Is This the End of Stay-or-Pay Clauses? States Move to Restrict Repayment Clauses
Recent legislative developments in multiple states have targeted “ stay-or-pay” clauses—contract terms that obligate employees to repay certain bonuses and educational or training expenses if the employee does not stay for a required period of time. Historically, these provisions were intended to safeguard employer investments in training and onboarding. However, state lawmakers are increasingly viewing them as restrictive and unfair to workers. Employers, particularly those with employees across multiple states, should carefully examine current agreements and prepare for compliance with these evolving state standards to mitigate risk and maintain lawful practices. California Effective January 1, 2026, California Assembly Bill 692 (AB 692) prohibits employment contracts that require employees to repay employment related costs upon early separation. If the employer violates the law, they may be exposed to penalties, fees, or costs such as liquidated damages. The California le...