“Stay or Pay” Contract | Assembly Bill 692

“Stay or pay” contracts have become increasingly common in California workplaces, particularly in industries that require training or onboarding costs. These agreements typically require an employee to remain with an employer for a specified period of time or repay certain expenses if they leave early.

However, Assembly Bill 692 significantly changed how “stay or pay” provisions are treated under state law.

If you have been paid unfairly due to a “Stay or Pay” contract, contact our Orange County wage and hour violation attorneys to seek compensation and discuss your legal options. Schedule a free consultation today.

What Exactly Is a “Stay or Pay” Contract?

A “stay or pay” contract requires an employee to either:

• Remain employed for a defined period of time, or
• Repay costs if they leave before that period ends

Employers often link these agreements to training, licensing, relocation, or onboarding expenses. In practice, many agreements function as financial penalties for resigning, even when the employee leaves for legitimate reasons.

Before AB 692, employers frequently used these contracts to discourage employees from leaving or to recover broad categories of costs that were not truly voluntary or transferable.

What Assembly Bill 692 Changed

Assembly Bill 692 amended California law to limit when employers may require repayment from employees. The law reflects California’s long-standing policy against agreements that restrain employee mobility or function as unlawful penalties. AB 692 clarifies that employers may only seek repayment when all of the following conditions are met:

• The expense is voluntary and optional.
• The expense primarily benefits the employee, not the employer.
• The cost is clearly documented and disclosed in advance.
• The repayment amount reasonably reflects the actual expense.
• The agreement does not operate as a wage deduction or penalty.

If a contract fails to meet these requirements, it may be unenforceable under California law.

Costs That Often Cannot Be Recovered

Many “stay or pay” agreements attempt to recover costs that California law does not permit employers to shift onto employees. Examples of problematic repayment demands include:

• Mandatory training required to perform the job
• Onboarding or orientation costs
• Employer-required certifications
• Costs that primarily benefit the employer’s business
• Flat repayment amounts unrelated to actual expenses
• Repayment triggered by termination without fault

When training or expenses are required for the job, California law generally treats those costs as the employer’s responsibility.

How “Stay or Pay” Contracts Can Violate California Law

Even when labeled as reimbursement agreements, “stay or pay” contracts may violate multiple California employment laws. Potential legal issues include:

• Unlawful wage deductions
• Violations of minimum wage laws
• Penalties that discourage employees from resigning
• Retaliation for refusing to sign or comply with the agreement
• Interference with protected rights

If repayment obligations reduce an employee’s pay below minimum wage or function as a punishment for leaving, the agreement may be unlawful regardless of how it is written.

Industries Where “Stay or Pay” Contracts Are Common

These agreements appear most often in industries with high turnover or training requirements, including:

• Healthcare and caregiving
• Transportation and logistics
• Technology and technical services
• Hospitality and service industries
• Security and public safety roles

Employees in these fields are often told the agreement is standard or non-negotiable, even when it does not comply with California law.

How a Lawyer Can Help With “Stay or Pay” Contract Issues

“Stay or pay” disputes often involve contracts that appear enforceable on their face but fail under legal scrutiny. Employers may pressure employees to repay costs, withhold final pay, or threaten legal action. An Orange County employment lawyer can review the agreement, evaluate whether the costs are legally recoverable, and determine whether the contract violates wage and hour laws or public policy. An attorney can also address unlawful deductions, retaliation, or threats tied to refusal to repay. In many cases, employees do not owe what the employer claims, and early legal guidance can prevent improper financial loss.

Contact Us

If you were asked to sign a “stay or pay” contract or your employer is demanding repayment after you left a job, not all repayment demands are lawful under Assembly Bill 692. Call (949) 379-6250 or contact us online to schedule a free consultation with Aegis Law Firm. We can review your situation, explain your options, and help you protect your wages and mobility.