Governor Newsom recently signed a new law that significantly impacts how California employers structure repayment or reimbursement provisions, including signing bonuses, relocation expenses, and visa/immigration related costs.
What the Law Does
In short, beginning January 1, 2026, AB 692 makes it unlawful for any employer to require an employee to agree to repay expenses if their employment ends. Any agreement entered into after January 1, 2026, that includes such a requirement, will be void and unenforceable. Importantly, employers will no longer be able to seek reimbursement for visa and/or immigration related costs.
Limited Exceptions
The law provides four narrow exceptions to this general rule. An employer can seek reimbursement only for the following:
- Government loan repayment or forgiveness programs;
- Tuition costs for transferrable credits;
- Apprenticeship programs; and
- Discretionary or unearned monetary payments (signing or retention bonuses).
For repayment of discretionary signing or retention bonuses, employers must meet all of the following requirements:
- The repayment terms are outlined in a separate agreement from their employment contract;
- The employee must be given at least five business days to consult an attorney before signing;
- Any repayment for early separation must be prorated over a retention period of up to two years and cannot include interest;
- Employees must be allowed to defer receiving the payment until the retention period ends; and
- Repayment can only be required if the employee resigns voluntarily or is terminated for misconduct.
Next Steps for Employers
Employers should review and revise their templates now to ensure compliance before the law takes effect. Employers who currently require repayment of visa or immigration-related costs must discontinue that practice for any agreements entered into going forward.
Noncompliance may result in penalties of the greater of an employee’s actual damages or up to $5,000 per worker, plus injunctive relief, attorney’s fees, and costs.
Firm Contacts
If you would like assistance updating your employment agreements or have questions about how this law affects your business operations, please contact any member of the LimNexus Employment Law Team: