the contracts signed on or since January 1, 2026, the employer should not require repayment of job training or fee to quit the job. This ban extends to the situation when the debt has been made a loan or penalty. The legislation is supposed to safeguard the mobility of workers so that you do not get stuck in a toxic work environment because of a debt of 10,000 dollars to take a compulsory training.
Exceptions Under California Labor Law
Although the ban is wide, there are strict exceptions in which repayment can still be done.
When Can They Charge You?
The employers may still impose repayment of:
- Sign-on Bonuses: These must be legally independent of the employment contract, and be pro-rated.
- Transferable Credentials: To the extent that it is not a condition of employment, voluntary training leading to the issuance of a portable degree/license (e.g., a CPA license), and the cost is given in advance.
FAQs
1. Does AB 692 apply to contracts signed before 2026?
No. The law is prospective in application to the contracts signed in or after January 1, 2026. Nevertheless, old contracts can still be disputed with the other labor codes.
2. Can my employer charge me for a uniform if I quit?
As a rule, no. According to the California law, the employer is expected to cover business costs that are necessary to the employee such as mandatory uniforms and training.
3. What if I am fired? Do I still have to pay back my sign-on bonus?
In AB 692, valid bonuses are typically only repayable upon resignation or when you are terminated due to willful misconduct, but not on the regular layoffs.
4. What is the penalty for employers violating this law?
The actual damages or a statutory penalty of 5,000 USD per employee plus attorney fees can be sued by the employees.
