California’s AB 692: Can Your Employer Really Make You Repay Training Costs?

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.

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