(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.
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.
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.
Although the ban is wide, there are strict exceptions in which repayment can still be done.
The employers may still impose repayment of:
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.
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.
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.
The actual damages or a statutory penalty of 5,000 USD per employee plus attorney fees can be sued by the employees.
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