By Michael T. Jackson
California Governor Gavin Newsom signed into law on 13 October 2025 AB 692, a bill that, starting on 1 January 2026, will restrict the ability of employers to require California workers to repay various monetary or employment-related costs at the end of their employment with that entity. This change is poised to impact talent mobility programs moving employees into, out of, or within the state of California, particularly those that may currently utilize relocation repayment agreements related to employer-provided mobility-related benefits.
What the New Law Covers
The new law, which will take effect on 1 January 2026 and apply to any new contracts and/or contract terms enacted on or after that date, will prohibit inclusion, either in an employment contract or other contract requiring execution by an employee as a condition of employment or an employment relationship, terms that:
- Requires the employee to pay, either to an employer, training provider, or debt collector, for a debt after the termination of the employee’s employment or work relationship with the employer;
- Authorizes an employer, training provider, or debt collector to resume or initiate collection or end forbearance on a debt if an employee’s employment or work relationship with the employer ends; and
- Imposes a penalty, fee, or cost on an employee if the employee’s employment or work relationship with the employer ends.
Violations of the law could result in an employer and/or their relevant service providers being financially liable for actual damages sustained by the employee or $5,000 per employee, whichever is greater, in addition to injunctive relief and attorney fees and costs.
What Exclusions Are Currently in the Law
Under the law, exclusions are provided for contracts related to loan repayment assistance/forgiveness programs offered by a governmental agency, tuition costs for a transferable credential that meets certain established criteria, and apprenticeship programs approved by the California Division of Apprenticeship Standards.
The law does not provide a broad exclusion for mobility/relocation-related benefits and services, but two exclusions within the law could have applications within talent mobility/relocation contexts. The first, in Section 2(D) of the law, is an exclusion for contracts related to “the receipt of a discretionary or unearned monetary payment, including a financial bonus, at the outset of employment that is not tied to specific job performance” in cases when the following five criteria are met:
- The terms of any repayment obligation are set forth in a separate agreement from the primary employment contract.
- The employee is notified that they have the right to consult an attorney regarding the agreement and are provided with a reasonable time period of not less than five business days to obtain advice of counsel before executing the agreement.
- Any repayment obligation for early separation from employment is not subject to interest accrual and is prorated based on the remaining term of any retention period, which shall not exceed two years from the receipt of payment.
- The worker has an option to defer receipt of the payment to the end of a fully served retention period without any repayment obligation.
- Separation from employment prior to the retention period was at the sole election of the employee, or at the election of the employer for misconduct.
The second exclusion, located in Section 2(E) of the law, related to contracts “related to the lease, financing, or purchase of residential property, including, but not limited to, a contract pursuant to the California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code).”
What Does the New Law Mean for Talent Mobility?
The impacts of this new law once it goes into effect on 1 January will vary employer-by-employer depending on factors such as their current practices around mobility-related repayment clauses, how the employer handles the provision of mobility-related benefits and services to their employees, whether individuals are new hires at the start of their employment with the employer or an existing employee, and the types of benefits and services the employer includes in any mobility-related repayment agreements/clauses. Talent mobility professionals with employees in California should engage with their applicable relocation management companies and internal/external employment and legal counsels to review how this new law might impact their particular organizations based on their existing practices, mobility-related policies and guidelines, and mobility-related benefits and services related to employees connected with California.
WERC’s Engagement Related to the New Law
In recent weeks, WERC has held meetings with key offices in the California State Assembly and Senate involved with AB 692 around the mobility-related ramifications of the new law and made recommendations for how the law could be refined to mitigate issues related to talent mobility:
- Expanding the financial exclusion in Section 2(d) to also cover current employees in addition to new employees;
- Refining the real estate-related language in Section 2(E) to specifically also include “sale of” in addition to the purchase of residential property; and
- Expanding the scope of what can be included in the residential property exclusions to also cover moving-related services, such as the moving and shipping of household and personal goods, and temporary housing support.
In his signing statement enacting AB 692, Governor Newsom asked the legislature in a signing statement to enact legislation next year to address issues with the law, with the governor specifically citing updating the collective bargaining process provisions. WERC is urging the legislature to also address, in any follow-up actions, the unintended ramifications this law has on talent mobility and on California employers and their workforces in the state, and WERC will continue to engage with policymakers in the state around this issue as the new legislative session starts.
If this new law in California will impact your internal mobility program or those of the clients that you support, please reach out to me directly to share these impacts with WERC and to indicate if you would be willing and able to be a part of future engagement with California policymakers around this new law in 2026.
WERC and our public policy forums will continue to monitor this new law and will provide updates as they are available.